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Hi sir,
Part d)
In this the co. has customers who owe $5m to be repaid in 4yrsAnd how come if they default after 3 years the company loose the entire AMT unless they take CDS !?
Is the payment only happening in 4th year !?
And In securitization,
The cr.risk is transferred,If the customers of the co. Defaults then
is company liable to the borrowersWhere are you finding this question?
I have the original exam in front of me, and there is no part (d).
Only part (a) for 10 marks, part (b) for 4 marks, and part (c) for 6 marks (it was in Section B of the exam).
In Bpp rkit ques 12 its of 25 marks
d) is 5 marks.Aside from the securitization, go slo motors has a large corporate fleet customer which owes $5 million to be repaid in 4 years,
Management is worried of default
A credit default swap, trading @ 450 basis points can be obtained,
Illustrate the result of hedging using CDS1) in the event of no default
2) in the event of default after 3 years
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