Product details

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Published by: INSEAD
Originally published in: 2004
Version: 08.2014

Abstract

This is part of a case series. Based on a Merton-type structural model of credit risk, Steve Dash, a trader at KBC AIM, perceives that British Airways' CDS (credit default swaps) are mispriced relative to the company's share price. Steve has to figure out which trades to put on to exploit the potential mispricing and what the main profit drivers of this strategy are. At the same time, he needs to be aware of the risks of his strategy and whether the 'mispricing' could be attributable to factors that his capital structure arbitrage modedl isn't able to capture.
Location:
Size:
Approx 80 employees
Other setting(s):
2004

About

Abstract

This is part of a case series. Based on a Merton-type structural model of credit risk, Steve Dash, a trader at KBC AIM, perceives that British Airways' CDS (credit default swaps) are mispriced relative to the company's share price. Steve has to figure out which trades to put on to exploit the potential mispricing and what the main profit drivers of this strategy are. At the same time, he needs to be aware of the risks of his strategy and whether the 'mispricing' could be attributable to factors that his capital structure arbitrage modedl isn't able to capture.

Settings

Location:
Size:
Approx 80 employees
Other setting(s):
2004

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