A Contract Whose Payoff Increases as a Yield Spread Increases

question 59

Multiple Choice

A contract whose payoff increases as a yield spread increases above some stated exercise spread is a

• A)put option.
• B)call option.
• C)digital default option.
• D)futures option.
• E)credit spread call option.

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Definitions:

Shortage

A condition where there's more market demand for a product or service than what is supplied.

Equilibrium Price

The rate at which the volume of goods available meets the volume of goods sought.

Surpluses

The amount by which supply exceeds demand, often referring to goods, services or public finances.

Shortages

A situation where the demand for a product or service exceeds the supply available at a specific price.