Financial Risk Manager Part 2
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In the context of a company's balance sheet, which specific item correlates with the subordinated debt held by a hedge fund when the company is experiencing financial difficulties? Moreover, identify a market or corporate scenario that could potentially increase the expected return on the subordinated debt in question.
A
The subordinated debt acts like equity of the company, and a decrease in the volatility of the company's assets would increase the expected return on equity.
B
The subordinated debt acts like equity of the company, and an increase in the volatility of the company's assets would increase the expected return on equity.
C
The subordinated debt acts like callable debt of the company, and a decrease in the volatility of the company's assets would increase the expected return on callable debt.
D
The subordinated debt acts like callable debt of the company, and an increase in the volatility of the company's assets would increase the expected return on callable debt.