An article in the Wall Street Journal observes that at a time when the volatility in stock prices had declined, a measure of the price of options designed to protect against stock declines, has fallen dramatically." Why would we expect options prices to fall when the volatility of stock prices falls OA. When the market becomes less volatile investors look to protect profits by purchasing more options. This increase in demand for options causes their price to fall OB. Options are most profitable when there are large changes in stock prices either above or below the strike price. If volatility decreases then demand for options decreases causing option prices to fall OC. When the market becomes less volatile providing options through option writers becomes less profitable. This results in a decrease in supply of options causing their price to fall. D. When the market becomes less volatile, investors become more concerned about losses than profits causing options to become more attractive to investors. This increases demand for options causing their price to fall. An article in the Wall Street Joumal refers to the financial firms that sold credit default swaps on homebuilder Hovnanian to the Blackstone Group as having sold Blackstone "insurance." In what sense are credit default swaps a type of insurance? An investor (buyer) pays a premium to the seller of a credit default swap (CDS) to guarantee positive returns for an asset such as a bond, The investor would onl receive money back from the seller if the asset the CDS covers loses value due to guarantee positive returns cover default risk cover interest rate risk An article in the Wall Street Journal refers to the financial firms that sold credit default swaps on homebuilder Hovnanian to the Blackstone Group as having sold Blackstone "insurance In what sense are credit default swaps a type of insurance? An investor (buyer) pays a premium to the seller of a credit default swap (CDS) to guarantee positive returns for an asset such as a bond. The investor would only receive money back from the seller if the asset the CDS covers loses value due to interest rate changes in the market suffers a default or decline in value earns below average profits loses value due to interest rate changes in the market