Question: In an April 21, 2011 article in Bloomberg.com by Abigail Moses entitled, Greece, Portugal Sovereign Credit-Default Swaps Jump to Records,(www.bloomberg.com/news/2011-04-21/greece-portugal-sovereign-credit-default-swaps-jump-to-records.html), the following statement appears: Credit-default

In an April 21, 2011 article in Bloomberg.com by Abigail Moses entitled, “Greece, Portugal Sovereign Credit-Default Swaps Jump to Records,”(www.bloomberg.com/news/2011-04-21/greece-portugal-sovereign-credit-default-swaps-jump-to-records.html), the following statement appears:
“Credit-default swaps on Greece jumped 40 basis points to 1,340 basis points according to CMA, signaling a 68 percent chance of default within five years.”
(a) How is the “68 percent chance of default” obtained?
(b) What assumptions must be made to use this estimate of default?

Step by Step Solution

★★★★★

3.48 Rating (165 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a The 68 percent chance of default can be obtained from relations that back out default probabilitie... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

518-B-C-F-B-V (1095).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

What assumptions must be made about the realization of undistributed subsidiary income when the affiliates file separate income tax returns? Why?

What assumptions must be met in order to carry out a t test about a population mean?

What assumptions must be satisfied in order to use the methods presented in this section?

How does technology, specifically management information systems, play a significant role in the sustainability and competitive advantage of the company? Describing the reasoning, providing details...

IRA Method Tanya Hayworth was employed as a training and curriculum specialist at the child development center ("CDC") owned by and operated on the campus of a large corporation. The CDC provided...

1. Make a PESTLE Analysis of Opportunities and Threats 2. Make a Porter's 5 Forces of Competitive Advantage 3. Make an EFE Matrix Analysis 4. Make an internal analysis sing the VRIO framework. 5....

Can you continue making the VRIO framework and describe its resources and capabilities in the 4 functional areas of management? Resources Valuable Rare Inimitable Well-Organized 7-3 "By selling...

CHAPTER 8 Criminal Law and Procedure 333 plastic containing axle grease. A total of $2,164,431.00 in cash was found inside the truck. establishing a connection between the currency and A laptop...

1. On April 21, 2011, Karla started working as a cook at McDonald's, Karla's salary started at $8.75 per hour (then the minimum wage in BC), and by 2021 had reached $15.20 per hour (also basically...

On April 21, 2011, Karla started working as a cook at McDonalds. Karlas salary started at $8.75 per hour (then the minimum wage in BC), and by 2021 had reached $15.20 per hour (also basically minimum...

Which substance is oxidized and which substance is reduced in this reaction? 2Li(s) + O2(g) ( Li2O2(s)

FlyJet Airways instituted a frequent flyer program in which passengers accumulate points toward a free flight based on the number of miles they fly on the airline. One point was awarded for each mile...

15.17 Attitudes toward secondhand stores. To study customers attitudes toward secondhand stores, researchers interviewed samples of shoppers at two secondhand stores of the same chain in two cities....

Suppose that you manage a bank that has made many loans at a fixed interest rate. You are worried that inflation might rise and the value of the loans will decline. a. Why would an increase in...

The founder of Alchemy Products Inc. discovered a way to turn gold into lead and patented this new technology. He then formed a corporation and invested $200,(XX) in setting up a production plant. He...

Here is a simplified balance sheet for Caterpillar Tractor: Caterpillar has 657 million shares outstanding with a market price of $83 a share. a. Calculate the company's market value added. b....

Salad Daze maintains an inventory of produce worth $400. Its total bill for produce over the course of the year was $73,000. How old on average is the lettuce it serves its customers?

A(n) eight-year bond has a yield of 9% and a duration of 7.204 years. If the bond's yield increases by 50 basis points, what is the percentage change in the bond's price? (Input the value as a...

Check My Work (2 remaining) eBook Given the graphs above, calculate the total fixed costs, variable costs per unit, and sales price for Firm A. Firm B's fixed costs are $120,000, its variable costs...

What is the beta? Is it larger than one or smaller than one? Why do you think it's larger or smaller than 1 ( hint: consider the industry ) ? I am choosing mIcrosoft corporatoon. The beta is 0 . 8 8...