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19. Firm A buys CDS from AIG. The notional amount is 1 million USD. The reference entity is firm B. The swap premium is
19. Firm A buys CDS from AIG. The notional amount is 1 million USD. The reference entity is firm B. The swap premium is 3%, payable at the end of each quarter. Suppose firm B defaults on January 31. The current price of firm B's bond is $200 (out of $1,000). a. What actions each party needs to do if cash settlement? For cash flows, please write down the numbers. b. What actions each party needs to do if physical settlement? For cash flows, please write down the numbers.
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Settlement of Credit Default Swap CDS Scenario Firm A bought a CDS on Firm B from AIG Firm B default...
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Bond Markets Analysis and Strategies
Authors: Frank J.Fabozzi
9th edition
133796779, 978-0133796773
