Questions tagged [cds]
Credit Default Swap or CDS - a type of swap which purpose is transferring the credit exposure of fixed income products between parties. It works like an insurance policy, where protection buyer who makes fixed periodic payments, and a protection seller, who collects the premium in exchange for making the protection buyer whole in case of default. Most of CDSs are traded via OTC as single derivatives or index derivatives like iTraxx / Markit CDX
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Markit CDS price data
I am currently looking at a way to run a basic sentiment analysis NLP model and look for a possible relationship with firm CDS spreads. I am however unsure as to which spread to use for my regression (...
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Why do we have CDS + Bond = Treasury?
In section 25.1, sub-section "Credit Default Swaps and Bond Yields", of "OPTIONS, FUTURES, AND OTHER DERIVATIVES", John Hull defines "CDS–bond basis = CDS spread - Bond yield ...
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Recovery Rates in CDS valuation
I am pricing CDS calibrating the default probabilities intensities using CDS spreads from Markit.
Those spreads are given with a recovery.
I have two questions regarding the recovery:
In Option, ...
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Historical data on Credit default swap
I am aware that there is an active CDS market for insurance from US sovereign default (in terms of treasury bond) as Dimitri Vulis
commented. I am looking for the ...
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CDS spread term structure
As I know a CDS is defined w.r.t. some unique Reference bond with a given maturity from a given issuer. Now, an issuer can issue bonds with different maturities and ...
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CDS Par Curve construction from sector Quoted curve
Recently I was given a dataset containing sector/rating CDS spreads curves. The methodological document says that after estimating de Quoted Spread from the data, they obtain the Par Spread curve. For ...
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In which units the conventional CDS spreads in Markit's data are measured?
I am trying to understand if the conventional spread column in Markit's CDS database simply represents the CDS spread, measured in bps, or should I make some adjustments (in case I would like to make ...
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Is there a mapping that ties Credit Events to standard CDS documentation clauses?
I'm trying to map the standard CDS documentation clauses that we receive from Markit:
CR/CR14
MR/MR14
MM/MM14
XR/XR14
to the credit event types that we are seeing:
BANKRUPTCY
FAILURE TO PAY
...
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Correlation between CDS return relevance
I see that there is much literature that uses the correlation notion in the equity returns to construct a graph or look into how they are related to one another. If we want to extend this to Credit ...
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Which spread to use to analyse CDS data from Markit
So I am currently doing some analysis on CDS Data and I am using Markit to extract this data. However, I am a bit confused regarding the quotation standards here. I want to investigate the ...
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Shock to a system of CDS spread values
Assume we have a system that is built on the CDS spread values. If we want to shock the system, how can we define the shock? For instance, we can define it as the increase in the spread. Of course a ...
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Debt seniority and probability of default
I would like to ask if different debt seniorities ( like senior unsecured bonds and subordinated bonds) have different probability of default?
(Before edited I used debt tiers instead of seniority but ...
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CDS Option Pricing (Missing Index Factor)
I've read the OpenGamma paper https://quant.opengamma.io/CDS-Options-OpenGamma.pdf on CDS Options, and noticed a small discrepancy. So I wanted to double-check my understanding.
In Section 6.4 the ...
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Graph of price of CDS against par spread
I'm new to credit and I'm trying to wrap my head around the following idea. I understand that the par spread $s$ is the value of the fixed coupon payment at which the fixed and floating legs are equal ...
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Is the payoff of an $N^\text{th}$ to default basket CDS equal to the credit loss on only the $N^\text{th}$ default, or all prior defaults too?
I have some notes that state that the higher the value of $N$ in an $N^\text{th}$ to default basket credit default swap, the lower the credit risk exposure (to the party selling the protection) ...
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What is the way to calculate "Risky PV (Present Value)" (discounting including the probability of default) from bond yield curve?
Instead of using CDS spread to do risky discounting, I would like to use the bond yield curve. Can I directly use the discounting factors from the bond yield curve or do I need to figure out the ...
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CDS spread changes with its recovery rate
Not sure if my question makes any sense because I'm pretty new to the credit market.
Suppose I have a 5Y CDS spread which is quoted as 100 bps with 40% recovery rate.
So, if I want to estimate another ...
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Quick rule of thumb for DV01 and CS01 calculations
If someone tells me there is a IRS and a CDS both with 10M notional and 5y maturity, is there a reliable quick calculation that I could easily do mentally to approximately calculate their ...
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Why is the DV01 of a CDS roughly equal to the DV01 of a par bond issued by the same reference entity?
The claim was made in this link:
https://www.investment-and-finance.net/derivatives/c/cds-dv01
But I don't understand why that is.
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US Market CDS Data during the Corona Pandemic for Bachelor Thesis
I need CDS spread data over the US market. I would need data for an exact period. I can't find the data I need through Bloomberg. Does anyone by any chance have CRSP or WRDS and could help me out?
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Why was CDS-bond basis close to zero before the financial crisis?
For instance, see the evidence here:
This paper claims that this arises from the fact that cash bond and CDS have different margins, and thus it is cheaper (funding wise) to hold CDS positions. ...
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Index CDS Option (Spread Quoted) - Black's Formula
I have looked at the question and answers here and I have read Chapter 11 of Dominic O'Kane's book Modelling Single-name and Multi-name Credit Derivatives. The book is very clear and has some in-depth ...
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Different types of swaps and generalized pricing structure - correlation swap, variance swap, volatility swap, gamma swap, etc
I am very new to derivatives pricing, and I am currently trying to learn these on my own.
As far as I can tell, most of the derivatives that are simple (in the sense of having a constant strike that ...
