cdsbootstrap | Bootstrap default probability curve from credit default swap market quotes |
cdsprice | Determine price for credit default swap |
cdsspread | Determine spread of credit default swap |
cdsrpv01 | Compute risky present value of a basis point for credit default swap |
Bootstrapping a Default Probability Curve
In a typical workflow, pricing a new CDS contract
involves first estimating a default probability term structure using cdsbootstrap
.
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.
A credit default swap (CDS) is a contract that protects against losses resulting from credit defaults.