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:

Oxygen Balance

A concept in chemistry that helps in assessing the degree to which an explosive can be oxidized; it measures the relative amounts of oxygen and combustible elements in a compound.

Explosive

A reactive substance that contains a great amount of potential energy and can produce an explosion when released suddenly, usually accompanied by the generation of light, heat, sound, and pressure.

Explosions

Explosions are rapid expansions of matter resulting in a quick release of energy, often accompanied by the production of heat, light, sound, and shock waves.

Oxygen Source

An entity or process that produces or supplies oxygen, necessary for the survival of most life forms on Earth.