In 2017, you purchased a 5-year 100 bp semi-annual coupon bond from AvalonBay Communities Inc at 101.4463 (YTM = 35.742 bp). At that time, you also purchased CDS on the bond whose premium was 70 bp (APR) of the bond's principal (quarterly settlement, annuity due). Calculate the market value of default risk on AvalonBay's bond when you purchased the CDS. It is the amount of money the market is willing to pay to remove any default risk. (Assume that there is no default in your calculation. Use the YTM as your discount rate. You may use the following annuity formula).

In 2017, you purchased a 5-year 100 bp semi-annual coupon bond from AvalonBay Communities Inc at 101.4463 (YTM = 35.742 bp). At that time, you also purchased CDS on the bond whose premium was 70 bp (APR) of the bond's principal (quarterly settlement, annuity due). Calculate the market value of default risk on AvalonBay's bond when you purchased the CDS. It is the amount of money the market is willing to pay to remove any default risk. (Assume that there is no default in your calculation. Use the YTM as your discount rate. You may use the following annuity formula). PV = 1 -7(1 +1) (1 + r) Enter all values and hit . 90 Actions - 90 Products - 42 View 91 Settings Credit Default Swap Valuation Cpty CDS CNTAPARTY Client " OCP OTC Ticker / WVB Series Deal a Load 34 Save 35 Refresh 14 Send to VCON/TR Deal Market Buy - Trade Date 05/23/17 Trd Sprd (bp) To.0009 1at Acer Start 03/20/17 - Backstop Date 03/24/17 Recovery Plate 0.40 Flat 1at Coupon 06/20/17 Coupon [bp) 100.000D Term Spread Prob Pen Coupon 03/21/22 Day Cut ACT/ 360 Fred 12/20/17 11.9200 0.0012 65/20/18 21.5800 0.0039 Maturity Pay Al True Date Gen 06/20/19 31 8500 0 0111 Use curve recovery rate True Business Days 05/20/20 438400 010227 Recovery Rate Bus Day Adj 1 Amrt 06/20/21 $7.3500 5/20/22 0.0595 Calculator IBDA Fair Value Model (Vie 06/20/24 94.9000 .1113 Cash Settled On 05/20/ 17 Valuation Date 05/23417 0 65/20/27 111.6300 0. 1801 Cash Calculated On 05/26/17 MTH -162,673 EDO NO- Repl Sord (bp) 70,0090 1) Convert upfront fee to spread Price 101 44631182) Spread DV01 4.879. 16 Frequency Quarterly IMH Principal IR DVO1 37.59 Day Count Accrued (65 Days) 18.056 Rec Risk (11) 49.77 Cash Amount -102 687 Def Exposure This application is based on the ISDA Sid Model vi, developed and supported in collaboration with Markit Group Led. 41585 EDT