The Difference Between Implied Correlation and Base Correlation in CDOs

question 17

Multiple Choice

The difference between implied correlation and base correlation in CDOs is that

• A) Base correlation is the smallest correlation implied across all tranches of a CDO.
• B) Base correlation is the correlation of cumulative sets of tranches starting with the equity tranche, whereas implied correlation is for single tranches only.
• C) All base correlations are implied, but not all implied correlations are base correlations.
• D) Base correlation is historical and implied correlation is computed using tranche prices at a point in time.

Recognize the importance of lifestyle changes in mental health.

Understand the role and mechanism of antianxiety drugs in treating anxiety and their potential side effects, including addiction.

Comprehend the application and effects of selective serotonin reuptake inhibitors (SSRIs) in elevating mood and their therapeutic use in depression.

Identify the uses and limitations of antipsychotic drugs in treating schizophrenia and related side effects such as tardive dyskinesia.

---

Definitions:

Monohybrid Cross

Cross between two individuals identically heterozygous for one gene; for example Aa × Aa.

Purebred

An animal bred from parents of the same breed or variety, maintaining specific desired traits over many generations.

Genotype

The particular set of alleles that is carried by an individual’s chromosomes.

Black Coat Color

A genetic trait determined by the specific alleles in an organism that result in a black pigmentation of the fur or skin.