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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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Calculation of adjusted CDS spread changes in event study

I am conducting a study about the impact of credit ratings on credit default swap spreads for European Sovereigns. In the related literature, most authors use adjusted spread changes to account for ...
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Properties of an itraxx index

I am working on maintaining the market data of itraxx indexes in our systems and I have the following questions. can someone clarify? 1.What events prompt change in series and version of an itraxx ...
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Why z-spread differs from CDS spread in 1 period example

Suppose we have a 5% (paid-annually) coupon bond with 1-year to maturity. We also have a 1-year CDS with a single payment paid annually (running spread with zero upfront). Assume that the underlying ...
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Questions on CDS

I have a few questions on CDS and especially sovereign ones: I've read that usually CDS are generally traded in millions of notional value, which means that not everybody can purchase sovereign CDS, ...
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Credit Default Swap transaction data

I'm looking for historical transaction data for (OTC) Credit Default Swaps. One option is to take a look on DTCC Data: http://www.dtcc.com/repository-otc-data.aspx Are there other options to get the ...
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Return on a CDS portfolio

Good evening, I try to compute the performance of a portfolio of a CDS. I already know how to mark-to-market a CDS but typically, the first time you enter a CDS, you invest zero as the mark-to-market ...
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Why do CDS Spreads differ by currency?

last time using Bloomberg I found out that the CDS Spread for Italy 5Y CDS in USD was somewhere around 230bp whereas the Spread for Italy 5Y CDS in EUR was just around 130bp. I looked at other debtors ...
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181 views

Is Red Code unique per derivative instrument

Does RED Code (="Markit Reference Entity Database Code") uniquely identify the derivative that has been traded? Is it possible to get a derivative's ISIN code from RED Code?
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174 views

Do CDS have interest rate exposure?

For hedging purposes, do CDS have interest rate exposure? I've thought of CDS as a pretty direct proxy for credit risk, but on the other hand say if interest rates rise it would be harder for ...
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How is valuing corporate CDS different from sovereign CDS?

How are they different? I have done some corporate CDS valuations but I want to know how to value sovereign CDS. Thanks!
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48 views

CDS Spread sensitivity

I am computing HVaR for corporate bonds using CDS spread to approach credit risk. I have data on cds spread for different maturities along the bond life and I need the sensitivity to spread change for ...
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How to construct spreads from cds proxies?

We are in the journey to get PDs of clients with no market info (neither CDS nor Bonds) and we would like to use CDS indices or proxies to estimate such PDS, we have the idea to do a regression or a "...
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where can i get historical daily price data of counties (especially for turkey) CDS prices? [duplicate]

i need countries historical CDS prices (especially for Turkey) but i am failed to find. can anyone suggest me a website please?
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Why does/did a CDO need a “sponsor”?

I've been reading a lot of about the "Magnetar trade" (see pro-publica article here and the links therein, as well as this paper), and I'm slightly confused by the argument about how Magnetar (and ...
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Difference between par curve and MSQ curve for CDS

This concept between par curves and MSQ curves has been tripping me recently. Par curves on a cds or bonds usually refer to the yield that makes PV=0. So par curve levels are easy to backtrack from ...
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189 views

ISDA CDS Model Functions

I'm using the ISDA CDS Model downloaded from http://www.cdsmodel.com/cdsmodel/. I've taken the Excel Add-In. I see we have the following functions. However there does not seem to be examples or ...
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CDS Indices Query

I'm just getting into Credit derivatives at the moment but I'm having a bit of trouble with the technicalities of CDS Indices(CDX etc.) My question is. Given that CDS indices have fixed lifetime, is ...
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255 views

Using Euro CDS for a USD transaction

I'm working under the assumption that CDS spreads are not as sensitive to currency as bonds. As long as default risk and FX risk are independent, CDS spreads in different currencies should not differ (...
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509 views

From quoted spread and coupon to ufront, and inversely : which recovery rates and when?

Echoing the following question : Markit recovery rates : assumed vs real I would like to have a confirmation on my understanding on the matter. Markit provides data for CDS, namely, for tenors ...
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1answer
109 views

Is it possible to sell protection on own asset with CDS?

Is it possible for a company to sell protection on their own assets or own country bonds by CDS? The company can buy protection on those assets, but how about selling? I suppose it can not sell. Is ...
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283 views

Positive base arbitrage CDS vs Asset Swap

While I completely understand the negative base arbitrage when the base is defined as : $$Base = CDS - ASW$$ I am stuck on the possible arbitrage when the base is positive. Let's think with an easy ...
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294 views

What does rolling a CDS entail?

I saw the question What does "rolling" for a CDS contract mean? One answer says: Entering into a new contract when the old one expires. and another says: Rolling is the act of ...
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306 views

Importance of z-spread in CDS-Bond Basis trading

Consider the following: A bond with a 9% coupon and a price of $98. Let's say the zero swap curve is flat at around 7% (e.g. the zero swap curve is high because we're at the end of a business cycle). ...
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CDS protection/contingent leg pricing, taking expectation of interest and hazard rates

The Pricing and Risk Management of Credit Default Swaps, with a Focus on the ISDA Model Screenshot: Pricing protection leg of a CDS, by OpenGamma In the screenshot above, I am having trouble ...
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CDS Mark-to-Market

I am trying to calculate the Mark-to-Market of a CDS, and I want to know if what I did is correct. Let a CDS of maturity $T$, we suppose that the recovery $RR$, the discount rate $r$, and the hazard ...
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1answer
186 views

