- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 2. Forward Commitment and Contingent Claim Features and Instruments
- Subject 3. Credit Derivatives
CFA Practice Question
Which of the following parties takes the credit risk of the underlying security in a credit-linked note?
B. Seller of the credit-linked note
C. Third party
A. Buyer of the credit-linked note
B. Seller of the credit-linked note
C. Third party
Correct Answer: A
The credit risk of the underlying security in a credit-linked note is taken by the buyer of the note. If the price of the note decreases due to the default then the buyer suffers the loss.
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