An investor wants to be long the credit risk of a given company. The companys bond currently
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An investor wants to be long the credit risk of a given company. The company’s bond currently yields 6% and matures in five years. A comparable five-year CDS contract has a credit spread of 3.25%. The investor can borrow at Libor, which is currently 2.5%.
Identify a basis trade that would exploit the current situation.
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The bond and CDS markets imply different credit sp...View the full answer
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