A Digital Default Option Is

question 24

Multiple Choice

A digital default option is

• A)an option that pays the par value of a loan in the event of default.
• B)a call option whose payoff increases as a yield spread increases above a stated exercise spread.
• C)a call option on the loss ratio incurred in writing catastrophe insurance with a capped (or maximum) payout.
• D)None of the listed options are correct.

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Definitions:

Nuclear Energy

Energy released during nuclear fission or fusion, especially when used to generate electricity.

Electricity

A form of energy resulting from the existence of charged particles such as electrons or protons, characterized by its ability to perform work, such as powering electrical devices.

BTUs

Stands for British Thermal Units, a unit of measure used to describe the heat value of fuels or energy sources.