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A CDS is traded on a 10-year 8% coupon corporate bond as reference obligation. The CDS trades at a credit

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A CDS is traded on a 10-year 8% coupon corporate bond as reference obligation. The CDS trades at a credit spread of 650 basis points. The CDS has a duration of 9 years. The high-yield referenced obligation has a CDS coupon of 5%. 10-year US Treasuries yield is 1.3%. 


(a) What is the upfront premium on this CDS? 


(b) How would you perform a basis trade and what is the additional return?

Expert Answer:

Answer rating: 100% (QA)

a To calculate the upfront premium on this CDS we can use the formula Upfront Premium Credit Spread View the full answer


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Income Tax Fundamentals 2013

Income Tax Fundamentals 2013

ISBN: 9781285586618

31st Edition

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill

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Posted Date: September 24, 2023 06:58:36
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