Question: A large AAA-rated German bank has a request from a Greek portfolio manager to provide a credit default swap for the manager's 5.5 million position

A large AAA-rated German bank has a request from a Greek portfolio manager to provide a credit default swap for the manager's €5.5 million position in Greek sovereign bonds. What annual payment should the bank charge? Greek sovereign bonds have a 6% probability of default per annum and pay 70% of value in default.

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