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Answer: seller of the swap.
## Explanation In a credit default swap (CDS): 1. **Seller of the swap** (also known as the protection seller) receives periodic premium payments from the buyer. 2. In return, the seller promises to compensate the buyer if a specified credit event (default) occurs with a third-party reference entity. 3. **Buyer of the swap** (protection buyer) pays periodic premiums to receive protection against credit losses. 4. **Clearinghouse** acts as an intermediary to reduce counterparty risk but is not the party receiving cash payments for promising compensation. Therefore, the party receiving cash payments in return for promising to pay compensation for credit losses is the **seller of the swap**. **Key Concept**: In CDS transactions, the protection seller receives premiums and assumes credit risk, while the protection buyer pays premiums to transfer credit risk.
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In a credit default swap, the party that receives a series of cash payments in return for promising to pay compensation for credit losses resulting from a third party's default is most likely the:
A
clearinghouse.
B
seller of the swap.
C
buyer of the swap.