Go slo motor corp 6/10

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February 12, 2018 at 1:24 pm #436567
Zamil
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Hi sir,

Part d)
In this the co. has customers who owe $5m to be repaid in 4yrs

And 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 borrowers
February 12, 2018 at 3:28 pm #436600
John Moffat
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Where 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).
February 12, 2018 at 8:25 pm #436640
Zamil
Member
- Topics: 15
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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 CDS

1) in the event of no default
2) in the event of default after 3 years
February 13, 2018 at 7:56 am #436714
John Moffat
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They have obviously added a part (d) by themselves and so without having it in front of me I can’t really help.
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