In a credit default swap, who pays periodic fees in exchange for credit protection and what triggers a payout?

• A. The protection buyer pays premiums; payout occurs if a credit event occurs for the reference entity.
• B. The protection seller pays premiums; payout if rating upgrades.
• C. Both parties pay premiums; payout at maturity.
• D. The buyer pays a one-time fee; payout occurs only if the bond defaults.

Answer: (A)