How does the role of a credit derivative differ from that of an interest-rate swap in terms of controlling risk?
Answer to relevant Questions(a) What is the advantage of a call provision for an issuer? (b) What are the disadvantages of a call provision for the bondholder? What is the cash flow of a seven-year bond that pays no coupon interest and has a par value of $10,000? Answer the below questions. (a) For a single-name credit default swap, what is the difference between physical settlement and cash settlement? (b) In physical settlement, why is there a cheapest-to-deliver issue? Answer the below questions. (a) What is an asset swap? (b)In pricing a single-name CDS, what information does the par asset swap market contain? Answer the below questions. (a) What is meant by a reference entity? (b) What is meant by a reference obligation?
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