A $100 Million CDO Has Tranches Running from Loss Ranges

question 10

Multiple Choice

A $100 million CDO has tranches running from loss ranges of: 0-3%, 3-7%, 7-10%, 10-15%, and greater than 15%. The 7-10% tranche may be stated equivalently as

• A) A long call on the CDO collateral at strike $10 million and a short call on the CDO collateral at strike $7 million.
• B) A long put on the CDO collateral at strike $10 million and a short put on the CDO collateral at strike $7 million.
• C) The value of the $3 million tranche plus a call spread consisting of a short call on losses at the 7% strike level and a long call at the 10% strike level.
• D) The value of the $3 million tranche minus a call spread consisting of a short call on losses at the 7% strike level and a long call at the 10% strike level.

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Definitions:

Cruelty to Animals

Involves actions or neglect that cause unnecessary harm, suffering, or distress to animals.

Anxious

Experiencing worry, unease, or nervousness, typically about an imminent event or something with an uncertain outcome.

Pervasive Developmental Disorders (PDDs)

A group of disorders characterized by delays in the development of socialization and communication skills, including autism and Asperger's syndrome.

Autism Spectrum Disorders

A range of developmental conditions characterized by challenges with social skills, repetitive behaviors, and communication, with symptoms and severities varying widely among individuals.