Mark Consider a CDs on a three-year bond. If the bond defaults, it will only be in the middle of a year. In the event of a default, the recovery rate is 40%. The risk-free rate is 10%. If the hazard rate is 2.90% for each of the three years estimate the CDS spread. (1) 1.96% b1839 1.72% 2.479 We 2.19% Mark Consider a CDs on a three-year bond. If the bond defaults, it will only be in the middle of a year. In the event of a default, the recovery rate is 40%. The risk-free rate is 10%. If the hazard rate is 2.90% for each of the three years estimate the CDS spread. (1) 1.96% b1839 1.72% 2.479 We 2.19%