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Answer: Watchlist reviews for ratings downgrades
**Correct Answer: C** **Explanation:** C is correct. Hull, Predescu, and White (2004) looked at the impact of rating changes on credit default swap spreads and found that watchlist reviews for a downgrade contain significant information, but downgrades and negative outlooks do not. Positive rating events were much less significant. Generally, credit default swap changes seem to anticipate rating changes. A, B, and D are incorrect per the explanation for C above.
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According to the study by Hull, Predescu, and White examining the impact of rating changes on credit default swap spreads, which of the following ratings actions is found to have the greatest impact on credit default swap spreads when announced?
A
Watchlist reviews for ratings upgrades
B
Ratings upgrades
C
Watchlist reviews for ratings downgrades
D
Ratings downgrades