If you are interested in speculating on a deterioration in the credit quality of a company,which of the following would be appropriate?
A) Buy the bonds of the company.
B) Short the forwards on the credit spread of the company.
C) Buy credit spread call options on the company's bonds (i.e. ,options that pay off if the spread widens) .
D) Sell put options on the company's bonds.
Correct Answer:
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Q1: Which of the following statements is valid?
A)A
Q2: Bank A is able to raise
Q4: Which of the following credit derivatives is
Q5: A digital default swap is a contract
Q6: Bank A has a funding cost
Q7: Which of the following is not a
Q8: Suppose that an investor has purchased $250
Q9: Total return swaps (TRSs)are sometimes undertaken between
Q10: A collateralized default obligation (CDO)is a pool
Q11: Bank A holds a credit risky asset
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