Question
Gertrude works as a credit analyst at DFL&T, a reputable rating agency. In order to get a sense of what the markets are thinking about
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Gertrude works as a credit analyst at DFL&T, a reputable rating agency. In order to get a sense of what the markets are thinking about Brazil she calls her buddy Wynthrop, a sovereign bond trader at Bartlays. Wynthrop told her that if Brazil does not default on its external debt, then Brazil's USD 10-year sovereign bond would trade at a spread of 500bp over Treasuries; and if Brazil defaulted, the spread would widen to 2,000. Wynthorp adds that the 10-year is currently trading at 800bp. Based on this information, what number should Gertrude use for the implied market probability of of a sovereign default by Brazil?
a. 50%
b. 20%
c. 25%
d. 80%
Gertrude works as a credit analyst at DFL&T, a reputable rating agency. In order to get a sense of what the markets are thinking about Brazil she calls her buddy Wynthrop, a sovereign bond trader at Bartlays. Wynthrop told her that if Brazil does not default on its external debt, then Brazil's USD 10-year sovereign bond would trade at a spread of 500bp over Treasuries; and if Brazil defaulted, the spread would widen to 2,000. Wynthorp adds that the 10-year is currently trading at 800bp. Based on this information, what number should Gertrude use for the implied market probability of of a sovereign default by Brazil?
| a. | 50% | |
| b. | 20% | |
| c. | 25% | |
| d. | 80% |
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Your Financial Well Being How To Get Your Financial Well Being With Smart Spending Habits
Authors: Fransisca Patten
1st Edition
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