Regular credit default swap and a binary credit default swap

Reference no: EM131240265

a. Explain the difference between a regular credit default swap and a binary credit default swap.

b. A credit default swap requires a semiannual payment at the rate of 60 basis points per year. The principal is $300 million and the credit default swap is settled in cash. A default occurs after 4 years and 2 months, and the calculation agent estimates that the price of the cheapest deliverable bond is 40% of its face value shortly after the default. List the cash flows and their timing for the seller of the credit default swap.

Reference no: EM131240265

Questions Cloud

Determine the shaft and size fittings : Estimate the factor of safety if the allowable shear stress in the weld throat is 105MPa - What is the major problem that is inherited in such design? Propose and show graphically FOUR (4) designs which are able to reduce the problem stated above -..

Determine the magnitude and direction of the shearing stress : A layer of water flows down an inclined fixed surface with the velocity profile shown in Fig. P12.2. Determine the magnitude and direction of the shearing stress that the water exerts on the fixed surface for U = 3 m/s and h = 1 m.

Which sources were easiest to use and most beneficial : Which sources were easiest to use and most beneficial? Did they give salary ranges for the career you chose? Did they include educational requirements?

Explain the two ways a credit default swap can be settled : Explain the two ways a credit default swap can be settled. - Explain how a cash CDO and a synthetic CDO are created.

Regular credit default swap and a binary credit default swap : Explain the difference between a regular credit default swap and a binary credit default swap. - List the cash flows and their timing for the seller of the credit default swap.

Why does this occur and which resources are affected : When building a large Hopfield network consisting of many neurons, computer resources are being consumed very quickly. Why does this occur and which resources are affected?

Create an argument for allowing loss on a sales transaction : Create an argument for allowing a loss on a sales transaction between a controlled corporation and shareholder when the transaction includes an independent appraisal and the loss is similar to losses incurred in arm's length transactions

How much will you have in 20 years : Suppose you have $50,000 to invest today. If you can earn a 12 percent return and no additional annual savings, how much will you have in 20 years?

Explain fact that some people have better memories : Relate this to the human brain memory that contains about 100 billion neurons. How can you explain the fact that some people have better memories than others?

User Account

All Pages