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Home  >> Quiz >> Credit Derivaties Quiz >> Quiz #2 September 7, 2010, 3:01 am
Credit Derivatives Quiz
Team Latte
Jan 01, 2006

Quiz # 2

  1. One of the following is not a credit derivatives instrument:
    a) Equity Default Swap;
    b) Interest Rate Swaps;
    c) Credit Default Swaps;
    d) Basket Default Swaps;


  2. CLN �V Credit Linked Notes- fall under the category of :
    a) Funded instruments;
    b) Unfunded instruments;
    c) Partially funded instruments;
    d) None of the above;


  3. CDS- Credit Default Swaps- fall under the category of :
    a) Funded instruments;
    b) Unfunded instruments;
    c) Partially funded instruments;
    d) None of the above;


  4. A basket TRS - total return swap-can be substitute for a:
    a) Equity option trade;
    b) Credit spread option trade;
    c) Repo trade;
    d) Equity default swap trade;


  5. The subordinate tranche of a CDO is an:
    a) An equity tranche;
    b) A debt tranche;
    c) A hybrid tranche;
    d) None of the above;


  6. A credit switch is when:
    a) A portfolio manager purchases credit protection on one reference asset and
             simultaneously sells protection on another asset;
    b) A portfolio manager purchases credit protection on one reference asset and
             goes long on the underlying equity of the asset;
    c) A portfolio manager sells credit protection on one reference asset and goes
             short on the underlying equity of the asset;
    d) None of the above;


  7. Structural model are:
    a) Characterized by modeling a firm's value in order to provide the probability of
             firm's default;
    b) Are non-arbitrage models whereby they can be fitted to the current term
             structure of risky bonds to generate non-arbitrage prices;
    c) Models for calculating default and credit migration using statistical transition
             matrices;
    d) None of the above;


  8. Credit Derivatives market in the U.S. really started off with:
    a) In 1994 when commercial banks started experiencing losses on their
             corporate loan books;
    b) In the aftermath of Enron bankruptcy;
    c) In 1998 when there was a Russian debt crisis;
    d) In the aftermath of 1987 stock market crisis;


  9. The observed spread between an issuer par curve and the risk fee par curve reflects;
    a) A liquidity premium;
    b) Default risk;
    c) Both liquidity premium and default risk;
    d) None of the above.


  10. A 3 year EDS-equity default swaps-is trading at 240 basis points and the recovery rate 30%; implied market probability of the EDS even occurring is
    a) 8.5%
    b) 2.35%
    c) 10.3%
    d) 5.4%

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