Question
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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Lessons In Corporate Finance
Authors: Paul Asquith, Lawrence A. Weiss
2nd Edition
1119537835, 978-1119537830
