Question

A hedge fund purchased credit default swaps on securities it did not own because it believed that the securities were likely to default. In this example, the hedge fund is.

Answer 1

A hedge fund purchased credit default swaps on securities it did not own because it believed that the securities were likely to default. In this example, the hedge fund is speculating.

What is a hedge fund?

It should be noted that the hedge fund simply means a pooled investment fund which trades in liquid assets. This is usually managed by the professional fund managers.

Therefore, a hedge fund purchased credit default swaps on securities it did not own because it believed that the securities were likely to default. In this example, the hedge fund is speculating.

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