standard investment-grade CDS coupon rate

问题如下：

(1) What should the protection buyer expect to pay or receive to enter a new 10- year CDS contract?

选项：

The buyer should receive approximately 6.5625% of the notional.

The buyer should pay approximately 15.3125% of the notional.

The buyer should pay approximately 6.5625% of the notional.

解释：

C is correct. Because the market premium is 0.75% above the 1.00% standard investment-grade CDS coupon, the protection buyer must pay the protection seller 6.5625% = EffSpreadDurCDS× ΔSpread = 8.75×0.75% of the fixed notional amount upon contract initiation; the initial CDS price is therefore 93.4375 per 100 of notional with a CDS spread of 175 bps.