SSP-Android

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Exam Code:SSP-Android

Exam Name:Secure Software Practitioner - Android

Questions and Answers:67 Q&As

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Updated: 09-15-2020

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NEW QUESTION: 1
A long position in a credit sensitive bond can be synthetically replicated using:
A. a short position in a treasury bond and a short position in a CDS
B. a long position in a treasury bond and a long position in a CDS
C. a short position in a treasury bond and a long position in a CDS
D. a long position in a treasury bond and a short position in a CDS
Answer: D
Explanation:
Explanation
The correct answer is choice 'a'
A long position in a credit sensitive bond is equivalent to earning the risk free rate and the spread on the bond.
The risk free rate can be earned through a long position in a treasury bond, and the spread can be earned in the form of premiums on a CDS, which are received by the protection seller, ie the party short a CDS contract.
Therefore we can get the same results as a long bond position using a combination of a long treasury bond and a short position in a CDS. Choice 'a' is the correct answer.

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