Which of the following is correct regarding credit derivatives?
A) If the expected recovery value increases, then the size of payment upon the occurrence of a credit event will increase. This will increase the protection payment.
B) If the expected recovery value decreases, then the size of payment upon the occurrence of a credit event will decrease. This will increase the protection payment.
C) If the expected recovery value decreases, then the size of payment upon the occurrence of a credit event will remain stable. This will increase the protection payment.
D) If the expected recovery value decreases, then the size of payment upon the occurrence of a credit event will increase. This will increase the protection payment.
Correct Answer:
Verified
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