- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 32. Credit Default Swaps
- Subject 3. Basics of Valuation and Pricing
CFA Practice Question
During the life of a CDS the credit quality of the reference entity improves. Which party of the CDS will benefit from this?
A. bondholder.
B. protection buyer.
C. protection seller.
Explanation: The protection seller continues to receive the same payment series but now bears less risk. The bondholder will benefit too but is not a party of the CDS.
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