24-50 Which of the following is the primary sellers of credit risk protection?
A)Insurance companies.
B)Mutual funds.
C)Depository institutions.
D)Vulture funds.
E)Commercial banks.

Question

Quizplus · Accepted Answer

Insurance companies are the primary sellers of credit risk protection in the market. They offer credit default swaps (CDS) to investors who want to transfer the credit risk of a debt instrument to them. The investors in turn pay a premium to the insurance company to protect them against any potential credit events such as default or bankruptcy. This allows investors to mitigate their risk and diversify their investments. Other options listed such as mutual funds, depository institutions, vulture funds and commercial banks may engage in credit risk transfer through various means, but they are not primary sellers of credit risk protection.

24-50 Which of the Following Is the Primary Sellers of Credit