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Fixed Income homework A CDS is traded on a 10-year 8% coupon corporate bond as reference obligation. The CDS trades at a credit spread of

Fixed Income homework

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A CDS is traded on a 10-year 8% coupon corporate bond as reference obligation. The CDS trades at a credit spread of 650 basis points. The CDS has a duration of 9 years. The high-yield referenced obligation has a CDS coupon of 5%. 10-year US Treasuries yield is 1.3%. (a) What is the upfront premium on this CDS? (b) How would you perform a basis trade and what is the additional return

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