Question: Problem 2.2: Bootstrapping the hazard rates from CDS spreads Consider a Credit Default Swap with maturity 2 years, paying a premium with semi-annual frequency. Assume

Problem 2.2: Bootstrapping the hazard rates from CDS spreads Consider a

Problem 2.2: Bootstrapping the hazard rates from CDS spreads Consider a Credit Default Swap with maturity 2 years, paying a premium with semi-annual frequency. Assume that defaults can occur only at times 0.25 years, 0.75 ycars, 1.25 years and 1.75 ycars. The CDS spread is 150 basis points. Assume that the risk-free interest rate is 5% and the recovery rate is 30%. What is the hazard rate of the reference name? Assume a constant hazard rate for the entire maturity of the CDS Problem 2.2: Bootstrapping the hazard rates from CDS spreads Consider a Credit Default Swap with maturity 2 years, paying a premium with semi-annual frequency. Assume that defaults can occur only at times 0.25 years, 0.75 ycars, 1.25 years and 1.75 ycars. The CDS spread is 150 basis points. Assume that the risk-free interest rate is 5% and the recovery rate is 30%. What is the hazard rate of the reference name? Assume a constant hazard rate for the entire maturity of the CDS

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