Is it possible for a company to sell protection on their own assets or own country bonds by CDS? The company can buy protection on those assets, but how about selling? I suppose it can not sell. Is there any paper, writing about the subject? Thanks.
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$\begingroup$ You might look up the term "wrong way risk". $\endgroup$– nbbo2Commented Nov 21, 2017 at 21:32
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First, I would emphasize that default protection is bought and sold on debt securities , not on assets. To answer your question, you cannot sell protection on your own debt. You can sell protection on sovereign debt, including the sovereign where your company is based. However, the buyer of this protection understands that there may be a high correlation between the default of the sovereign and the default of your company (the so called wrong way risk mentioned by @noob2), so the price they pay for this protection may be a discount to the full market price.
