CDOs

question 4

Multiple Choice

CDOs:

• A) Are illegal.
• B) Are collateralized debt obligations.
• C) Are not securities.
• D) Could not be hedged.

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Definitions:

Quasilinear Preferences

A type of preference where utility is linear in one argument, allowing indifference curves to have the same slope regardless of the level of consumption of other goods.

Equivalent Variation

A measure used in economics to evaluate the change in wealth that would leave an individual's utility unchanged before and after a policy change or a price change.

Compensating Variation

A monetary measure of the amount of money a consumer would need to reach their original utility level after a price change.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.