The "Base" Correlation in a CDO Is

question 2

Multiple Choice

The "base" correlation in a CDO is

• A) The lowest correlation implied across all the tranches of the CDO.
• B) The correlation required to match the value of the collateral of the CDO.
• C) The average correlation of all implied tranche correlations.
• D) The correlation required to match total losses from the equity tranche to any particular loss tranche.

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