13-41 Credit derivatives allow FIs to hedge credit risk on individual assets,but not on portfolios of assets.

Question

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Credit derivatives can be used to hedge credit risk on individual assets as well as portfolios of assets. For example, a credit default swap (CDS) can be used to hedge the credit risk of an individual bond or a portfolio of bonds. Similarly, a credit index option can be used to hedge the credit risk of a portfolio of bonds or other assets.

13-41 Credit Derivatives Allow FIs to Hedge Credit Risk on Individual