- CFA Exams
- CFA Level I Exam
- Study Session 13. Fixed Income (2)
- Reading 36. Credit Default Swaps
- Subject 4. Applications of CDS
CFA Practice Question
Proponents of naked CDS argue that:
II. They provide more stability in the credit market.
III. They can be used to hedge against adverse economic conditions because even if an investor has no exposure to a borrower, the default of a sovereign entity or municipality imposes costs on investors.
I. They bring liquidity to the credit market.
II. They provide more stability in the credit market.
III. They can be used to hedge against adverse economic conditions because even if an investor has no exposure to a borrower, the default of a sovereign entity or municipality imposes costs on investors.
Correct Answer: I, II and III
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