Use the following information for the next two questions: 3. A credit default swap...
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Use the following information for the next two questions: A credit default swap requires a semiannual payment at the rate of basis points per year. The principal is $ million and the credit default swap is settled in cash. A default occurs after three years and one months, and the calculation agent estimates that the price of the cheapest deliverable bond is of its face value shortly after the default. What is the amount of the semiannual payment to the seller of the credit default swap? How much does the seller of the credit default swap have to pay at the time of the default?
Use the following information for the next two questions:
A credit default swap requires a semiannual payment at the rate of basis points per year. The principal is $ million and the credit default swap is settled in cash. A default occurs after three years and one months, and the calculation agent estimates that the price of the cheapest deliverable bond is of its face value shortly after the default. What is the amount of the semiannual payment to the seller of the credit default swap?
How much does the seller of the credit default swap have to pay at the time of the default?
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