I am working on validating the CDS volatility generated by a third party risk engine. It appears that returns are calculated with simple substractions and adjusted for the CS01:
(Price of the CDS today - Price of the CDS yesterday) * CS01
The argument is that log returns or log returns approximation [(Pt - Pt-1)/Pt-1] cannot apply to fixed income instruments in general as prices are distorted by duration, therefore returns cannot be normal.
Have you ever seen these returns calculated like this? What do you make of this this statistically speaking?