An investment bank wants to price a first-to-default basket…

An investment bank wants to price a first-to-default basket CDS on 2-year bonds issued by two companies, Gamma and Delta. The premium is paid at initiation and again after 1 year, provided that no default has occurred during the first year. The default probability for each company is 6% per year, the recovery rate is 0%, and the risk-free rate is 3%. Assume defaults happen at the end of each year, the two firms default independently, and the face value is 100 for all bonds. Calculate the premium for the first-to-default basket CDS using a 2-step tree. Use discrete compounding (annual).

1-800-Flowers sent Stephanie a marketing email to reminder h…

1-800-Flowers sent Stephanie a marketing email to reminder her to send flowers to her mom for her birthday. However, Stephanie hasn’t opened her her email all summer and has over 1,000 marketing emails from various companies. Instead of reading any of these messages, Stephanie deleted all of them. For 1-800-Flowers the other emails surrounding their marketing message could be considered….