# What is zero month tenor of CDS?

there is 0 month tenor for CDS instruments, it is not clear what does it refer to Can anyone explain what zero month tenor for single-name CDS stands for?

Following the "big bang", the standard CDS maturities are June 20 and December 20. (See: https://www.isda.org/a/vGiDE/amend-single-name-on-the-run-frequency-faq-revised-as-of-12-10.pdf and https://www.isda.org/a/jGiDE/amend-single-name-on-the-run-frequency-faq-revised-as-of-10-5.pdf question 11 for more examples. Single-name contracts used to roll 4 times a year, but now almost all roll only twice a year, like the indices.) (They are sometimes called "IMM dates", which confuses people who think "IMM dates" are 3rd Wednesdays).

For example, if today is June 1, 2020, then a 5-year CDS matures on June 20, 2025.

A 1-year CDS matures on June 20, 2021.

A 6-month CDS matures on December 20, 2020.

Do you see the pattern?

A 0-month CDS matures on June 20, 2020, the next standard maturity date.

If a 3-month and 9-month CDSs are liquid, then they would mature on September 20, 2020 and March 20, 2021 respectively.

Now consider the state of the world 1 month later - on July 1, 2020. The 0-month CDS has matured and does not trade anymore. The other tenors are unchanged.

Now consider the state of the world 6 month later - on December 1, 2020.

All the tenors have shifted by 6 months. A 5-year CDS matures on December 20, 2025, while a 0-month CDS exists again and matures on December 20, 2020.

Observe the 0-month tenor exists for 3 months, then does not exists for 3 months, then exists again (with its date 6 months later) for 3 months...

• thanks for the explanation. a couple of questions to clarify more. You are saying that CDS rolls twice a year. Then how can it work for 3-month contract? Let’s say today is December 20, so the next day after roll we have 6-month CDS contract with maturity on June 20 the next year. Is it correct to say that until March 19 the next year this contract will be indicated as 6 month contract and starting March 20 the next year and until June 20 this contract is transformed to 0 month contract? And If yes, how all this works for 3 month contracts? Commented Sep 29, 2020 at 11:19
• Link you shared shows many interim tenors like 1.25Y or 3.75Y. In reality I saw pricing data for some standard list of contract tenor without those interim tenors. How do those interim tenors exist? Commented Sep 29, 2020 at 11:19
• CDS are traded OTC. There is no exchange to force everyone to trade only standard contracts. Sometimes two parties want to trade a CDS maturing September 20 or March 20 (which used to be standard maturity dates). They can also submit the spreads or upfronts that they mark to IHS Markit, which (last I look) will publish 0.25y etc concensus quote if they receive enough submissions. In practice, 3mo and 9mo only become liquid for very distressed credits, when the credit event seems imminent, but the bets are on when. They can trade CDS maturing on any date at all, but IHS Markit won't publish it. Commented Sep 29, 2020 at 12:12
• thanks for your reply, but can you share more info on zero month contracts as it seems you are very professional in CDS area. Is my assumptions correct? Let’s say today is December 20, so the next day after roll we have 6-month CDS contract with maturity on June 20 the next year. Is it correct to say that until March 19 the next year this contract will be indicated as 6 month contract and starting March 20 the next year and until June 20 this contract is transformed to 0 month contract? Commented Sep 29, 2020 at 16:56
• yes exactly! The same contract maturity date goes through being "5 years maturity" for 6 months, then "4.5 years maturity" for 6 months, ... "1.5 years maturity" for 6 months, then "1 year maturity" for 6 months, then "0.5 year maturity" for 6 months, then "0 maturity, but still trading, not yet matured" for 3 months, and finally "matured and no longer trading". Commented Sep 29, 2020 at 17:07