If You Are Interested in Speculating on a Deterioration in the Credit

question 25

Multiple Choice

If you are interested in speculating on a deterioration in the credit quality of a company, which of the following would be appropriate?

• A) Buy the bonds of the company.
• B) Short the forwards on the credit spread of the company.
• C) Buy credit spread call options on the company's bonds (i.e., options that pay off if the spread widens).
• D) Sell put options on the company's bonds.

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