A credit default swap provides protection on bonds with principal value of $100 million. The...
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A credit default swap provides protection on bonds with principal value of $100 million. The CDS spread is 80 basis points per year paid semiannually, that is through payments of 40 basis points every six months. The CDS is settled in cash. A default occurs after 1 year and nine months. The price of the cheapest to deliver bond is 45% of tis face value shortly after the default. What are the cash flows of the CDS from the perspective of the CDS buyer? List each amount with its timing
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