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Part II
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Credit Risk
Credit Risk
Hard
A bank buys a put option from an oil-producing company on the oil price. This position most likely exhibits:
A
Wrong-way risk, because a drop in oil prices increases both the option's value and the counterparty's default probability
B
Right-way risk, because a drop in oil prices reduces the option's value
C
No directional credit risk, because options are always fully collateralized
D
Right-way risk, because oil-producing companies benefit from lower oil prices
Select an answer to continue
Tags
#wrong-way-risk
#specific-wwr
#counterparty-risk
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FRM Part II — Credit Risk Practice Question | AcadiFi | AcadiFi