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Assume u have a portfolio with Spread duration = 4 and MV of 100,000,000. U buy a CDS with a spread duration of 2 year
Assume u have a portfolio with Spread duration = 4 and MV of 100,000,000. U buy a CDS with a spread duration of 2 year and principal of 200,000,000 what will be the approximate return of the portfolio ( CDS + portfolio ) if ur spread moves up by 100 bps?
Hint: Do the calc of the MV change in CDS for the portfolio and CDS and then add them together!
0 bps
-20 bps
+20 bps
None of the Above
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