Consider a CDS on a three-year bond. If the bond defaults, It will only be in the middie of a year. In the event of a default, the recovery rate is 40%. The risk-free rate is 10%. If the hazard rate is 2.90% for each of the three years, estimate the CDS spread. Oa 1.96% Ob 1.83% OC 172% Od 247% Oe. 219%
Consider a CDS on a three-year bond. If the bond defaults, It will only be in the middie of a year. In the event of a default, the recovery rate is 40%. The risk-free rate is 10%. If the hazard rate is 2.90% for each of the three years, estimate the CDS spread. Oa 1.96% Ob 1.83% OC 172% Od 247% Oe. 219%
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 11P
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