Connection To Fixed Recovery CDS
A related instrument is a fixed recovery CDS. In theory an RDS protection (receive fixed recovery) can be approximated by buying protection with fixed CDS (binary CDS) and selling the ordinary CDS (writing protection). In reality there may be a slight difference in the terms of the swaps, particularly relating to settlement. It is usually the case that fixed recovery CDS are settled immediately, since there is no need to wait for recovery to be determined, whereas a recovery swap will wait until the ordinary CDS is settled before paying out.
Read more about this topic: Recovery Swap
Famous quotes containing the words connection to, connection, fixed and/or recovery:
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—Gaston Bachelard (1884–1962)
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—D.H. (David Herbert)
“It’s even pleasant to be sick when you know that there are people who await your recovery as they might await a holiday.”
—Anton Pavlovich Chekhov (1860–1904)