Credit Derivatives R96022087 張智烜. Credit Derivatives Market risks Credit Default Swap(CDS)

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Presentation transcript:

Credit Derivatives R 張智烜

Credit Derivatives Market risks Credit Default Swap(CDS)

CDS provides insurance reference entity Buyer has the right to sell bonds issued by the company makes periodic payment to the seller CDS spread, notional principal Seller agree to buy the bonds

CDS Physical settlement 100% of face value Cash settlement determine the mid-market value of the cheapest deliverable bond recovery rate

CDS Hedge a position in a corporate bond risky-rate = risk-free-rate + CDS spread

Credit Indices track CDS spread a list of credit instruments or exposures designed to be representative of some part of the credit market as a whole

CDS Valuation Marking to Market a CDS Binary CDS The future of CDS

To be continued..