Multiple Choice
Which of the following happens when the default correlation of the companies underlying a CDO increases?
A) The value of the senior tranche and the equity tranche to the protection buyer both increase
B) The value of the senior tranche and the equity tranche to the protection buyer both decrease
C) The value of the senior tranche to the protection buyer decreases and the value of the equity tranche to the protection buyer increases
D) The value of the senior tranche to the protection buyer increases and the value of the equity tranche to the protection buyer decreases
Correct Answer:
Verified
Correct Answer:
Verified
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