Economy – Quantitative Finance – Pricing of Securities
Scientific paper
2009-12-23
Economy
Quantitative Finance
Pricing of Securities
20 pages, 6 figures
Scientific paper
In the third part of this series we introduce consistent relative value measures for CDS-Bond basis trades using the bond-implied CDS term structure derived from fitted survival rate curves. We explain why this measure is better than the traditionally used Z-spread or Libor OAS and offer simplified hedging and trading strategies which take advantage of the relative value across the entire range of maturities of cash and synthetic credit markets.
Berd Arthur M.
Mashal Roy
Wang Peili
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