Question

What is the purpose of a Credit Derivative, such as a Credit Default Swap (CDS)?

a.

To transfer credit risks from a protection seller to a protection buyer

b.

To speculate on future credit risks in the financial market

c.

To create a standardized contract for credit protection

d.

To facilitate the exchange of cash for a specified asset

Answer: (a).To transfer credit risks from a protection seller to a protection buyer Explanation:Credit Derivatives, like Credit Default Swaps (CDS), are contracts designed to transfer credit risks from a protection buyer to a protection seller. They are used for managing and mitigating credit exposure.

Interact with the Community - Share Your Thoughts

Uncertain About the Answer? Seek Clarification Here.

Understand the Explanation? Include it Here.

Q. What is the purpose of a Credit Derivative, such as a Credit Default Swap (CDS)?

Similar Questions

Explore Relevant Multiple Choice Questions (MCQs)

Q. What distinguishes an American Option from a European Option based on maturity date?

Q. What is the primary difference between a Call Option and a Put Option?

Q. What is a key characteristic that distinguishes a futures contract from a forward contract?

Q. What does a Forward contract represent in the context of financial derivatives?

Q. What are the two main categories of derivatives based on the market place?

Q. What is the primary purpose of using derivatives in financial risk management?

Q. Which of the following statements best defines Financial Risk Management?

Q. What is the basic reason for the emergence of a well-functioning derivative market in India?

Q. What has been the growth trend of derivatives market in India since June 2000?

Q. How is the repricing of futures contracts different from forward contracts?

Q. What is the key difference between Futures and Forwards regarding fulfillment of the contract on the delivery date?

Q. What is the strike price in an options contract?

Q. What is the main difference between a Call Option and a Put Option?

Q. What is the classification of options based on the maturity date?

Q. What is the main characteristic of options contracts regarding the buyer's obligation?

Q. What is the prime motive for futures contracts?

Q. In what form are Stock Index futures traded?

Q. What are examples of commodity futures?

Q. What is the essential characteristic of futures contracts regarding their terms?

Q. What is "Marking to Market" in the context of futures contracts?

Recommended Subjects

Are you eager to expand your knowledge beyond IC 89 Management Accounting? We've handpicked a range of related categories that you might find intriguing.

Click on the categories below to discover a wealth of MCQs and enrich your understanding of various subjects. Happy exploring!