A Second-To-Default (STD) Basket Option Pays Off When Any One

question 18

Multiple Choice

A second-to-default (STD) basket option pays off when any one of the companies in a credit basket defaults. The price of the STD basket increases when

• A) The credit quality of any issuer in the basket improves.
• B) The correlation of default across names in the basket increases.
• C) The correlation of default across names in the basket decreases.
• D) The volatility of credit spreads for names in the basket decreases.

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Definitions:

Psychological Research

The systematic investigation of mental processes and behavior through observation, experimentation, and analysis.

Scientific Research

The systematic pursuit of knowledge involving the recognition and formulation of a problem, the collection of data through observation and experiment, and the formulation and testing of hypotheses.

Canadian Psychological Association (CPA)

The national association for the science, practice, and education of psychology in Canada, promoting psychology as a discipline and profession.

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The fundamental guidelines that dictate behavior, determining what is right and wrong in various contexts, such as in professional and personal settings.