Portfolio Management Q176
0. Which of the following best describes an example of interactions among risks?
- A
Political events cause a decline in economic conditions and an increase in credit spreads.
- B
A stock in United States declines at the same time as a stock in Germany declines.
- C
A market decline makes a derivative counterparty less creditworthy, while causing it to owe more money on that derivative contract.
- Option : C
- Explanation : The conditions mentioned in A are directly linked and hence do not represent an interaction of risks. B indicates a global decline in equity values which is also not an interaction of risk. C represents an interaction between market risk and credit risk.
