Which of the following is true of the credit default swaps (CDSs) ?

A) The CDS buyer has to own the debt security.
B) The CDS seller is not government regulated.
C) The CDS seller is required to carry cash reserves to cover losses.
D) The CDS contracts are not traded in secondary market.

Credit Default Swaps

Financial swap agreements that transfer the credit exposure of fixed income products between parties.

CDS Buyer

An entity that purchases a credit default swap, obtaining protection against specific credit risks.

CDS Seller

A counterparty in a credit default swap agreement who provides credit protection, compensating the buyer in case of a debt default or other credit event.