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Hedge the default risk of position

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Reference no: EM133058505

Suppose you purchased $100 million notional of a bond at a price of 75. Assume the recovery rate on this bond is 60% (assume this is known with certainty). How many CDS (in notional) do you need to purchase to hedge the default risk of this position (assume the CDS are physically settled)?

Reference no: EM133058505

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