) THE CURRENT POTENTIAL CREDIT LOSS OF THE BANK'S CALL OPTION POSITION IS CLOSEST TO

5.) The current potential credit loss of the bank's call option position is closest to:

A.

$0.

B.

$30.

C.

$35.

Answer = C

A failure (e.g., bankruptcy) of the option seller would mean the option holder (the bank)

would lose the entire market value of $35.

“Risk Management,” by Don M. Chance, Kenneth Grant, and John Marsland