Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition

Solution to Stage Eighteen

1.	I prefer to sell credit protection as, due to the current recession and my private information that it will get better, the fee received is likely to exceed the expected loss resulting from a default.
2.	Protected by a credit default swap (CDS), you still incur market risk (that is, a potential change in the value of the reference asset) and counterparty risk (the risk that the protection seller will default).