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U have a bond with a SD of 4 years and MV of 10,000,000. U SELL a CDS for a principal of 20,000,000 USD and
U have a bond with a SD of 4 years and MV of 10,000,000. U SELL a CDS for a principal of 20,000,000 USD and SD of 3 years. What will be the change in the entire package if the spread moves up by 30 bps.
Hint: Caclulate the MV add/loss of each component separately and then sum them together!
-300,000 | ||
-250,000 | ||
+230,000 | ||
NONE OF THE ABOVE! |
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