The table below shows the historical cumulative probabilities for corporate bonds with quality ratings of B Cumulative Probabilities Cumulative Probabilities a Determine the conditional default probabilities from the cumulative probabilities shown in the table b Given your probability calculations,...

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The table below shows the historical cumulative probabilities for corporate bonds with quality ratings of B: Cumulative

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The table below shows the historical cumulative probabilities for corporate bonds with quality ratings of B: Cumulative Probabilities

Cumulative Probabilities
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a. Determine the conditional default probabilities from the cumulative probabilities shown in the table.

b. Given your probability calculations, determine the values and spreads on a five-year CDS with a B-quality rating. Assume each swap has an $N P$ of $\$ 100$ and a recovery rate of $30 \%$ and that the appropriate discount rate is $6 \%$.

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Derivatives Markets And Analysis

ISBN: 9781118202692

1st Edition

Authors: R. Stafford Johnson

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Question Posted: Apr 26, 2024 05:00 AM

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The table below shows the historical cumulative probabilities for corporate bonds with quality ratings of B: Cumulative

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Year 1 2 3 4 5 12 6% 13% 20% 28% 36%

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Derivatives Markets And Analysis

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