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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How does buying a CDX and then taking a short CDS position generates alpha?

Can someone please explain to me how buying a CDX and then taking a short CDS position generates alpha? I am so confused.
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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 pricing using intensity models incorporating liquidity

I want to price a CDS using an intensity based model, but I want to account for liquidity as well. General model: The default time $\tau$ is the first jump time of a cox process, and the survival ...
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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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ISDA CDS model Upfront Fee

Can the ISDA CDS model be used for "legacy" CDS? I understand that it lets you convert from traded spread to upfront and back on the day CDS was traded but what about CDS that was traded 2 years ago ...
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CDS Quote Conversion - Quoted vs Par

Just to be on the same page, let me start with some nomenclature: Par Spread = Coupon for which the CDS has NPV=0, assuming a piece-wise constant hazard curve (considered in conjunction with all ...
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Quantlib CDS model

I have started working on CDS model using Quantlib and as a starting point, utilized code provided in GitHub Quantlib/Python examples with modifications in initial code as given at the end and have ...
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279 views

CDS ISDA model/Bloomberg

I am becoming more acquainted with QuantLib as a platform. I've been using both the python implementation and QuantLib XL. As I have started to look at CDS, I would like to know if there is a ...
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Change in CDS and counterparty

How can CDS contracts be used in order to hedge (neutralize) CVA charge movements with respect to changes in the underlying rates for a counterparty? In here CVA is a proportion that’s subtracted ...
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289 views

Deriving default probability from CDS spread via stripping

I am currently trying to derive the cumulative probability of default from a CDS spread where the LGD is 30% and there are quarterly premiums including the accrued premium. ...
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“Where is my money”: CDS Sensitivities, Spreads and PnL Calculations

Trading CDS I experienced something unexpected: A half year ago I sold protection on a single name at a spread of 190bp The coupon was 5% and the contract had a maturity of five years. Using ...
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704 views

CDS credit spreads vs default probability

What is the relationship between a CDS credit spread (as set by the CDS issuer) and the instantaneous default probability (as estimated by the CDS issuer)? I hear they are similar but not the same. ...
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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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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: What events prompt change in series and version of an iTraxx index ? Is it after one ...
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Hedging a CDS sold

How would a bank that sold a CDS to a client hedge its position? Is there a replication method similar to what is done with option hedging or other methods used? Many thanks
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Reason for stale sovereign CDS spreads (e.g. Greece)

I have a dataset of CDS spreads for European sovereign from Thomson Reuters Datastream. I noticed for some entities in some timeframes, spreads are essentially stale. For example in the case of greece ...
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How to measure effectiveness of CDS hedging

In a fixed income emerging markets portfolio investing in Sovereign and Corporates, CDS on governement bonds are used for hedging credit risk. To be clear CDS are used to hedge both the exposure of ...
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CDX funded vs unfunded returns timeseries

I've been asked to provide a CDX.NA.IG unfunded total returns timeseries, for which I've been able to use a Bloomberg ticker LX01TUUU Index. This works fine - it's called an unfunded total returns ...
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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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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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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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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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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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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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364 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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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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323 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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487 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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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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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 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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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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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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Market Value of a CDS

I need to model the market value of CDS in a portfolio. My current approach is to calculate the present value of the future spread payments - does anybody have a better idea to solve the problem? ...
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Quanto CDS modeling

What is the market standard for pricing quanto CDS (i.e. CDS which pays the contingent leg in different currency than the pricing leg)?
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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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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 ...
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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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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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How to compute the implied probability of default from a CDS spread?

I have two tasks: Given country's CDS spread draw implied probability of default. Given probability of default calculate CDS spread. If possible, refer to any papers.
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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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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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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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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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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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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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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.