If you’re BEARISH (aka, anticipating the underlying bond to fall in price/default), why would you want to SHORT a CDS?
This is very counterintuitive when you start thinking of the payoffs.
If you’re BEARISH (aka, anticipating the underlying bond to fall in price/default), why would you want to SHORT a CDS?
This is very counterintuitive when you start thinking of the payoffs.
If you’re anticipating a default, you would buy default protection…If you sell protection, you will get crushed when default happens.
You short a CDS means you’re buying protection.
so I’m just getting caught up on the vernacular?