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A 4-year credit default swap (CDS) specifying physical delivery defaults at the end of two years. If the reference asset is a $100 million, 8.0% ABC corporate bond, and the CDS spread is 125 basis points, the buyer of the CDS will: A. receive payments of 800 basis points for the next two years. B. deliver the bond and receive a payment of $100 million. C. receive a payment of $167.5 million. D. continue to receive payments of 675 basis points for the next two years. |