easy · Frm Part 2 Credit Risk
In a standard single-name credit default swap (CDS) contract, which of the following best describes the primary obligation of the protection buyer?
- Making a contingent payment equal to the face value of the reference obligation upon a credit event.
- Paying a periodic premium, known as the spread, to the protection seller until maturity or a credit event occurs.
- Providing collateral to the reference entity to improve its credit quality.
- Determining whether a credit event has occurred through a unilateral internal legal review.
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