Reading 65: Using Credit Derivatives to Enhance Return and M class, div, center, following, credit

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Session 17: Derivative Investments: Options, Swaps, and Interest Rate and Credit Derivatives
Reading 65: Using Credit Derivatives to Enhance Return and Manage Risk

LOS c: Explain the use of credit derivatives by the various market participants.

 

 

Which of the following entities is the fastest growing segment of the credit derivatives market?

A) Commercial banks.

B) Hedge funds.

C) Investment Banks.

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There are hedge funds that specialize in the trading of credit derivatives. In their pursuit of relative value opportunities, they have become quite active and are important providers of liquidity to the market. Hedge funds represent the fastest growing segment of the credit derivatives market.

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Which of the following is least likely a stated use of credit derivatives by commercial banks and corporations?

A) Speculation.

B) Income.

C) To satisfy regulatory standards.

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Commercial banks use credit derivatives to hedge their exposures and to satisfy regulators. Corporations use credit derivatives for hedging and income enhancement.

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Which of the following entities is the largest market participant in the credit derivatives market?

A) Hedge funds.

B) Investment Banks.

C) Commercial banks.

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Commercial banks use credit derivatives to hedge their exposures and to satisfy regulators. They are the largest participant in the market, with a share of 35-40%.