Explain the two ways a credit default swap can be settled

Reference no: EM131240266

1. Explain the two ways a credit default swap can be settled.

2. Explain how a cash CDO and a synthetic CDO are created.

3.Explain what a first-to-default credit default swap is. Does its value increase or decrease as the default correlation between the companies in the basket increases? Explain.

4. Explain the difference between risk-neutral and real-world default probabilities.

5. Explain why a total return swap can be useful as a financing tool.

Reference no: EM131240266

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