标题: Credit Spread Forward : Long or short [打印本页] 作者: John10 时间: 2011-7-13 13:30 标题: Credit Spread Forward : Long or short
R30 : CFAI text V4 Q4 on P.148
The statement : She decides to enter into a six-month Credit Spread Forward
contract "taking the position that the Credit Spread will decrease".
Is this a long or short position by "taking the position that the Credit Spread will decrease". Please judge before you refer to the solution on P.158.
How do you judge ?作者: infinitybenzo 时间: 2011-7-13 13:30
I assume she is short, since she is betting against worsening credit conditions作者: bboo 时间: 2011-7-13 13:30
rosengri Wrote:
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> I assume she is short, since she is betting
> against worsening credit conditions
Credit Spread decrease means improving credit condition rather than worsening credit condition.作者: Iginla2011 时间: 2011-7-13 13:30
yes, that was my thought - bet against worsening, i.e. bet for improving作者: mp3bu 时间: 2011-7-13 13:30
hey guys,
can anyone refresh our memories with the formula for the payoff, please? I remember that it is something involving the notional, some kind of risk factor and the difference between the strike spread and the spread @ expi, but would it be (strike -spread @ expi) or (spread @ expi- strike) from the LONG perspective?
I would go for the second, any idea?
Thanks,
M.作者: Analyze_This 时间: 2011-7-13 13:31
from the LONG perspective : (spread @ expi- strike) x NP x risk factor作者: ohai 时间: 2011-7-13 13:31
it depends on if you're long or short a call or put. you're either short a call or long a put in this example (on the SPREAD)作者: Valores 时间: 2011-7-13 13:31
@FICC_chk
"The payoff to the investor who is long the credit spread forward is = MAX [spread at expiration - strike spread, 0] x Notional Principal x Risk Factor "
If it is Credit spread FORWARD, why did you use MAX in the formula. It is not an option ???作者: thommo77 时间: 2011-7-13 13:31
Just came across this question - quite tricky bit (schweser only got eg on long position and didnt say so). So in summary:
Long position - investor expects credit to worsen and spread widen, so payoff will be Spread at maturity LESS Strike spread x Notional Amount x Risk factor.
Short position - investor expects credit to improve and spread narrow, so payoff will be Strike spread Less Spread at maturity x Notional Amount x Risk factor.
