I need help on the following assignment questions which should be
trivial for any credit trader. It is urgent!!!! Kindly help before
31Mar2006, please!

note : I presume you know what CDS stands for ... credit default swap

Question 1
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Consider the following news from Reuters:

1008 GMT [Dow Jones] LONDON?SG recommends selling
7-year 0-3% tranche protection versus buying 5-year and 10-
year 0-3% protection. 7-year equity correlation tightened versus
5-year and 10-year last year. SG?s barbell plays a steepening
of the 7-year bucket, as well as offering positive roll
down, time decay, and jump to default.
SG also thinks Alstom?s (1022047.FR) 3-5-year curve is too
steep, and recommends buying its 6.25% March 2010 bonds
versus 3-year CDS.

(a) What is a barbell? What is positive roll down, time decay?
(b) What is jump to default?
(c) Explain the logic behind SG?s strategy.

Question 2
==========
Consider the following news from reuters:

0843 GMT [Dow Jones] LONDON? Sell DG Hyp 4.25% 2008s
at 6.5bp under swaps and buy Landesbank Baden-Wuerttemberg(
3.5% 2009s at swaps-4.2bp, HVB says. The LBBW deal is
grandfathered and will continue to enjoy state guarantees;
HVB expects spreads to tighten further in the near future.

(a) What is a German Landesbank? What are their ratings?
(b) What is the logic behind this credit strategy?
(c) Can you take the same position using CDSs? Describe how.