|
The correct answer is D
The total value of expected payments made by the buyer of the CDS includes both the payments based on the spread and the expected accrual payment. Both are shown in the tables below.
PV of expected payments:
|
Time (Years) |
Survival Probability |
Expected Payment |
PV of Expected Payment |
|
1 |
0.9800 |
0.9800s |
0.9229s |
|
2 |
0.9604 |
0.9604s |
0.8518s |
|
3 |
0.9412 |
0.9412s |
0.7861s |
|
4 |
0.9224 |
0.9224s |
0.7256s |
|
|
|
TOTAL |
3.2864s |
PV of the accrual payments in the event of default:
|
Time (Years) |
Probability of Default |
Expected Accrual Payment |
PV of Expected Accrual Payment |
|
0.5000 |
0.0200 |
0.0100s |
0.0094s |
|
1.5000 |
0.0196 |
0.0098s |
0.0087s |
|
2.5000 |
0.0192 |
0.0096s |
0.0080s |
|
3.5000 |
0.0188 |
0.0094s |
0.0074s |
|
|
|
TOTAL |
0.0335s |
Present value of total expected payments = 3.2864s + .0335s = 3.3199s
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发表于 2009-7-1 09:58
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