Which of the Following Is True

question 15

Multiple Choice

Which of the following is true?

• A) Risk neutral default probabilities are usually much lower than real world default probabilities
• B) Risk neutral default probabilities are usually much higher than real world default probabilities
• C) Risk neutral and real world probabilities must be close to each other if there are to be no arbitrage opportunities
• D) Risk-neutral default probabilities cannot be calculated from CDS spreads

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Definitions:

Footbinding

A historical Chinese custom where young girls' feet were tightly bound to alter their shape; considered a sign of beauty and status but also caused severe physical deformities and limitations.

Sociological Analysis

The practice of examining social phenomena, organizations, or patterns to understand human behavior within a societal context.

Cultural Norms

Cultural norms are shared expectations and rules that guide behavior within a society or group, shaping individuals' actions and interactions.

Anecdotal Evidence

Evidence based on personal stories or individual instances, rather than systematic research or statistical analysis, often considered less reliable.