Risk
Fixed Coupons and Upfront Payments in CDS Contracts
For practical reasons, the coupon on CDS contracts within the same series usually remains fixed for new trades, even though the market spread changes over time. As a […]
Archive
Category: Options, Futures & Other Derivatives, – John C. Hull
Risk
CDS Indices
While a single-name Credit Default Swap transfers the credit risk of one company, a CDS index applies the same principle to a standardized portfolio of companies. Through a […]
Interest Rates
CDS vs Bond Spreads
What Additional Return Does a Corporate Bond Offer Compared with a Risk-Free Instrument? Bond Spread A buyer of a corporate bond assumes the company’s credit risk. If the […]
Risk
Valuation of CDS
The protection buyer periodically pays the CDS spread, while the protection seller assumes the obligation to compensate for losses if the organization defaults. However, this raises the main […]
Risk
Credit Default Swaps (CDS)
A CDS is an instrument/contract that provides protection against the default of a specific company or government. There are three parties or elements in the contract: Protection buyer […]
Risk
Credit-Metrics Model
We discussed the Vasicek model that address to question: “how many borrowers may default in an adverse economic scenario?” This model is particularly useful when we have a […]
Risk
Vasicek Credit VaR Model
The Vasicek Value at Risk model is a special case of the Gaussian Copula model. To recall, in the previous posts we started with a simple idea: every […]