不理解

问题如下：

When Tundra entered into CDS 1 and 2, its view about the reference entity's credit curve was most likely that the curve would:

选项：

A.A.flatten.

B.B.remained unchanged.

C.C.steepen.

解释：

1. Correct because entering into CDS 1 and 2 together constitute a curve trade, which involves buying single-name or index protection at one maturity and selling protection in the same reference entity at a different maturity. A steeper curve means that long-term credit risk increases relative to short term credit risk. An investor who believes that long-term credit risk will increase relative to short-term credit risk (credit curve steepening) can buy protection by buying a long-term single-name CDS and sell protection by selling a short-term single-name CDS. On the other hand, a flatter curve means that long-term credit risk decreases relative to short term credit risk. An investor who believes that long-term credit risk will decrease relative to short-term credit risk (credit curve flattening) can sell protection by selling a long-term single-name CDS and buy protection by buying a short-term single-name CDS. This is the case of the curve trade entered into by Tundra. Therefore, its view about the reference entity's credit curve was that it would flatten.

2. Incorrect because, as explained in the rationale for the correct answer, with CDS 1 and 2, Tundra entered into a curve trade expecting that the reference entity's credit curve would flatten, not remain unchanged.

3. Incorrect because, as explained in the rationale for the correct answer, with CDS 1 and 2, Tundra entered into a curve trade expecting that the reference entity's credit curve would flatten, not steepen.

• describe the use of CDS to manage credit exposures and to express views regarding changes in the shape and/or level of the credit curve