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Credit Spread Forward vs TRRS vs CDS vs CS Put

Your firm is holding a short position in an Argentinean bond with a notional value of ARS 5,000,000 and a coupon yield of 5.5%. Your model predicts the bond’s yield will decrease over the coming year. You are asked to hedge the position. Your recommendation is to:
Choose one answer.

a. Short a credit-spread forward
b. Buy a credit default swap
c. Sell a credit-spread put option
d. Buy a total rate of return swap

Again there are more the one concepts one should be aware to solve this problem

Need to know abt the various derivatives CS Forward, TRRS, CDS, CS Put & the payoff of these derivatives if you are short the
underlying. Further we need to hedge the underlying with the provided credit derivatives.

Thanks
Rahul
 

David Harper CFA FRM

David Harper CFA FRM
Staff member
Subscriber
Hi Rahul - this is a great type of question, thanks for sharing; did you want my help, or are you just sharing? - David
 
Hi David,

My understanding about this question is limited & wud like your kind of explanation to make basis more strong.

Thanks
Rahul
 
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