When using the percentage change in the credit spread as a measure of the credit spread change, what assumption is being made?
What will be an ideal response?
When using the percentage change in the credit spread as a measure of the credit spread change, one is assuming that the change in the credit spread is proportional to the level of the credit spread. This means that securities with wider spreads are likely to have larger spread changes than those with tight spreads.
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Indicate whether the statement is true or false