Which of the following is an out-of-the-money counterparty?
A)Counterparty in a loan commitment contract.
B)FI that trades in securities prior to their actual issue.
C)Counterparty that is currently at an advantage in terms of cash flows.
D)FI that guarantees to underwrite the performance of the buyer of the guaranty.
E)Counterparty that is currently at a disadvantage in terms of cash flows.

Question

Quizplus · Accepted Answer

An out-of-the-money counterparty is one that is currently at a disadvantage in terms of cash flows, meaning they have already paid or committed to payment for a transaction or contract that is now worth less than what they initially paid.

Which of the Following Is an Out-Of-The-Money Counterparty