A First ÐTo-Default (FTD) Basket Pays Off When the First

question 18

Multiple Choice

A first Ðto-default (FTD) basket pays off when the first default occurs in the given basket of "names." The spread on a first-to-default basket is:

• A) At least the narrowest credit spread of all the names in the basket and at most the widest credit spread of all the names in the basket.
• B) Equal to the average credit spread across all the names in the basket.
• C) At least the widest credit spread of all the names in the basket and at most the sum of the credit spreads across all the names in the basket.
• D) Equal to the widest credit spread of all the names in the basket.

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Definitions:

Positive Emotions

Feelings that are generally beneficial to well-being and happiness, such as joy, gratitude, serenity, and interest.

Inflexible

characterizes an unwillingness or inability to change or adapt to new circumstances, ideas, or information.

Stereotyping

The act of assigning a set of characteristics to people based on their membership in a particular group, often oversimplifying and having negative connotations.

Perceptual Distortion

The misinterpretation or misperception of a real external stimulus, often influenced by an individual's mental state or preconceptions.