hard · Quantitative Finance
A quant is pricing a 2-year Credit Default Swap (CDS) using a reduced-form model. The hazard rate is λ = 0.04 (constant), the recovery rate is R = 40%, and the risk-free rate is r = 5%.
Using the standard approximation, what is the fair CDS spread s in basis points?
- 160 bps
- 150 bps
- 400 bps
- 240 bps
Sign up free to see the explanation and track your rank →
More Quantitative Finance practice
- If the underlying stock price S moves by +$2.00 over a very short interval, what is the es
- What is the estimated OLS slope hatβ?
- If the flat yield curve is at 4% (continuously compounded), what is the bond's price?
- As the number of assets n approaches infinity, what happens to the total portfolio varianc
- What is the fair no-arbitrage price for a six-month (T = 0.5) forward contract?
- If the risk-neutral probability of an up move is p = 0.6 and the risk-free rate is zero, w
- When pricing a 'Digital' (or Binary) call option near expiry with the spot price very clos
- Calculate the price of a zero-coupon bond that pays $1000 in two years, given that the one