Who gets the Swaption right?

CFA Level II
#21

A T/G

#22

But because you all love it so much… Question 3: Which of the following most accurately describes a correlation trade using credit default swaps? The investor: A) goes long a credit index and shorts specific credit default swaps. B) sells a credit default swap on a firm’s subordinated debt and buys a cheaper credit default swap on the senior debt. C) buys both a credit default swap and an equity call option. D) sells protection on a first-to-default basket of credit default swaps.

#23

D

#24

D

#25

Dude you have to stop doing this ;-). That’s correct. My knowledge of these things turned out to be minimal.

#26

D

#27

Let’s throw in a curve steepner/ curve flattener question. i’m at work so i’m just going to make one up. you think a company’s long term prospects are good but you think they will have some difficulties in the short term… based on this which trade do you put on? a. put on a curve steepener b. put on a curve flattener then explain what your choice consists of doing.

#28

A, Curve steepener, basically buy payer short term protection, buy reciever for long term protection

#29

honestly I haven’t got a clue

#30

Wow after the first one, I had NO IDEA what the others were about :frowning:

#31

no clue for me too. Is this in the books?

#32

I just realized I have it backwards, its a curve flattener, but using the process above.

#33

again. don’t have books, but i think you want to do a flattener here. which is what you describe b swan. i think you may have the names switched. can someone please confirm. sorry. i should know this sh*t if i’m going to post questions right? buying protection short term cds and selling long term cds = flattener.

#34

correct got it… LONG S-T protection + SHORT L-T protection = curve flattener We use a curve flattener in this case! since there is instability in neat future, but the long term perspectives looks good.

#35

CFASF1, read up, I corrected myself, it is a flattener, but uses the process i listed in the first one, i did have the names switched.

#36

cool. you had the concept right.

#37

which is a lot more than I can say

#38

Anyone have a memory trick for the flattner/steepner?

#39

mcpass Wrote: ------------------------------------------------------- > which is a lot more than I can say me too…

#40

Black Swan Wrote: ------------------------------------------------------- > C or A, I’ll go C C’mon Swanny, you taught ME this shiite. You can do this stuff…