Question
A company buys a credit default swap (CDS) that offers protection on 280000 of corporate bonds ay paying 38 basis points of the principal to
A company buys a credit default swap (CDS) that offers protection on €280000 of corporate bonds ay paying 38 basis points of the principal to the seller every four months. Default occurs after four years and one month, after which the bonds are worth 28% of their face value.
Ignoring interest rates, the net amount paid by the seller to the buyer over the lifetime of the CDS is € ___________
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Options Futures and Other Derivatives
Authors: John C. Hull
10th edition
013447208X, 978-0134472089
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