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- Identify which of the following instrumets are used for hedging receivables Forex Borrowing Choose..V Choose... No Yes Choose... Spot Contract Futures Contract, Option contract Choose... Forward Contract Choose... Forex Lending Choose...are in essence an insurance contract against the default of one or more borrowers. O Credit default swaps O CMOS ETFs O Collateralized debt obligations O CollarsWhy are the credit default swaps, in essence, an insurance contract against the default of one or more borrowers?
- A guarantee issued by an FI that obligates the FI to pay if the purchaser of the letter defaults on a debt is called a a. loan commitment. b. forward rate agreement. c. credit swap agreement. d. collar. e. None of these options are correct.Counterparty credit risk is a function of the probability of default, exposure at default, and loss given default. Assuming that the individual exposure at default with a counterparty is fixed, which of the following statements is correct? A. The probability of default can be mitigated by collateral, and exposure at default can be mitigated by netting. B. The probability of default can be mitigated by netting, and exposure at default can be mitigated by collateral. C. Loss given default can be mitigated by collateral, and exposure at default can be mitigated by netting. D. Loss given default can be mitigated by netting, and exposure at default can be mitigated by collateral.Which of the following are all traditional credit risk enhancement techniques? Group of answer choices B. Collateral, transparency, early termination, bond insurance C. Marking to market, netting, guarantees, reassignment D. Bond insurance, netting, disintermediation, put options A. Put options, netting, bond insurance, derivatives
- a)explain current credit risk and potential credit risk. b)describe the primary methods of managing derivative credit risk. c)explain what is meant by netting, and discuss various forms of netting. d)define credit derivatives. e) describe the four primary types of credit derivatives: total return swap, credit swap/credit default swap, credit spread option, credit-linked securityWhich of the following is not a credit event that would trigger payment under a credit default swap? loan refinancing bankruptcy default debt downgradeDescribe a credit default swap and its purpose. Note the rationale for the protection buyer and the protection seller and the cash flow between the two parties. Describe four key credit events that would trigger payment under a credit default swap.
- Answer the following questions: REGARDING AMLS A: What is the difference between an interest rate change cap and a life of loan interest rate change cap.? Be specific and give an example. B: What is the rationale/consideration in not using the initial interest rate for the rate used to qualify a borrower?How is a credit default swap like insurance?Which of the following is an arrangement by which one party promises to pay a sum of money to policyholder as protection against an adverse or unfavorable occurrence of event? a. Short Term Loans b. Fixed Deposit c. Insurance d. Investment