Long, long time since I did this, but back then you made an assumption that you'd get 40% of the bond's principle in case of a default. I recently asked a credi

Long, long time since I did this, but back then you made an assumption that you'd get 40% of the bond's principle in case of a default. I recently asked a credit guy about this and he also gave me this magic figure. So from there you basically are saying at 100% chance of default, you get 40, and at zero you get 100. That gives you some amount that balances the payment from the CDS with the value of the bonds.