Explain with an example why the equilibrium CDS spread is equal to a bonds credit...
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Explain with an example why the equilibrium CDS spread is equal to a bonds credit spread. In your example, assume a year BB bond is trading at the only risk on the bond is credit risk, a year Treasury is trading at and the spread on the CDS is Explain the equilibrium relation between credit spread, CDS spread, and probability of default.
Explain with an example why the equilibrium CDS spread is equal to a bonds credit spread. In your example, assume a year BB bond is trading at the only risk on the bond is credit risk, a year Treasury is trading at and the spread on the CDS is Explain the equilibrium relation between credit spread, CDS spread, and probability of default.
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