Which of the Following Happens When the Default Correlation of the Companies

question 20

Multiple Choice

Which of the following happens when the default correlation of the companies underlying a CDO increases?

• A) The value of the senior tranche and the equity tranche to the protection buyer both increase
• B) The value of the senior tranche and the equity tranche to the protection buyer both decrease
• C) The value of the senior tranche to the protection buyer decreases and the value of the equity tranche to the protection buyer increases
• D) The value of the senior tranche to the protection buyer increases and the value of the equity tranche to the protection buyer decreases

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Definitions:

Efficiency

The ratio of the useful work performed by a machine or in a process to the total energy expended or heat taken in.

Productivity

The measure of efficiency in which goods and services are produced, often evaluated by the output per unit of input.

Employee Assistance Programs

Work-based intervention programs designed to assist employees in resolving personal problems that may affect their job performance, health, and well-being.

Supervisors

Individuals in a position of authority who oversee the performance and conduct of employees, often responsible for guiding, instructing, and evaluating them.