Question
(b) Bank of City One has credit asset of $120 million with a spread of 85 basis points over HIBOR. (HIBOR is currently 1.77% p.a.)
(b) Bank of City One has credit asset of $120 million with a spread of 85 basis points over HIBOR. (HIBOR is currently 1.77% p.a.) Suppose Bank of City One has to pay 70 basis point of its credit asset value to CDS seller and the new risk weighting becomes 20%. Determine the ROE with the use of the CDS.
Additional information: The Bank aims to maintain 10.5% CAR and funding cost is HIBOR. Assume no reserve requirement.
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The Everything Guide To House Hacking
Authors: Robert Leonard
1st Edition
1507217196, 978-1507217191
