Question

how to make a portfolio with bond and credit default? (how many/much contract to add)

Answer 1

There are many ways to make a portfolio one of them being making a portfolio with bond and credit default swap.

In a credit default swap (CDS) there is a swap buyer and a swap seller, where the swap seller will compensate the swap buyer usually the face value of the bond in the event of debt defaulting or any other credit event and the swap buyer pays to the swap seller a particular sum of money periodically.

Accordingly we must make a portfolio with bonds and the relevant number of credit default to compensate us in any credit event and we can constantly keep churning the portfolio i.e. keep on adding and reducing the CDS contracts according to the addition in the bonds.