A contract that pays the par value of a loan in the event of default is a
A)put option.
B)call option.
C)digital default option.
D)futures option.
E)credit spread call option.

Name: A contract that pays the par value of a loan in the event of default is a A)put option. B)call option. C)digital default option. D)futures option. E)credit spread call option.
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Question

Quizplus · Accepted Answer

A digital default option pays the par value of a loan if the borrower defaults, acting as a form of credit protection for the lender.

A Contract That Pays the Par Value of a Loan