Financial Risk Manager Part 1

Credit derivatives, such as credit default swaps (CDS) and collateralized debt obligations (CDOs), received significant blame for the financial crisis, but the problem was not the instruments themselves but how they were used. The crisis resulted from the misuse and mismanagement of these instruments.

Choice A is incorrect. Credit derivatives were a contributing factor, but they were not the sole cause of the financial crisis.

Choice B is incorrect. While some credit derivatives declined in popularity or faced increased scrutiny after the crisis, others, like credit default swaps (CDS) and collateralized loan obligations (CLOs), continued to be used in the financial markets.

Choice D is incorrect. Very complex instruments like collateralized debt obligations squared (CDOs-squared) are unlikely to be revived.