The payoff of a credit spread call option increases as the yield spread on a specified benchmark bond increases above some exercise spread.

Question

Quizplus · Accepted Answer

This statement is true. The payoff of a credit spread call option depends on the difference between the yield spread on a specified benchmark bond and the exercise spread. As the yield spread increases above the exercise spread, the payoff of the credit spread call option also increases.

The Payoff of a Credit Spread Call Option Increases as the Yield