In the case of a financial institution that seeks to make a market in the new CRT vehicles, there is a concern that in selling more complex products, such as synthetic CDOs, they may not be properly hedging their position and therefore ________.

Question

Quizplus · Accepted Answer

The concern is that in selling more complex products, such as synthetic CDOs, the financial institution may not be properly hedging their position, which would increase the institution's risk. Therefore, the correct answer is C. Choice A and B are incorrect because they imply that the institution is either maintaining or decreasing its risk, which is not necessarily the case.

In the Case of a Financial Institution That Seeks to Make