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.


1 Answer 1


Markit's CDS Calculator can price "legacy" (i.e. historically traded) CDS back to January 2005. However, as you rightly observed, it does not provide historic or current CDS spreads, you have to enter them yourself. This pricer is not a database. It's just a model.

Markit's calculator provides the upfront (= market value) of a CDS, given a spread. And yes, this upfront is $$Upfront = MtM = RPV01 \cdot (FairSpread - FixedCoupon)$$

See e.g. Section 4.5. in The Pricing and Risk Management of Credit Default Swaps, with a Focus on the ISDA Model for more details.

Sources for CDS spreads are either Markit themselves, ICE, Bloomberg or Reuters. Markit and ICE publish some spreads here:

Now, if you want to price a CDS, which was booked 2Y years ago with a 5Y expiry, and now has a 3Y expiry, you just book it as a 3Y and enter any spread you want.


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