AAFM Exam CWM_LEVEL_2 Topic 1 Question 83 Discussion

Actual exam question for AAFM's CWM_LEVEL_2 exam

Question #: 83
Topic #: 1

Section B (2 Mark)

A bank has a limited geographic area. It would like to diversify its loan income with loans in other market areas but does not want to actually make loans in those areas because of their limited experience in those areas. Which type of credit derivative contract would you most recommend for this situation?

ACredit linked note

BCredit risk option

CTotal return swap

DCredit swap

Show Suggested Answer

Suggested Answer: B

by Arletta at Jul 17, 2024, 07:27 PM

Limited Time Offer

25%

Off

Get Premium CWM_LEVEL_2 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Maryann

2 days ago

A credit swap seems like the logical choice here. The bank can offload the credit risk without venturing into unfamiliar territory. Simple and effective!

upvoted 0 times

...

Felicidad

8 days ago

I think a credit swap would be the best option for the bank. It allows them to diversify their loan income without actually having to make loans in unfamiliar areas.

upvoted 0 times

...