Why use a credit default swap instead of bonds to speculate on default risk? - smaller cash outlay - greater selection of maturities - limited interest rate exposure - occasionally more liquid than underlying bonds - can bet on foreign credit while mitigating forex risk
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Replying to @M1tchRosenthal
Not convinced about greater selection of maturities. Outside of 5Y most names get pretty illiquid. With you on cash efficiency, limiting rates exposure, liquidity and FX hedging.
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Replying to @macrocephalopod
Ah I see, I found these advantages from a Pimco blog, interesting it didnt mention that liquidity drawback. Thanks for letting me know!
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Replying to @M1tchRosenthal
It’s probably true for indices but less so for single names
12:51 AM - 25 Jan 2021
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