A credit default swap (CDS) is a privately negotiated contract which you can use to:   Question 2 options:   hedge prepayment risk on a pool of mortgages.   hedge default risk on fixed income assets.   hedge interest rate risk on fixed income assets.   hedge exchange rate risk on euroyen deposits.

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 security

Which of the following most accurately describes the behavior of credit default swaps?a. When credit risk increases, swap premiums increase.b. When credit and interest rate risk increase, swap premiums increase.c. When credit risk increases, swap premiums increase, but when interest rate risk increases, swap premiums decrease.

Total project value ($) Debt Option Loan-to-value Rate (%) Interest only period (years) Amortization (years) $35,000,000.00 A 65% 3.25% 3 20 B 70% 3.25% 3 30 C 70% 3.00% 0 30 D 50% 4.25% 0 30

The Interest rate on which of the following is the LIBOR? a. Bankers' acceptances b. Repurchase agreement c. Certificate of Deposits d. Eurodollar CD

A Collateralized Mortgage Obligation (CMO) allows you to create some AAA rated tranches from a pool of subprime mortgages by ordering the tranches by payback precedence.   Question 36 options:   True   False

A synthetic Collateralized Debt Obligation uses credit default swaps to increase the credit risk of its assets. O True O False

The sale of a mortgage portfolio by setting up mortgage pass-through securities is an example of A) Credit enhancement. B) Credit swap. C) Unbundling. D) Derivatives.

Credit risk refers to:   Question 10 options:   Risk from reclassification of the creditworthiness of the borrower   Risk from a change to the interest rate on a loan   Risk of a change to the repayment schedule of a loan   Risk of a change to the maturity of a credit

Question 2 a) Give an example of how a swap might be used by a portfolio manager. b) Explain the nature of the credit risks to a financial institution in a swap agreement.