A French company files for bankruptcy, triggering various CDS contracts. It has two series of senior bonds

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A French company files for bankruptcy, triggering various CDS contracts. It has two series of senior bonds outstanding: Bond A trades at 30% of par, and Bond B trades at 40% of par. Investor X owns €10 million of Bond A and owns €10 million of CDS protection. Investor Y owns €10 million of Bond B and owns €10 million of CDS protection.


Explain whether Investor Y would prefer to cash settle or physically settle his CDS contract or whether he is indifferent.

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Fixed Income Analysis

ISBN: 9781119850540

5th Edition

Authors: Barbara S. Petitt

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