A credit default swap requires a semi annual payment at the rate of 200 basis points per year. The principal is $1 billion and the credit default swap is settled in cash. A default occurs after four years and two months, and the calculation agent estimates that the price of the cheapest deliverable bond is 60% of its face value shortly after the default. List the cash flows and their timing for the seller of the credit default swap..

A credit default swap requires a semi annual payment at the rate of 200 basis points per year. The principal is $1 billion and the credit default swap is settled in cash. A default occurs after four years and two months, and the calculation agent estimates that the price of the cheapest deliverable bond is 60% of its face value shortly after the default. List the cash flows and their timing for the seller of the credit default swap..

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 2EP

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