PT Ch31

PT Ch31 - Exam Name MULTIPLE CHOICE Choose the one...

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Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Credit derivatives, particularly ________, allow the transfer of credit risk to another party without the sale of the loan. 1) A) credit default vehicles B) credit default swaps C) special purpose swap D) special purpose vehicles 2) The proceeds to meet the obligations to the CDO tranches (interest and principal repayment) can come from coupon interest payments from the ________. 2) A) coupon interest payments from the collateral assets. B) sale of collateral assets C) maturing of collateral assets D) All of these 3) The reference obligation ________. 3) A) could be Ford Motor Credit Company. B) is the issuer of the debt instrument and hence is also referred to as the reference issuer. C) is the particular debt issue for which the credit protection is being sought. D) could be a corporation or a sovereign government. 4) In a ________, the protection buyer pays a fee to the protection seller in return for the right to receive a payment conditional upon the occurrence of a credit event by the reference obligation or the reference entity. 4) A) credit default swap B) credit protection swap C) protection default swap D) credit event swap 5) Which of the below statements is FALSE? 5) A) The ability of originators to transfer credit risk via credit derivatives, CDOs, or securitization has raised concerns that a lending culture based on origination volume rather than prudent lending practices may be inadvertently adopted by banks. B) For credit risk transferred out of the banking system, there is the concern with the extent to which credit risk is being transferred to nonbanks, such as monoline or multiline insurance companies and hedge funds. C) Within the insurance industry, the largest seller of credit protection is financial guarantors, insuring the senior tranches in synthetic CDO deals. D) None of these 6) ________ is a term used by Moody's to refer to an entity whose business activities and operations as well as its credit rating are based on detailed, predetermined parameters. 6) A) A structured finance operating company (SFOC) B) An organized finance operating company (OFOC) C) An organized finance cooperative (OFC) D) A structured finance cooperative (SFC) 1
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7) Credit derivatives can be used to create credit risk transfer products. The two most common products employing credit default swaps are ________. 7) A) synthetic CDOs and credit - linked notes. B) synthetic notes and credit - linked notes. C) nonsynthetic notes and credit - linked CDOs. D) synthetic CDOs and credit - linked CDOs. 8) Studies have identified regulatory and supervisory concerns with CRT vehicles, such as credit derivatives and CDOs. From these studies, four general issues were identified including ________. 8)
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PT Ch31 - Exam Name MULTIPLE CHOICE Choose the one...

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