CDS Vs Credit Risk premium over risk free

Credit default swap is the premium you pay to protect against a credit default from your borrower. Would it be equal to the credit premium over risk free i.e. bond yield - risk free of comparable ...
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CDS systemic and idiosyncratic risks

It is well known that generally CDS spreads increase as credit-worthiness of a firm declines. Is it possible to separate the systemic/market risk from the idiosyncratic/specific firm's risk in a CDS ...
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57 views

CDS for Funding

I was wondering if anyone is familiar with how credit default swaps can be used for corp funding and financing. I came across an old case where a bank created a funding structure for a client (asset ...
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1answer
230 views

Granger causality with stocks and CDS

I would like to take a closer look at stock prices and CDS spreads of different entities. Because both of them are nonstationary in levels, I use log stock returns and the first difference of the CDS. ...
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287 views

Quanto CDS effects: definition

few days ago I was speakign with my teacher who cited the so called quanto effect. If I have not understood wrongly it is the difference between CDS in one currency and in another. 1) Do you have a ...
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VAR models when examining relationships between financial markets

When researchers examine lead-lag relationships between credit default swaps and (as an example) stock markets, many use Vector Autoregressive Models (VAR). They want to find out what market "is ...
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1answer
3k views

What does “rolling” for a CDS contract mean? [closed]

I tried to google it but I only get results for ISDA intruducing a new rolling convention.
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1answer
309 views

Questions about Markit rates curve bootstrapping

I am reading the following two Markit documents concerning the bootstrapping of respectively the USD rates curve and the EUR, GBP, JPY, CHF, CAD, HKD, SGD, AUD and NZD rates curves. (Both versions are ...
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Writing option on one's own default

Maybe this is a weird question, but suppose that, for some reason, one would like to write an (implicit) option whose payoff is indexed on the writer's CDS spread. I would like to know what would be a ...
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Credit quotations with which ISDA models?

I understand that single name liquid CDSs are (roughly speaking) quoted through either upfront+coupon, spread or price, and that for the pricing, the ISDA standard model is used : among other ...
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1answer
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How to converting CDS Upfront Fee into Traded Spread?

If I know all the economics of a CDS trade included the Upfront Settlement Fee from the ISDA CDS Model, how can I convert that amount back to Traded Spead? Can some help explain the process?
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1answer
616 views

Reliability of CDS indices?

Looking at a time series two North American CDX indexes, one high yield and one investment grade, shows somewhat unexpected trends. CDX.NA.IG seems to be much higher and more volatile than CDX.NA.HY,...
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335 views

Which interest rate to choose to estimate a CDS default probability?

As you know, with basic assumptions default probability could be calculated by $$\text{CDS Spread} = p \cdot \frac{1-RR}{1+r}$$ Does that make sense to use 5 Year CDS Spread with 5 year Generic ...
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dataset on Credit Default Swap [duplicate]

I would like to have the CDS for the main countries. Do you know where I could find these data free to use? Thanks a lot
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62 views

Is a CDS spread a spread in a typical sense

I have a basic question that's causing me some confusion. I see discussion of a "CDS spread," defined as the cost of protection. Are these the same as a bid-ask spread? Is there any relation between ...
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1answer
265 views

How measure the hedge effectiveness in hedging relation using CDS?

For examples if we bought a 10 years corporate bond and want to hedge the credit risk only using CDS , 1- how can we calculate the hedge ratio (compare the change in the asset credit risk vs what )?...
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Estimating Recovery Rates

What are some methods for estimating recovery rates for an entity? For example, say I am trying to find the recovery rate that would be used to price a single name CDS on JPMorgan. The true ...
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What are the difference between LCDX vs CDXHY?

I would like to understand what the main differences between LCDX and CDXHY are. Also, can anyone explain what the cancellable feature for LCDS, which is not there for CDS's, is and what it means for ...
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3answers
4k views

Formula to price a CDS Index Option?

Say I wanted to buy an option on the CDX US HY Index (specifics here are irrelevant, but the point is that I'm looking for an option on a CDS Index). What would be the pricing formula given inputs of ...
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129 views

Where can I find the Credit default swap index that Chase bank puts out?

Where can I find the Credit default swap index that JPMorganChase bank puts out? I am able to find some indices for Europe but none for the US. thanks
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Bootstrapping bond spreads as in the standard CDS model

Suppose that we have a spread curve $\boldsymbol{s}:=(s_1, ..., s_n)$, where $s_i$ are CDS par spreads. Moreover, assume the standard ISDA model framework, i.e. piecewise constant forward / hazard ...
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939 views

What is the Difference Between a Credit Default Swap and a Bet

Reading the wikipedia page for derivatives on 00:02 E.S.T March 21 2016, a credit default swap (CDS) is summarized as being "A credit default swap (CDS) is a financial swap agreement that the seller ...
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3answers
2k views

Credit Valuation adjustment (CVA) Hedges

I need to understand once CVA Desk has CVA number(Bilateral or Unilateral) for a Counterparty, how does it take hedge position. for Eg: if CVA charge for my bank to JPM is 100K Dollars. What does ...
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CDS spread scenarios from historical market data

I'm searching for information on the best way to generate scenarios to be used in VaR or ES calculations, for CDS spreads. Given that we need significant historical data in order to achieve a decent ...
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Where to get price data on Credit Default Swaps?

I trust market-driven CDS more than credit ratings. Where can one get the CDS of corporate bonds of major companies? Are there any good internet links? If charts on the historical end-of-day prices ...