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:

Illegal

Activities or actions that are prohibited by law and subject to penalties.

Fort Worth, TX

A city in the U.S. state of Texas, known for its rich history in the cattle ranching industry and vibrant cultural scene.

Stockyards

Designated areas where livestock are held temporarily before being slaughtered, sold, or shipped to another location.

Ranch Hands

Workers responsible for the maintenance and operations of a ranch, including caring for livestock.