Credit Default Swaps
Additional tools for working with credit default swaps and are available in Financial Instruments Toolbox™. For more information, see Price Credit Derivative Instruments (Financial Instruments Toolbox).
- Bootstrapping a Default Probability Curve
In a typical workflow, pricing a new CDS contract involves first estimating a default probability term structure using
- Finding Breakeven Spread for New CDS Contract
The breakeven, or running, spread is the premium a protection buyer must pay, with no upfront payments involved, to receive protection for credit events.
- Valuing an Existing CDS Contract
The current value, or mark-to-market, of an existing CDS contract is the amount of money the contract holder would receive or pay to unwind this contract.
- Converting from Running to Upfront
A CDS market quote is given in terms of a standard spread and an upfront payment, or in terms of an equivalent running or breakeven spread, with no upfront payment.
- Bootstrapping from Inverted Market Curves
These examples show bootstrapping with inverted CDS market curves, that is, market quotes with higher spreads for short-term CDS contracts.
- First-to-Default Swaps (Financial Instruments Toolbox)
This example shows how to price first-to-default (FTD) swaps under the homogeneous loss assumption.
- Credit Default Swap (CDS)
A credit default swap (CDS) is a contract that protects against losses resulting from credit defaults.