0
$\begingroup$

Can the ISDA CDS model be used for "legacy" CDS? I understand that it lets you convert from traded spread to upfront and back on the day CDS was traded but what about CDS that was traded 2 years ago and has 3 years to maturity?

On the Markit Calculator webpage, for the legacy CDS, I can enter the Trade Date as today, cash settle will be T+3 but why does it need "Traded Spread"? Where do I get that from since trade happened 2 years ago and I don't know/care what the current trade level is? Why can it not calculate the "fair spread" for this 2 year old CDS based on the credit curve it already has and use that as traded spread? If it did that, then upfront as of today would just be

$$(fair\_spread - coupon) \times PV01$$

wouldn't it? Or am I confused about what Upfront really means on a legacy CDS?

Thanks in advance.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.