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The 5-year credit-default swaps on Argentina jumped 200 basis points to 1,850 basis points according to Credit Monitoring Arrangement data (CMA). Assuming a recovery rate
The 5-year credit-default swaps on Argentina jumped 200 basis points to 1,850 basis points according to Credit Monitoring Arrangement data (CMA). Assuming a recovery rate of 60 percent, identify the chance of default within five years. Make appropriate assumptions if necessary. Explain the formulae you use. (15 marks)
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