Reading 65: Using Credit Derivatives to Enhance Return and Ma following, difference, describes, default, investor

youzizhang

 

LOS d: Discuss credit derivatives strategies and how they are used.

Q1. Which of the following most accurately describes a basis trade using credit default swaps? The investor:

A)   buys a long-term credit default swap and sells a short-term credit default swap.

B)   exploits the difference between the credit default swap premium and asset swap spread.

C)   buys a short-term credit default swap and sells a long-term credit default swap.

 

Q2. Which of the following most accurately describes a credit curve steepener trade using credit default swaps? The investor:

A)   buys a short-term credit default swap and sells a long-term credit default swap.

B)   sells a credit default swap on a firm’s subordinated debt and buys a cheaper credit default swap on the senior debt.

C)   buys a long-term credit default swap and sells a short-term credit default swap.

 

Q3. Which of the following most accurately describes a correlation trade using credit default swaps? The investor:

A)   goes long a credit index and shorts specific credit default swaps.

B)   sells a credit default swap on a firm’s subordinated debt and buys a cheaper credit default swap on the senior debt.

C)   sells protection on a first-to-default basket of credit default swaps.

 

Q4. Which of the following most accurately describes the pricing of a first-to-default basket of credit default swaps in a correlation trade? The swap premium will be higher when the number of credit default swaps is:

A)   higher and when the default correlations are higher.

B)   lower and when the default correlations are higher.

C)   higher and when the default correlations are lower.

 

Q5. Which of the following most accurately describes the characteristics of options on credit default swaps? Options on credit indices are:

A)   less liquid than single issuer options and in a receiver option the option buyer has the right to buy a credit default swap.

B)   more liquid than single issuer options and in a receiver option the option buyer has the right to buy a credit default swap.

C)   more liquid than single issuer options and in a receiver option the option buyer has the right to sell a credit default swap.

elea0930

a

紫栀

thanks

快乐狗狗

thx

LegendL

3X

giolu

thanks

suodi

[em50]

cyberken

 thanks a lot!

selvie0818

thanks

gchh

thanks