Це відео не доступне.
Перепрошуємо.
FRM: Valuation of credit default swap (CDS)
Вставка
- Опубліковано 24 жов 2008
- The key idea in valuing a CDS is a fair deal: the (probability-adjusted) expected PAYMENTS (i.e., made by protection buyer) should equal the expected PAYOFF (contingent, made by seller). For more financial risk videos, visit our website! www.bionicturtle.com
Thank you a lot @bionicturtle !!!
big help on my final exam thx
It is an assumption made by J.Hall. If the default occurs, buyer then needs to pay 50% of the premium to the seller. Since the buyer will have a small chance to pay this accrual, the spread will be lower than pricing CDS without counting the accrual.
Can you also share how you could replicate the ISDA Standard CDS Model in Excel which uses a piecewise constant hazard rate implied from the say 5Y CDS with a term structure of rates and not just a flat risk free rate?
2021 and this video keeps helping people, thanks a lot
2024 and this video keeps helping people
how many times you can short one particular CDO? that is how many investors can buy cds on the same cdo
just want to say thank you. well done
You're welcome! Thank you for watching!
Great Video!!!! Thank you :)
Do you think it is possible to have the Excel
Thank you
Expected accrual part is not clear. Why should we take half-percent of PDs in the calculation?
can this be performed in matlab?
Love you
great video - would you always use the risk-free rate for discounting both sides?
risk-neutral valuation
After ascertaining the basis point from this excel and you are told to get profit. How I do I go about it. I have the real market CDs value to be 18.353 and from my excel computation I got another basis point of 6.618 and my risk free rate is 0.426%. So if I add my rf to my excel basis point to get the coupon. How do I get the profit made from the transaction.
How can we calculate CDS when we have two countries' treasury bond rate such as USA and a developing country ?
Hello! If you do not receive an answer here, you may find an answer in our forum here on our website, where David and other members answer questions daily: www.bionicturtle.com/forum/.
Can I have the spreedsheet to examine the calculation in detail please?
I know it is too late 😂, but were you able to get the excel file?
sir what is the name of the book. and could you recommend some good text books which helps to get an intuition as to how derivatives work. not applications but the mechanics behind them. thank you sir.
Hello Rishitha. If David does not get the chance to respond here, our forum may be helpful. You can post a question in our forum, and I'm sure some of our members could give you recommendations. www.bionicturtle.com/forum/
Hi David
Thanks for detailing every component involved in valuation of a CDS. I am beginner in the credit derivatives market, hence I would like to understand the basis for arriving the discounting factor which is used to weight the PV of expected payments/pay offs. In the example I understand that the buyer has to pay a sum of $124 (1000 * 0.124) per annum for the next five years, of course when there is no default by the reference entity. Please confirm whether my understanding is correct
2. I was in an impression that the premium the buyer pays is equal to the interest rate of the bond (say 6.5 %) less the risk free rate i.e., ( 6.5 - 5.0)
= 1.5 % or 150 basis points. So I am wondering why the risk free return is not involved in the calculation of spread.
I kindly request you to clarify my above queries.
Thanks
Saravana
I am new to the CDS market, but from my understanding , the risk free rate is used here, it is used in calculation of all discounting factors mentioned 1/(1.05)^t, t is years.
Also the spread is 0.0124 therefore the buyer pays a premium of $12.4 not $124. This seems less but in actual life notional values go upto even a billion dollars therefore a spread of 0.0124 will amount to $12.4 million every year for the next 5 years (total premium = $62 million)
what does 124 basis point represents
That cds buyer needs to pay the premium of 124 bp or 1.24% of notional principal to the cds seller
「もっと多くの人が必要なので、このビデオをもっと
Sorry how do you calculate discounts factors? Mathematically please
1/((1+r)^n) (N being term - so after year 1, n=1, after year 2, n=2)
Period 1 : 1/ (e^(r*1)) Period 2: 1/(e^(r*2)) (The number e, also known as Euler's number, is a mathematical constant approximately equal to 2.71828 that can be characterized in many ways.
Lo
Very informative , but that sound of gulping spit ugh! Change your mic man.
doesn't make any sense, at all!!