Why should I choose AnalystNotes?
Simply put: AnalystNotes offers the best value and the best product available to help you pass your exams.
Basic Question 9 of 9
Suppose a company has been having problems. It may be possible to buy the company's outstanding debt (usually bonds) at a discounted price. If the company has $1 million worth of bonds outstanding, it might be possible to buy the debt for $900,000 from another party if that party is concerned that the company will not repay its debt. If the company does in fact repay the debt, you would receive the entire $1 million and make a profit of $100,000. Propose an alternative way to take advantage of this opportunity without investing $900,000.
User Contributed Comments 1
| User | Comment |
|---|---|
| tianhes | This is the intuition behind credit default swaps. |
I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
Learning Outcome Statements
describe credit default swaps (CDS), single-name and index CDS, and the parameters that define a given CDS product;
CFA® 2025 Level II Curriculum, Volume 4, Module 30.