alleryStart learning →In a CDS, who makes periodic payments to the other party?
AReference entity pays the seller
BProtection seller pays the buyer
CReference entity pays the buyer
DProtection buyer pays the seller
Answer & Solution
Correct answer: D. Protection buyer pays the seller
The buyer pays the spread as a fee and receives a payoff if a credit event occurs.
Keep practising Derivatives Analysis and Valuation
Browse all Derivatives Analysis and Valuation questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
Which is the most widely used method for valuing real options, as most are American styledAn electric utility can switch between fuel sources. This is which type of option?In real options, what is non-recoverable upfront spending for flexibility called?An option to abandon for salvage value is equivalent to which financial option?Which option is equivalent to a call option on extra capacity?Which pricing method computes the average of past payouts and is only a rough guide?Why is Black-Scholes not a standard model for weather derivatives?Who struck the first weather derivative deal in July 1996?