–Katy Burne
Citigroup is recommending investors take a view on fx spot movements and credit spreads while volatility and correlation between the asset classes is still relatively high by historical standards.
The firm is advising investors to use quanto credit default swaps, which are triggered for settlement if a borrower referenced in the contract suffers a credit event. Since the contract is an offsetting position for the same underlying, for example selling protection in euros but buying protection in U.S.
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