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Calculating RPV01 for the up-front payment of a CDS contract
I'm trying to calculate the historical P&L of a CDS trading strategy, and am struggling to come up with the up-front payment of the contract. From what I can tell, the Mark-to-Market value of a ...
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Survival probabilities starting from CDS spreads
How is that possible to get survival probabilities starting from CDS spread?
Could you please provide me with a demonstration?
What is more, is that true that CDS Zero type is necessary so as to get ...
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CDS option pricing in Quantlib Excel (QuantlibXL)
I am trying to price an index CDS option using QuantlibXL. Anyone aware of an existing template sheet or sample formula for creation of CDS and CDS objects? The sample template sheets provided with ...
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How to compute a zero spread for unexpected loss
I have to discount a cash flows of mezzanine and junior note of NPL's securization, so the discount curve have to include a zero spread for unexpected loss, could you suggest me a proxy to estimate ...
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Mechanics of index CDS options
I am looking at some documents regarding pricing approaches for index CDS options but none of them give much detail on the mechanics of trading the product. I have looked at the CDX UNTRANCHED ...
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Why do I get different results from different credit pricing engines in QuantLib
I am trying to use three credit pricing engines: IsdaCdsEngine, MidPointCdsEngine and IntegralCdsEngine but I am getting different NPV results from each of them. The case is like this: When I have as ...
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What's the interpretation of the probability of default implied from CDS spreads?
What's the time horizon of the probability of default implied from a CDS spread? Given CDS = PD*(1-R), if I use a 5yr CDS spread in the formula, is the implied PD the probability that that name ...
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CDS - 2015 roll convention and short CDS tenors
I am reading the ISDA document here regarding the change to roll conventions on CDS that came in at the end of 2015 and in particular section 11 relating to the short end tenors. Additionally, I am ...
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CDS - IR currency for conversion between upfront and conventional spread
I was looking at a set of CDS quotes from Markit, for USD denominated CDS, for a reference entity whose standard contract currency is EUR. The quotes were for 6 Nov 2020. Markit provide three quotes, ...
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Objective probability of default from CDS spread
I have the risk neutral probability of default extrapolated from the market data of the CDS spreads. How can I empirically estimate the market risk price of the objective probability of default (i.e. ...
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Affine term structure for CDS
in papres such as https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2686284 (Exploring Mispricing in the Term Structure of CDS Spreads by Robert A. Jarrow, Haitao Li, Xiaoxia Ye, and May Hu) a ...
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Hazard process and affine term structure
How can I extrapolate the hazard processes and calibrate an affine term-structure model from the historical series of curves (1y, 2y, ..., 10y tenors) of the CDs spreads of different entities?
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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?
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Hazard rate and Term structure model
About the paper of Pan and Singleton 2008 “Default and Recovery Implicit in the Term Structure of Sovereign CDS Spreads”,
once the lambdas (hazard rates) for the different tenors of the term structure ...
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Should I hedge this spread with a spread option or an insurance product?
My firm generates electricity from wind. Accordingly, most of my generation takes place at night, when prices are low -- and, due to congestion / oversupply, often sharply negative -- so much so that ...
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CDS Option pricing in quantlib python
I am newbie in Python and I am trying to price a CDS Option in quantlib Python. I have the below code:
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Can I calculate the CVA or DVA over a sovereign portfolio?
Hi I haven't understood if I can apply the CVA just for derivatives or I can estimate the PD from CDS spreads and apply these in a bonds portfolio for the CVA calculus.
The CVA literature refers to "...
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Currency of CDS and adjustment of interest rated for country risk
I have question concered currency of the CDS spreads.
In the analysis I am conducting, I perform adjustment of interest rates for country risk (CDS could be a reference to reflect a country risk).
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Currency-denomination for the index in an event study
Suppose I want to perform an event study on corporate CDS spreads using the market model. All my CDS are US dollar-denominated, whereas the market index is euro-denominated. Is this strategy ...
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CDS currency and reference obligation currency
I have been reading a lot of posts on this topic, but still cannot find a definitive answer though.
If there is a CDS on a corporate reference entity in a currency denomination, does that imply there ...
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n-th to default swap with five reference names
I would like to price a n-th to default swap on a basket of 5 assets or reference names. I started to code in R and I put the routine hereby. my doubt is how to use the m = {m1,m2,m3,m4,m5} series ...
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MATLAB - Probability Default with CDS Bootstrapping
I have not understood which "zerorati" I must use for the bootstrap of the PD from the curve of the CDS spreads. Can you help me please? I consulted O'Kane (2008) and Brigo and Mercurio (2006), but I'...
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CDS basis trade using Risk free rate
The CDS spread pricing model uses “Risk free rate” to discount the PV and the Z-spread also uses “Risk free rate” to compute the spread. But the given example uses repo rate that comparing to Libor:
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The factor of 1/2 used in CDS spread derivation
Looking at the CDS spread formula, most of the variables are intuitive but only “2” in the equation that I’m stuck with.
$$S = \frac{(1-R)\sum D(t_i )(q_{i-1} - q_i)}{\sum D(t_i)q(t_i)d_i + D(t_i)(...
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Why Quantlib CreditDefaultSwap::ISDA fail on roll dates: 1st iteration: failed at 1st alive instrument, pillar
I am experimenting with Quantlib CDS engine, I create a piecwise hzard rate based on CDSHelpers and try to compute default probability with it and then some specific upfront.
I managed to match BBG ...
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Implied probability of default (CDS spread)
After some googling, I have made some progress but not enough to come to a conclusion, so here we go:
Given that the CDS spread of a counterparty is 100bp (flat across time) and that the risk free ...
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How is the Jump-to-default for CDS modeled in clearing houses?
I am trying to understand how the margin is calculated where protection is sold and more specifically what type of recovery rates are assumed.
Any insights would be much appreciated.
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