A credit default swap requires a premium of 70 basis points per year paid semiannually. The principal
Question:
A credit default swap requires a premium of 70 basis points per year paid semiannually. The principal is \($350\) million and the credit default swap is settled in cash. A default occurs after five years and two months, and the calculation agent estimates that the price of the reference bond is 50% of its face value shortly after the default. Please list the cash flows and their timing for the seller of the credit default swap.
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To determine the cash flows and their timing for the seller of the credit default swap CDS we need to consider the premium payments made by the CDS se...View the full answer
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Douglas Makokha
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Related Book For 
Quantitative Finance
ISBN: 9781118629956
1st Edition
Authors: Maria Cristina Mariani, Ionut Florescu
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