Suppose That You Want to Short BUG's Outstanding Ten-Year,5 Percent

question 13

Multiple Choice

Suppose that you want to short BUG's outstanding ten-year,5 percent coupon bond,but you cannot find anyone willing to lend you the bond (to short) .Given that US Treasuries and CDS trade,you can create a short position in BUG's bond by:

• A) going long a ten-year CDS on BUG
• B) going short a ten-year CDS on BUG
• C) going long a ten-year CDS on BUG and buying a ten-year US Treasury bond
• D) going long a ten-year CDS on BUG and shorting a ten-year US Treasury bond
• E) going short a ten-year CDS on BUG and shorting a ten-year US Treasury bond

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