CFA Level I · CFA Level I Exam · Forward Commitment and Contingent Claim Features and Instruments
Which of the following instruments is least likely to be classified as a forward commitment?
A credit default swap is least likely to be a forward commitment. It pays only if a credit event occurs, which makes it a contingent claim. Futures and interest rate swaps obligate both parties to perform and are forward commitments.
- AFutures contract
- BInterest rate swap
- CCredit default swapCorrect
Explanation
Forwards, futures and swaps (such as interest rate swaps) are forward commitments because both parties are obligated to transact. A credit default swap pays only if a credit event occurs, so it is a contingent claim.
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