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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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Carry & Roll for Upfront CDS

We can decompose the P&L for a CDS Position as follows: P&L = P&L(Carry) + P&L(Roll-Down) + P&L(Curve Shift) For a fixed horizon (h), Notional (N) and CDS Spread for a maturity T (...
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Assessment of cross-sectional regression model for CDS spreads of CVA calculations

For the purposes of the CVA calculation, someone might need to proxy the CDS spreads (and their associated implied hazard rates) for counterparty cases with illiquid CDSs. A common approach (leaving ...
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Survival probability interpolation between two time nodes

In the Open Gamma paper describing the ISDA CDS pricing model, it is mentioned that given the time notes of the credit curve $T^c=\{t_{1}^{c},...,t_{n_{c}}^{c}\}$ and that the survival probability for ...
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Match CDS upfront amount between Quantlib and Markit Converter model

I'm trying to reconciliate the upfront amount between the Markit converter model (https://cds.ihsmarkit.com/converter.jsp) and the result from the quantlib IsdaCdsEngine function. the difference is ...
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Correlation risk between protection (seller) and reference entity

I am learning about central clearing. In my understanding, CDS are usually cleared via central clearing. But at the same time I heard that in case of too much correlation such as US bank selling ...
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Quanto CDS pricer in Python

I am sales and would like to grasp rough levels of quanto CDS, such as BMW denominated in USD, without askin traders each time. What i'm thinking is to calculte it using Python. But i cannot build up ...
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Computation of CouponLegNPV using IsdaCdsEngine

I've recently been trying to work on and understand the concepts around CDS. By making simplifications (flat hazard rate, flat forward rate), I wanted to compare the values I could obtain by manual ...
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CDS data for different industries/rating? [duplicate]

I have come across below CDS data (index values) based on different Rating, Industries, and Regions, I am wondering where can I get more complete data i.e. such ...
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Conventions and Modeling of CDS Options

I am curious about the current standard conventions and modeling techniques in the CDS options market. I would be glad if someone could elaborate on the following topics: State of the art of index ...
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CDS Basket Kth to Default and Recovery rates

I am trying to determine the effect of recovery rate on the Kth-to-default CDS Basket made up of 5 names (all major investment bank names). I repeatedly change the recovery rate assumption from 0 to 1....
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CDS Runtime Error: Issue changing evaluation date using UpfrontCdsHelper in Python

If I run the below CDS pricing example (from https://github.com/lballabio/QuantLib-SWIG/blob/master/Python/examples/cds.py) using the UpfrontCdsHelper instead of the SpreadCdsHelper, I get the ...
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CDS Pricing formula leads to negative prices [closed]

I'm using this formula to price sovereign CDSs according to CDS Returns, Augustin, Saleh and Xu (2020), Journal of Economic Dynamics and Control. As you can see, the highlighted part will become ...
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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 ...
Jorge Vinseiro's user avatar
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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 ...
Guy Kern's user avatar
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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 ...
lampishthing's user avatar
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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 ...
ohRyZze's user avatar
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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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implied vol by Delta

I am looking at some data that is Delta 10, Delta 30, etc for an index option CDX IG. I know the meaning of Delta, as a sensitivity of the price move with respect $1 move in the underlying index. What ...
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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 ...
Ice Tea's user avatar
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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) ...
John Smith's user avatar
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1 answer
150 views

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 ...
Hemanth Kusampudi's user avatar
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1 answer
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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 ...
Pandaaaaaaa's user avatar
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1 answer
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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.
ILIE's user avatar
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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?
Mikail Kilic's user avatar
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1 answer
253 views

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 ...
germany's user avatar
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-1 votes
1 answer
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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 ...
Strictly_increasing's user avatar
1 vote
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331 views

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 ...
abruckner's user avatar
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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 ...
Hymn's user avatar
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2 votes
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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 ...
Francis's user avatar
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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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1 answer
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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 ...
Student's user avatar
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1 answer
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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 ...
Francis's user avatar
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4 votes
1 answer
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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, ...
Francis's user avatar
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1 vote
1 answer
348 views

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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1 answer
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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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1 vote
1 answer
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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?
d0whes's user avatar
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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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