Which of the following most accurately describes the behavior of credit default swaps?a. When credit risk increases, swap premiums increase.b. When credit and interest rate risk increase, swap premiums increase.c. When credit risk increases, swap premiums increase, but when interest rate risk increases, swap premiums decrease.
Which of the following most accurately describes the behavior of credit default swaps?a. When credit risk increases, swap premiums increase.b. When credit and interest rate risk increase, swap premiums increase.c. When credit risk increases, swap premiums increase, but when interest rate risk increases, swap premiums decrease.
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 11QTD
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Which of the following most accurately describes the behavior of credit default swaps?
a. When credit risk increases, swap premiums increase.
b. When credit and interest rate risk increase, swap premiums increase.
c. When credit risk increases, swap premiums increase, but when interest rate risk increases, swap premiums decrease.
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