1. A credit forward is a forward agreement that
hedges against a decrease in default risk on a loan after the loan rate is determined and the loan issued.
hedges against an increase in default risk on a loan before the loan rate is determined and the loan issued.
hedges against an increase in default risk on a loan after the loan rate is determined and the loan issued.
hedges against a decrease in default risk on a loan before the loan rate is determined and the loan issued.
hedges against an increase in default risk on a loan after the loan rate is determined and before the loan is issued.
2. Which of the following shows the change in the value of a put option for each $1 change in the underlying bond?
Open interest.
Volatility.
Delta.
Basis.
Sigma.