The payment of any compensation for loss is contingent on the actual occurrence of a credit-related event under a
A) Total return swap.
B) Credit default swap.
C) Collar.
D) Forward rate agreement.
E) swap agreement.

Question

Quizplus · Accepted Answer

The payment of compensation for loss is a characteristic of credit default swaps (CDS). CDS are contracts that provide protection against a specific credit event, such as default or bankruptcy, in exchange for periodic payments called premiums. If the credit event occurs, the protection buyer receives a payment from the protection seller. If the credit event does not occur, there is no payment.

The Payment of Any Compensation for Loss Is Contingent on the Actual