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In 2 0 2 3 , as a bond portfolio manager, you owned $ 1 million worth of Rite Aid bonds. Because you were concerned
In as a bond portfolio manager, you owned $ million worth of Rite Aid bonds. Because you were concerned about the credit risk of Rite Aid, you bought $ million worth of credit default swaps on Rite Aid. Rite Aid filed for bankruptcy in October Your CDS called for cash settlement. Suppose bondholders can recover cents on the dollar on the cheapest deliverable bond. Thus, the recovery rate is How much will you receive from the CDS seller under the cash settlement?
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1 Calculate the loss on the Rite Aid bonds You owned 1 million worth of Ri...
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
13th edition
1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099
