If the CDS-Bond Basis Is X Minus Y,what Are X

question 17

Multiple Choice

If the CDS-bond basis is X minus Y,what are X and Y?

• A) X is the CDS spread and Y is the excess of the bond yield over the swap rate
• B) X is the excess of the bond yield over the swap rate and Y is the CDS spread
• C) X is the CDS spread and Y is the excess of the bond yield over the Treasury rate
• D) X is the excess of the bond yield over the Treasury rate and Y is the CDS spread

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Definitions:

Call Contract

A financial contract that gives the holder the right, but not the obligation, to buy a stock, bond, commodity, or other asset at a specified price within a specific time period.

Option Contract

An agreement that gives the owner the right, but not the obligation, to buy or sell a specific asset at a specific price for a set period of time.

Put Options

Financial contracts giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.

Exercise Price

The price set for buying or selling an asset under the terms of an options contract.