An active portfolio manager seeking to purchase single-name CDS protection observes a 1.75% 10-year market credit spread for a private investment-grade issuer. The effective spread duration is 8.75 and CDS basis is close to zero.
What should the protection buyer expect to pay or receive to enter a new 10year CDS contract?
A The buyer should receive approximately 6.5625% of the notional.
B The buyer should pay approximately 15.3125% of the notional.
C The buyer should pay approximately 6.5625% of the notional.
为什么默认fixed coupon的spread=1?这里用(1.75%-1%)来计算