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Positive basis

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Positive basis
Positive Basis exists when the cost of buying protection (in the credit derivatives market) on a particular reference entity exceeds the Credit spread (generally expressed as a spread to Libor) on a Bond or note of similar maturity issued by that reference entity. When this occurs, investors looking to gain exposure to the reference entity can improve their expected return on an investment by taking exposure to the credit by selling protection in the credit derivatives market rather than buying the Bond or note. Technical factors between the Bond and credit derivatives market account for positive Basis.
Posted by  Privatebanking.com
 
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