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EEE Bank owns $31,000 worth of bonds issued by ZZZ Corp. 3-year credit default swaps on this firm have a spread of 115 basis points.
EEE Bank owns $31,000 worth of bonds issued by ZZZ Corp. 3-year credit default swaps on this firm have a spread of 115 basis points. The bonds held by EEE Bank have a 55% expected recovery rate. If the recovery rate for the swap had been pre- set to 55%, what notional principal of this CDS should the bank go long to hedge the credit risk of these bonds over the next 3 years? EEE Bank owns $31,000 worth of bonds issued by ZZZ Corp. 3-year credit default swaps on this firm have a spread of 115 basis points. The bonds held by EEE Bank have a 55% expected recovery rate. If the recovery rate for the swap had been pre- set to 55%, what notional principal of this CDS should the bank go long to hedge the credit risk of these bonds over the next 3 years
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