Credit Analyst Interview Question:

Explain me what Is a Credit Default Swap?

Submitted by: Muhammad

This question is more likely to be thrown at someone with previous experience in the field who is applying for a senior credit risk analyst position, but it still might show up in an interview for an entry-level credit risk analyst position with a bank. A good answer demonstrates you understand the concept, and a better answer likely includes an example. A credit default swap (CDS) is a frequently used method of mitigating risk in fixed-income, debt security instruments such as bonds, and it is one of the most common financial derivatives. A CDS is essentially a type of investment insurance that allows the buyer to mitigate his investment risk by shifting risk to the seller of a CDS in exchange for a fee. The seller of the CDS stands in the position of guaranteeing the debt security in which the buyer has invested.

Other questions likely to be encountered in a credit risk analyst position interview are general questions about your problem-solving abilities, your ability to work as a part of a team and your understanding of basic macroeconomics concepts such as fiscal policies and the prime rate.
Submitted by: Muhammad