Financial Risk Manager Part 2

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Which of the following statements accurately evaluates the use of credit indices and fixed coupons in pricing CDS transactions?

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A

Credit indices provide a precise average of CDS spreads for individual companies, while fixed coupons ensure consistent payments regardless of market fluctuations.

B

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Credit indices simplify trading by offering an average CDS spread for a portfolio of companies, and fixed coupons facilitate predictable payments throughout the contract duration.

C

Credit indices consolidate CDS spreads for individual companies, ensuring uniformity in pricing, whereas fixed coupons adjust payments based on market conditions.

D

Credit indices track individual CDS spreads for diverse companies, while fixed coupons stabilize payments by accounting for variations in market volatility.

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