Answer: Entering into a forward contract to buy WTI crude oil from a large oil producer at a fixed price.

Right-way risk occurs when the probability of counterparty default is negatively correlated with the exposure amount. In option C, when buying oil from a large oil producer at a fixed price, if oil prices rise (increasing your exposure), the oil producer becomes more profitable and less likely to default. This creates right-way risk because higher exposure coincides with lower default probability. In contrast: - Option A: Buying a put on the counterparty's stock creates wrong-way risk - if the stock price falls (increasing put value), the counterparty's credit quality deteriorates - Option B: Buying oil from an airline creates wrong-way risk - if oil prices rise (increasing your exposure), the airline becomes less profitable and more likely to default - Option D: Selling a put creates wrong-way risk - if the stock price falls (increasing your liability), the counterparty's credit quality deteriorates

Author: LeetQuiz .