The fair basis

Wujiang Lou remodels credit arbitrage by introducing funding and capital costs

CLICK HERE TO VIEW THE PDF

Known as a credit arbitrage strategy, credit default swaps and bond basis trading rely on bond funding and residual risk management. Here, Wujiang Lou incorporates funding and capital costs into the valuation of a risky bond under a dynamic credit spread model to better understand and predict a fair basis

A negative basis trade enters a long bond position and buys protection on the issuer of the bond through a credit default swap (CDS), aiming at the profit due on a

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here