A Derivatives Dealer Has a Single Transaction with a Company

question 7

Multiple Choice

A derivatives dealer has a single transaction with a company which is a long position in a five-year option.The Black-Scholes-Merton value of the option is $6.Suppose that the credit spread on five-year bonds issued by the company is 100 basis points.What is the dealer's CVA per option purchased from the counterparty?

• A) $0.19
• B) $1.19
• C) $0.29
• D) $1.29

Grasp the concept and stages of cultural eutrophication.

Recognize the significance of specific pollutants (e.g., nitrates, phosphates) and their control measures.

Understand the importance of water quality indicators.

Gain insights into the challenges and approaches in water pollution management and prevention.

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Definitions:

Stock Exchange

A marketplace where securities, such as stocks and bonds, are bought and sold.

Capital Markets

Financial markets where long-term debt or equity-backed securities are bought and sold, facilitating the raising of capital and investment.

Loss Contingency

A potential financial loss that might occur in the future, dependent on the outcome of a specific event, recorded in accounting if it is probable and the amount can be reasonably estimated.

U.S. GAAP

United States Generally Accepted Accounting Principles, the collection of rules and procedures designed to ensure consistency and transparency in financial reporting.