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Risk in CDS price is reflective of
Suggested Answer: A
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14 comments · newest first
EL
Elke
10 months ago
B could also be a factor, but not as directly related.
CA
Carin
11 months ago
I agree, A makes the most sense here.
ET
Ettie
11 months ago
Definitely A, higher default risk drives CDS prices up.
AL
Altha
11 months ago
Wait, are we sure about A? Seems too straightforward.
SH
Shawn
11 months ago
C is just wrong, lower default risk would lower prices!
TR
Tresa
11 months ago
I’m uncertain, but I think recovery rates might play a role too. I just can’t recall if they directly impact CDS pricing like the others do.
CA
Carmen
12 months ago
I feel like option C is not right since a decrease in default probability would usually lower CDS prices, not reflect risk.
MA
Madelyn
12 months ago
I remember practicing a question about how interest rates affect CDS prices, but I’m not sure if that’s the main factor here.
AD
Adelle
1 year ago
I think the risk in CDS price is mostly tied to the probability of default, so I’m leaning towards option A.
RA
Ranee
1 year ago
I'm pretty confident on this one. The CDS price reflects the market's assessment of default risk, so an increase in the probability of default would lead to a higher CDS price. I'll select option A.
DE
Desire
1 year ago
Wait, I'm a bit confused. Isn't the CDS price also affected by interest rates and recovery rates? I'll have to review my notes to make sure I understand the relationship between all these factors.
YO
Yong
1 year ago
Okay, I think I've got this. The CDS price goes up when the probability of default increases, since that means the risk is higher. So the correct answer must be A.
DE
Deane
1 year ago
Hmm, I'm not totally sure about this one. I know the CDS price is affected by default risk, but I'm not certain if it's the increase or decrease in probability of default that matters. I'll have to think this through carefully.
BE
Benton
1 year ago
This one seems pretty straightforward. The CDS price is directly related to the probability of default, so I'll go with option A.