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Basket default swap query

Discussion in 'SP6' started by TheMage, Jun 27, 2014.

  1. TheMage

    TheMage Member

    In Core Reading Unit 16, Section 7.3.2:

    The 4th sentence reads, “However, if a credit event occurs during this term, the swap is terminated and the buyer of protection delivers compensation for the loss on the reference credit.”

    Is this incorrect or am I misunderstanding? I thought that the buyer of protection receives compensation for the loss...

    It’s the tail end of the course, so maybe my brain has given up!
     
    TheMage, Jun 27, 2014
    #1
  2. Oxymoron

    Oxymoron Ton up Member

    You're right. It could also be that buyer of protection delivers the asset and receives compensation, in cash the deal is not cash settled.
     
    Oxymoron, Jun 30, 2014
    #2

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