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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 ...


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Yes, 42.520bp means its the spread of the CDS. The lower the CDS, the lower the premium of the sovereign entity and the less likely it will default. This is overly simplistic but gives you a sense of where the CDS comes from: Expected Loss = Probability of Default * (1 - Recovery Rate) * Default Exposure. The expected loss is the CDS premium you have to ...


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There are two kinds of credit risk: jump to default (JTD) and the CDS spread delta (CS01). If you're long a corporate bond, and you bought CDS protection on the sovereign, and the corporate bond defaults, then you don't have an effective JTD hedge. So let's just focus on CS01 hedge. Assume for simplicity that all the bonds are USD-denominated and that you ...


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I'm not sure if I understood your question right. What is a CDS? "agreement that the seller of the CDS will compensate the buyer [...] in the event of a loan default [...]. The buyer of the CDS makes a series of payments (the CDS "fee" or "spread") to the seller [...]" https://en.wikipedia.org/wiki/Credit_default_swap How this could be used? The ...


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