Question
Assume an investor holds $10 million of credit protection on a company with the following debt issues trading in the market. A 5-year senior unsecured
Assume an investor holds $10 million of credit protection on a company with the following debt issues trading in the market.
A 5-year senior unsecured bond trading at 66% of par.
A 1-year senior unsecured bond trading at 45% of par.
A 3-year subordinated unsecured bond trading at 23% of par.
The company files for bankruptcy.
What is cash settlement on the cheapest-to-deliver obligation for a senior CDS contract?
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Fundamentals Of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
16th Edition
0357517571, 978-0357517574
