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Just wanted to know if the quanto CDS hedge each other or not, if we assume that the quanto ratio is 100%(1).

Also, is it true that in stressed condition the volatility of CDS with home ccy decreases as compare to volatility of CDS with foreign ccy. If yes, what is the rationale.

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q1: Yes, even if you don't assume that the quanto factor is exactly 1, but you may to dynamically rehedge.

If your quanto CDS pricing model reports exposures to the dollar CDS spread and to the quanto factor assumption (which a good model does), then you can see the notionals and maturities of vanilla dollar CDS trades that would flatten both your jump-to-default risk and your sensitivity to the dollar CDS spread.

But as time goes by and interest rates and FX rates change, your exposures will no longer be flat and will need more vanilla dollar CDS trades to flatten again.

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