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Bankruptcy Swap Prices Registered Professional level members of Enron Credit can view Digital Bankruptcy Swap prices on hundreds of companies worldwide.
Digital Bankruptcy Swap prices are expressed in basis points and reflect the amount per year you would be charged to buy or sell protection against a specific counterparty. Bid and offer prices can be firm, indicative, or informational. For a more complete description of these terms, please see our Price Status page. |
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| Example: You have a just landed a five-year, $1,000,000 deal with a new counterparty. The expected recovery rate for this counterparty is 40%. If this company were to go bankrupt, your loss would be $600,000. To protect against your risk, you decide to purchase bankruptcy protection on the unrecoverable amount or $600,000. Assume the price for this protection is 150 basis points, or 1.5% per year. Your cost for this protection, payable to the protection seller, would be $9,000 per year ($600,000 * 1.5%). Upon the bankruptcy of your counterparty, you would be paid $600,000 - the amount of protection you originally purchased. |
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| Unlike other risk management instruments, the Digital Bankruptcy Swap is available exclusively from Enron Credit. A Digital Bankruptcy Swap gives you the ability to make your credit portfolio more liquid and hedge portions of your portfolio as needed. Portfolio swaps can often be made at little or no cost to you or you can purchase bankruptcy protection against specific counterparts.
For a more detailed discussion about Digital Bankruptcy Swaps and other credit derivatives, please see "Introduction to Credit Derivatives", "Pricing Credit Risk" or "Measuring Credit Risk" Technical Papers in the Learn More section.
For more information about Digital Bankruptcy Swap transactions, please see Enron Bankruptcy Swap General Terms and Conditions.
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