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Credit Default Swaps

Bootstrap CDS probability curve, price, and determine CDS spread,

A credit default swap is a particular type of swap designed to transfer the credit exposure of fixed income products between two or more parties. In a credit default swap, the buyer of the swap makes payments to the swap’s seller up until the maturity date of a contract. In return, the seller agrees that, in the event that the debt issuer defaults or experiences another credit event, the seller will pay the buyer the security’s premium as well all interest payments that would have been paid between that time and the security’s maturity date. A credit default swap is, in effect, insurance against non-payment. Tools for analyzing credit default swaps are available in Financial Toolbox™.

Functions

cdsbootstrapBootstrap default probability curve from credit default swap market quotes
cdspriceDetermine price for credit default swap
cdsspreadDetermine spread of credit default swap
cdsrpv01 Compute risky present value of a basis point for credit default swap

Examples and How To

Concepts

  • Credit Default Swap (CDS)

    A credit default swap (CDS) is a contract that protects against losses resulting from credit defaults.