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:

-Ectasis

A suffix indicating dilation or expansion of a hollow organ or vessel.

Cardiotonic

A substance that increases the contractility of the heart muscle, improving its performance.

Vasodilator

A substance that causes blood vessels to expand, increasing blood flow; used in the treatment of conditions like hypertension.

Vasopressor

A type of medication that causes blood vessels to narrow, raising blood pressure.