If You Expect Default Correlations to Increase in the Future,what

question 6

Multiple Choice

If you expect default correlations to increase in the future,what trade might you engage in to profit from this view?

• A)Buy the senior tranche of a CDO.
• B)Buy a second-to-default basket option and sell a first-to-default basket.
• C)Sell a second-to-default basket option and buy a first-to-default basket.
• D)Short the equity tranche of a CDO.

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