NO.PZ202209060200004406
问题如下：
Based on Choate’s final comments and the COF portfolio positions in Exhibit 1, Choate is most likely expecting:选项：
A.improved real estate markets and higher interest rate volatility. B.lower interest rate volatility and increasing default correlations. C.lower interest rate volatility and decreasing default correlations.解释：
SolutionB is correct. Choate expresses his belief that market expectations of interest rate volatility will decrease, so he buys agency MBS in the COF portfolio. The correlation of expected defaults on the collateral of a CDO affects the relative value between the senior and subordinated tranches; as default correlations increase, the value of mezzanine tranches usually increases relative to the value of senior tranches. Because he expects the correlation to be highly positive, he can try to profit by selling the lower yielding (or selling short) Class A and buying the higher yielding Class B.
A is incorrect because an investor buying MBS expects lower, not higher, volatility.
C is incorrect because an investor that expects higher correlations would short Class A and go long Class B.
如题
