Explanation:
In a credit default swap (CDS):
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.
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