NO.PZ2023040701000118
问题如下：
Another short-term trading opportunity that Smith and Chan discuss involves the merger and acquisition market. SGS believes that Delta Corporation may make an unsolicited bid at a premium to the market price for all of the publicly traded shares of Zega, Inc. Zega’s market capitalization and capital structure are comparable to Delta’s; both firms are highly levered. It is anticipated that Delta will issue new equity along with 5- and 10-year senior unsecured debt to fund the acquisition, which will significantly increase its debt ratio.
A profitable equity-versus-credit trade involving Delta and Zega is to:
选项：
A.
short Zega shares and buy protection on Delta using the 10-year CDS
B.
go long Zega shares and buy protection on Delta using 5-year CDS
C.
go long Delta shares and buy protection on Delta using 5-year CDS
解释：
Correct Answer: B
The shares of Zega can be sold at a higher price as a result of the unsolicited bid in the market. If Delta Corporation issues significantly more debt, there is a higher probability that it may default. If the Fund sells protection on Delta now, the trade will realize a profit as credit spreads widen. An equity-versus-credit trade would be to go long (buy) the Zega shares and buy protection on Delta.
If the Fund sells protection on Delta now, the trade will realize a profit as credit spreads widen. 请帮忙解释一下，不是有违约风险吗？为何还会实现profit呢？谢谢
