The type of basket default swap that usually makes a payment on the default of a single reference entity and then terminates is the: A. inverted swap. B. senior basket default swap. C. Nth-to-default swap. D. subordinate basket default swap.
The Nth-to-default swap makes no payments on the 1, 2, …N-1 defaults nor on the N+1, N+2 defaults. Payments are only made on the Nth default, and then the swap terminates.
