Assume that a company with several debt issues trading in the market files for bankruptcy (i.e., a
Question:
Assume that a company with several debt issues trading in the market files for bankruptcy (i.e., a credit event takes place). What is the cheapest-to-deliver obligation for a CDS contract where the reference bond is a five-year senior unsecured bond?
A. A subordinated unsecured bond trading at 20% of par
B. A five-year senior unsecured bond trading at 50% of par
C. A two-year senior unsecured bond trading at 45% of par
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C is correct The cheapesttodeliver or lowestpriced instrument is the twoyear senior u...View the full answer
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