Examples of use – Global

Example of use – Global

This webpage will contain examples of Deriveum World possible use

Bond type Sovereign
Bond number US836205AR58
Currency USD
Issuer South Africa (Republic of)
Yield 5.91%
CDS 4.28%
Coverage ratio 50%
AAA reference yield 0.36%
Return to investors 1.63%
Retturn to protection sellers 8.56%
Deriveum’s profit 0.36%

An example of a bond suitable for successful Deriveum trade would be Ukraine bond XS1902171757. As of the beginning of February 2020 it has been yielding 7.75%. The high yield is warranted having in mind that the last Ukrainian sovereign default was  back in 2015, when investors recovered 80c on the dollar. In this regard a prudent coverage of the bond would be 30 c on the dollar (in effect the first 30cof loss incurred by the investor).

A secured investor will be able to rely on return of 4.35% (bond yield of 7.75% minus the market CDS price of 3.4%) . This return is nearly 3% higher than the AAA-rated US bonds.

The risk protection seller (Insurer) will have to put only 30% of the insured notional amount as collateral. Therefore the Insurer will get 11.33% return on each dollar it has invested in Deriveum (the CDS premium divided by the invested capital).

The PSM and Hedger will ensure that neither the Insurer, nor the Insured will be exposed to price volatility.

Those numbers are very compelling for any investor or financial institution.


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