Suppose you purchased $100 million notional of a bond at a price of 75. Assume the...
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Suppose you purchased $100 million notional of a bond at a price of 75. Assume the recovery rate on this bond is 60% (assume this is known with certainty). How many CDS (in notional) do you need to purchase to hedge the default risk of this position (assume the CDS are physically settled)? Suppose you purchased $100 million notional of a bond at a price of 75. Assume the recovery rate on this bond is 60% (assume this is known with certainty). How many CDS (in notional) do you need to purchase to hedge the default risk of this position (assume the CDS are physically settled)?
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Related Book For
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
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