An auto parts supplier sells parts to a car company and the, Ask an Expert

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An auto parts supplier sells parts to a car company, and the car company borrows money from the parts supplier to pay for them (this is known as vendor financing). The parts company is worried that the auto company will go bankrupt before it has the chance to pay off the loan. The parts company can enter a derivative contract with an insurance company that will hedge the risk that the auto company will not pay its bill. What is that derivative called?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92429671

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