Transcription of CREDIT DEFAULT SWAPS The relationship …
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CREDIT DEFAULT SWAPS The relationship …
MAY 2005 THE TREASURER51package trade for many investors), and positivebasis does not generally represent a purearbitrage opportunity in the same in general is an important indicator ofrelative value between bond and CDS markets,and a key trade and profitability driver forinvestors. Implicitly, any investor whose remitallows investment in either bonds or CDS,isalways either long or short basis,depending onthe composition of their portfolio between bondsand a corporate perspective,understanding investors actions and creditappetite requires analysis of the relevantinvestment alternatives. As CDS moves centrestage,the drivers of the differential between it andmore traditional corporate CREDIT products becomea key component in this , as much as investors, will need tounderstand the drivers of basis starting with thosewhich are CREDIT ,bond or maturity specific,andmoving onto others which influence the tradingrelationships seen across the COVENANTS CDS and bonddocumentation are similar but not identical.
MAY 2005 THE TREASURER51 package trade for many investors), and positive basis does not generally represent a pure arbitrage opportunity in the same way.
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