The Money View: Can CDS be exchange traded?

The video tutorial explains three scenarios involving credit default swaps. Initially, it describes a broker situation where Paulson buys credit default swaps as an asset. Then, it explores a dealer market-making scenario with Goldman Sachs acting as a dealer. Finally, it details the actual situation where Abacus was the counterparty for Paulson, involving the purchase of risky bonds and treasury bills.

In a broker situation, what does buying a credit default swap resemble?

• Buying a bond

• Purchasing insurance

• Acquiring real estate

• Investing in stocks

What role does Goldman Sachs play in the second scenario?

• A broker

• A dealer making markets

• An investor

• A borrower

In the dealer scenario, who does Paulson buy the credit default swap from?

• Abacus

• A private investor

• Goldman Sachs

• IKB

Who was the actual counterparty for Paulson in the final scenario?

• A government entity

• Abacus

• IKB

• Goldman Sachs

What did Abacus use the proceeds from selling CDS to Paulson to purchase?

• Treasury bills

• Foreign currency

• Corporate bonds

• Real estate