A swap in which cash flows are exchanged in the event of a default is best described as a:
A) currency swap.
B) bankruptcy swap.
C) default debt swap.
D) credit default swap.

Question

Quizplus · Accepted Answer

A credit default swap (CDS) is a financial derivative that allows an investor to "swap" or offset their credit risk with that of another investor. In the event of a default on a debt instrument (such as bonds), the seller of the CDS compensates the buyer, effectively providing insurance against default.

A Swap in Which Cash Flows Are Exchanged in the Event