CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

An alternative to buying bonds for a financial institution to diversify its credit exposure would be to:

A. sell CDS protection.
B. buy CDS protection.
C. buy the reference entity.
Correct Answer: A

The financial institution could take on credit exposure without incurring the cost of funding.

User Contributed Comments 2

User Comment
schnurr ‘To diversify its credit exposure”. Wouldn’t buying cds protection diversify its exposure as well?
Logaritmus @up: Buying CDS is taking simillar credit risks.
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