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:

Forces

Elements or factors that can influence the direction or outcome of actions, events, or processes within organizations or industries.

Autocratically

In a manner that involves absolute or dictatorial control, often referring to a leadership or governance style.

Crisis

A significant, unexpected, and potentially dangerous situation requiring immediate attention and action to prevent or mitigate damage.

Communicate

The act of conveying information, ideas, or feelings to others through speech, writing, or other forms of expression.