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NEW YORK (Dow Jones)--Some derivatives buyers on Wednesday were asking dealers to quote default protection on Greek sovereign bonds using an upfront fee, according to credit default swaps pricing service Markit.
Paying "upfront," as the practice is called, would require a swap buyer to pay a percentage of the overall premium at the inception of the contract as well as over the life of the trade -- a request usually reserved for particularly risky investments.
Gavan Nolan, director in credit research at Markit in London, said a handful of dealers were quoting Greek CDS upfront in response to "specific client requests," although traders said this was likely for customer convenience and not a material shift in risk perception.
The move coincided with a hammering of Greek bonds that day, following escalating fears about how much sovereign bond holders would lose on a potential restructuring of the nation's debt.
German newspaper Die Zeit interviewed a senior executive at Standard & Poor's, who said that the chances of a restructuring were "almost one-third" and added that creditors may have to forego between 50% and 70% of their claims in such an event. CDS on Greece were quoted Wednesday with a spread of 1,060 basis points, 32 basis points more expensive than Tuesday's close and a new end-of-day record for five-year Greek CDS prices. The 1,060 basis points spread is equivalent to $1 million a year for five years of protection on $10 million of the underlying sovereign debt.
In upfront terms, the contract price is equivalent to a one-time fee at inception of $3.17 million upfront, plus a regular $500,000 annual premium to cover $10 million of debt for five years.
Very few sovereign CDS contracts are quoted upfront as a percentage, although this has more to do with sovereign CDS trading conventions and buyers being used to quotations in spreads. Greece was quoted in spreads, not upfront, the last time its five-year CDS were over 1,000 basis points -- when comparably priced corporate CDS would have been quoted upfront.
There is no set rule that determines when a contract is traded upfront, but in the corporate world CDS sometimes trade upfront when the price crosses 500 basis points. The likelihood of this increases as protection costs rise and CDS sellers worry of a sudden jump to default. Two sovereigns that have traded upfront for some time are Argentina and Venezuela, because of their poor credit history. One trader said when CDS were standardized recently, the contracts started trading with a set of predetermined coupons, and that the coupon for Greece may be out of sync considering where it currently trades. He said it is quoted with a 100 basis point coupon, but should ideally trade with a coupon of 500 basis points or higher.
Лека нощ и от мен. Ето и една моя графика със хиперскъпо-струващи тайни и мощни индикатори. Дори няма смисъл от коментар по анализ на сигналите. Успеваемоста е 100.31 %
Ефчето е сладурче, не се шегувайте с нея. Пенчев, за мен при двойка, която е в рейндж са правилни и дълги и къси позиции. В крайна сметка приключил съм деня на + 50, което означава, че входовете ми са били правилни. Грешни са ми били лимитите, но аз не мога да бъда 100 % сигурен, как ще се развие тренда. Но именно затова има и стопове. А и представи си как би представлявал един пазар, на който всички само продават или купуват и дали изобщо би съществувал ? И преди съм ти казвал, че аз не съм инвеститор. Приключвайки деня на 30 +, лягам, спя спокойно и чакам следващият ден. Наистина, че имаше заформен двоен връх и то при силна съпротива, но ти самият не си ли бил свидетел, колко често се провалят подобни фигури. Именно затова влизайки в дълги, го правех от нива на подкрепа с малки стопове и при възход, затварях третинката и слагах стопа на +. Грешно ли е ? Мисля, че не !
Прасчо,ние 30пипа ги правим за 30минути бря,а си тръгнал туй знойно девойче да сваляш
"църна му земя - невеста, тънка му пушка - зълвица, я чифт пищови - девери"
Лека нощ и от мен. Ето и една моя графика със хиперскъпо-струващи тайни и мощни индикатори. Дори няма смисъл от коментар по анализ на сигналите. Успеваемоста е 100.31 %
Лека нощ и от мен. Ето и една моя графика със хиперскъпо-струващи тайни и мощни индикатори. Дори няма смисъл от коментар по анализ на сигналите. Успеваемоста е 100.31 %
Лека нощ и от мен. Ето и една моя графика със хиперскъпо-струващи тайни и мощни индикатори. Дори няма смисъл от коментар по анализ на сигналите. Успеваемоста е 100.31 %
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