23-58 a Contract Whose Payoff Increases as a Yield Spread

question 113

Multiple Choice

23-58 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:

Tax System

A framework of policies governing how taxes are collected from individuals and businesses by a governing authority.

Disproportionate

Significantly uneven or out of balance in comparison to something else.

Excise Tax

A tax imposed on specific goods, services, or transactions, often aimed at reducing their consumption or generating revenue.

Polluting Firms

Companies that release pollutants into the environment as a byproduct of their activities, often subject to regulation and mitigation measures.