A digital default option expires unexercised in situations where the loan is paid in accordance with the loan agreement.

Question

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A digital default option is a clause in a loan agreement that automatically triggers certain actions (such as default interest rates or acceleration of the loan) if certain events (such as missed payments) occur. However, if the loan is paid in accordance with the agreement and no default occurs, the digital default option will expire unexercised.

A Digital Default Option Expires Unexercised in Situations Where the Loan