A large AAA-rated German bank has a request from a Greek portfolio manager to provide a credit default swap for the manager's €5.5 million position in Greek sovereign bonds. What annual payment should the bank charge? Greek sovereign bonds have a 6% probability of default per annum and pay 70% of value in default.

Answer rating: 100% (QA)

Before beginning its important to clarify what a Credit Default Swap CDS is A CDS is a financial con... View the full answer