Exam4Training

Credit risk in the case of a CDO (Collateralized Debt Obligation) is borne by:

Credit risk in the case of a CDO (Collateralized Debt Obligation) is borne by:
A . The sponsoring institution
B . Investors
C . The reference entity
D . The Special Purpose Vehicle (SPV)

Answer: B

Explanation:

Investors in CDOs bear credit risk. The SPV is merely a conduit that owns the underlying assets on which the sponsoring institution has bought protection. The investors have sold them this protection, and are on the hook for defaults or other credit events. The reference entity is relevant only to CDSs, not CDOs. Choice ‘b’ is the correct answer.

Latest 8006 Dumps Valid Version with 286 Q&As

Latest And Valid Q&A | Instant Download | Once Fail, Full Refund

Exit mobile version