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Posted on Jul 20, 2024

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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