Question: Assume u have a portfolio with Spread duration = 4 and MV of 100,000,000. U buy a CDS with a spread duration of 2 year

Assume u have a portfolio with Spread duration = 4 and MV of 100,000,000. U buy a CDS with a spread duration of 2 year and principal of 200,000,000 what will be the approximate return of the portfolio ( CDS + portfolio ) if ur spread moves up by 100 bps?

Hint: Do the calc of the MV change in CDS for the portfolio and CDS and then add them together!

0 bps

-20 bps

+20 bps

None of the Above

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