( Basis = BondSpread - CDSSpread )

( Basis = CDSSpread - BondSpread )

( Basis = BondSpread × CDSSpread )

( Basis = BondSpread ÷ CDSSpread )

Free CFA Fixed Income Practice Questions & Answers

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Question 241

The CDS protection leg PV is:

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Question 242

In a CDS auction, the final price is:

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Question 243

The loss given default (LGD) is:

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Question 244

The expected exposure (EE) at time ( t ) is:

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Question 245

The effective discount rate for a risky cash flow is:

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Question 246

The credit‑adjusted discount factor is:

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Question 247

The expected risky cash flow at time ( t ) is:

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Question 248

The CDS basis is:

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Question 249

What is “credit migration”?

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Question 250

What is a “credit event” in CDS terminology?

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Question 251

What is a “deliverable obligation” in CDS?

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Question 252

What is a “cheapest‑to‑deliver” bond?

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Question 253

What is a “PAC tranche”?

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Question 254

What is a “support tranche”?

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Question 255

What is a “sequential‑pay CMO”?

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Question 256

What is a “credit enhancement”?

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Question 257

What is “subordination” in securitization?

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Question 258

A CDS has LGD = 60%. PV(premium leg) = 4.0. PV(protection leg) = 0.24. Spread?

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Question 259

A PAC tranche receives scheduled principal of 40 but actual prepayments are 60. Support tranche absorbs:

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Question 260

A CDS auction final price is 35%. What is LGD?

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Question 261

A risky bond has hazard rate 3%. What is 2‑year survival probability?

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Question 262

A CDS has spread 200 bps and LGD 60%. Approximate annual PD?

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Question 263

A risky bond has survival probability 80% and recovery 30%. Expected payoff on 100 par?

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Question 264

A first‑to‑default (FTD) basket CDS references 3 names with independent annual default probabilities of 2%, 3%, and 4%. What is the probability that the basket defaults within 1 year?

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Question 265

A second‑to‑default (STD) CDS on 2 names with independent default probabilities p₁ = 5%, p₂ = 5%. What is the STD default probability?

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Question 266

In a first‑to‑default CDS, increasing correlation between names generally:

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Question 267

In a second‑to‑default CDS, increasing correlation:

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Question 268

A 5‑name FTD basket has identical hazard rates λ = 2%. Assuming independence, what is the basket hazard rate?

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Question 269

A 3‑name STD basket has hazard rates 1%, 2%, 3%. Assuming independence, what is the probability that at least two default in 1 year?

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Question 270

A 10‑name CDS index has equal weights. One name defaults. What happens to the notional?

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Free CFA Fixed Income Practice Questions & Answers

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