Comment by: Anonymous. Posted 11 years ago [2012-08-17 00:01:41]

Not necessarily. You are not exposed to that bank's credit risk in the case of mattress. You need, however, to insure the matteess against fire. But something is telling me there's spread to be made. We might've discovered a new trade...

Comment by: Anonymous. Posted 11 years ago [2012-08-16 23:32:29]

I was thinking simply of buying the notional in CDS that you could buy with cash (not using all your money as collateral against your trades and levering yourself up at all). I imagine most banks would take your money and pay you 0% interest on it - if not you can buy a big mattress and get the same return

Comment by: Anonymous. Posted 11 years ago [2012-08-14 12:30:19]

selling protection is a levered trade. exposure would have to be massive to have all cash invested and would leave you at the mercy of MtM swings and a b/o on exit. 2nd strategy (long bond into extending negative yield) exposes you to a call risk.

Comment by: Anonymous. Posted 11 years ago [2012-08-08 00:34:18]

It would seem a better economic strategy would be keep your money in cash earning 0% and sell protection on the desired corporate. This would always give you a positive yield. The only real reason to buy a bond at a negative yield is if you think it'll go even further into negative yield territory and give you a capital gain. This is essentially a trading position so you'd want maximum liquidity, not something generally available in corporates over governments so I think the Merrill prediction is flawed