23.8. Suppose that the risk-free zero curve is flat at 7% per annum with continuous compounding and...
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23.8. Suppose that the risk-free zero curve is flat at 7% per annum with continuous compounding and that defaults can occur halfway through each year in a new five-year credit default swap. Suppose, further, that the recovery rate is 30% and the hazard rate is 3%.
Estimate the credit default swap spread. Assume payments are made annually.
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