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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A model to stochastic hazard rate and CDS spread term structure

I'm interested in the term structure of CDS spread. It's known that the Market CDS rate (fair CDS spread or T-maturity spread) of a CDS contract initiated at $s$, maturity $T$ and recovery function $...
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CDS volatility: daily return calculated by simple substraction (Pt - Pt-1)?

I am working on validating the CDS volatility generated by a third party risk engine. It appears that returns are calculated with simple substractions and adjusted for the CS01: (Price of the CDS ...
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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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Dynamic Hedging for a Bond

Sorry if this question is duplicate. Analyzing the scenario to hedge bond credit risk with CDS. but if Bond price changes CDS notional will not change. is there any way i can hedge this ?
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Basket Default Swap (BDS)

I would like to understand better the $n^{th}$ to default pair spreads of a basket default swap containing $m>n$ entities. For example, consider 2 single name CDS's with same spread and same ...
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452 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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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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213 views

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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How are CDS prices calculated for financial institutions?

If you need to estimate the fair price of a credit default swap on a financial institution, can it be done? Typical structural models tend to break down for the complex debt and asset characteristics ...
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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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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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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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423 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 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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81 views

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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137 views

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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267 views

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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Where can I find bonds time series?

I want to study dependence and correlation between bonds and CDS. I have already found a large CDS database of time series there: www.datagrapple.com I am looking for such a similar database (with an ...
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Fair Price CDS Spread for a Bank

I have been using CreditGrades to calculate fair one year CDS spreads for firms. However, the authors of the model explicitly say that the model does not hold for banks or financial firms. If I need ...
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Construction of bond portfolio represented by a CDS-Index

Markit publishes investable basket CDS indices. These are indices intended to track the credit risk of a basket of issuers (e.g. in the case of iTraxx Europe Series 24 these are 125 names) in an ...
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how does a bond maturing affect the pricing of the corresponding CDS?

if a bond matures, and there is no other existing bond from the legal entity that has not matured. Then how does that affect the CDS that corresponds to that bond?
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Alternatives to CDSs for default term structure?

The CDS market seems to be drying up, funding&liquidity issues are now prevalent over credit, so other sources for default probabilities are needed. What else is commonly used to obtain a ...
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How to calculate Probability of Default from Survival Probability

I would calculate Probability of Default from Survival Probability. I want to know how they are related. This is how I think they are related: ...
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CDS ISDA Pricing (usage of accrued in calibration)

I am looking to understand the ISDA CDS Pricing Model for a 1Y "Buy Protection" CDS with Coupon = Quoted Spread = 100bp. Numbers are from Bloomberg. Cash-Flow Matrix ...
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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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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 ...