I would like to purchase a “CFAL2 Default Swap” from someone that will allow me to hedge against failing this exam. You can construct a timed online sample exam for me to take and set the premium accordingly. I’m looking for a ~$5k payout in the case of a fail to make me a tiny bit less miserable about life should that situation arise. Who’s willing to take my trade?
Asymmetric information will make the risk premium for this Failing Default Swap too high for an orderly market.
You’re not actually hedging your result, you’re hedging your emotions (like sports fans betting against their favorite team).
Well, he actually likely has an economic outcome (raise) related to his performance…whereas the sports fan doesn’t.
I need to perform a fundamental credit analysis on the reference issue and the issuer. In your case, your academic and professional history will be useful.
For this to be arbitrage free, the 5k would be discounted at the risk free rate, less the carrying costs of the exam fee.
I’ll hedge you and raise you another 5K
Ceredwyn Wrote: ------------------------------------------------------- > Asymmetric information will make the risk premium > for this Failing Default Swap too high for an > orderly market. lovely. serious asymmetric info here… there’s no way to model the price for an individual “L2 default swap” contract… maybe a basket of us would work a bit better! lol
Long put with a strike of about 70%…
Long a CDS while shorting the CDS then buy a payer swaption and pay someone off to raise ur score
NES…were are on the same page…lol
since your anticipation is a “fail” your in backwardation - but have a positive roll yield for next year’s exam - 
Positive rolle yield is only when you continue to backwards mate…
uh yea - re-taking the exam… thats not going forward…
so dont use forwards
Ok, I like jcpeng’s idea. Except lets make it a binary option – someone please sell me a put with the strike at the MPS. If I finish below the MPS, you pay me $5k.
Make it a double barrier digital
you guys are really nerdy
Ceredwyn Wrote: ------------------------------------------------------- > Well, he actually likely has an economic outcome > (raise) related to his performance…whereas the > sports fan doesn’t. Yeah, that may be right.