Question

Leading up to the 2007-2009 Financial Crisis, companies like AIG developed financial products divisions which wrote billions of dollars worth of financial insurance contracts, called ________, which later bankrupted the company.

Answer 1

credit default swaps

Step-by-step explanation:

Credit default swaps is an arrangement where the party selling a credit default swap agrees to insure the buyer against debt default or other credit event.

When a buyer is purchases a CDS he makes a series of payments to the seller over time for the value of the CDS, an is covered in case where the asset defaults.

In this scenarioAIG developed financial products divisions which wrote billions of dollars worth of financial insurance contracts.

These were credit default swaps that caused bankruptcy of the company because it bore all the credit risk.