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Chris Taylor
Chris Taylor
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If it is a single name CDS, the transaction leaves the bank short the credit spread of that bond vs a risk-free bond in the same currency.

To go long the spread, the bank would i) buy the same CDS from another bank or ii) sell short the same bond, and get rid of general interest rate risk by going long a risk-free bond (or interest rate swap) of the same tenor.

If it is a single name CDS, the transaction leaves the bank short the credit spread of that bond vs a risk-free bond in the same currency.

To go long the spread, the bank would i) buy the same CDS from another bank or ii) sell short the same bond, and get rid of general interest rate risk by going long a risk-free bond of the same tenor.

If it is a single name CDS, the transaction leaves the bank short the credit spread of that bond vs a risk-free bond in the same currency.

To go long the spread, the bank would i) buy the same CDS from another bank or ii) sell short the same bond, and get rid of general interest rate risk by going long a risk-free bond (or interest rate swap) of the same tenor.

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ZRH
ZRH
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If it is a single name CDS, the transaction leaves the bank short the credit spread of that bond vs a risk-free bond in the same currency.

To go long the spread, the bank would i) buy the same CDS from another bank or ii) sell short the same bond, and get rid of general interest rate risk by going long a risk-free bond of the same tenor.