PM of ABC company is worried that Company D will be downgraded and Company E will trade off due to poor financials (spread will get worse). What credit options are apppropriate: a. buy a binary call option on Company D and a credit spread put option on company E b. buy a binary put option on Company D and a credit spread put option on company E c. buy a binary put option on Company D and a credit spread call option on company E
C for sure
C, too.
I will take the physical challenge.
real tough question. We finally get a question posted but its a doosey
SkipE99 Wrote: ------------------------------------------------------- > I will take the physical challenge. lol
Pardon me, why not B?
Oal29 Wrote: ------------------------------------------------------- > Pardon me, why not B? Correct answer is ācā. A credit spread put option for E will be useful if you believe that the spreads will decline and not widen.
A credit spread call option has the spread as underlying. As the spread increases, so does the call value,