Ok, but I still want a convenient method to compare spreads that are quoted with an upfront (e.g. 20% upfront + 500 bp running) to those that are quoted without one (e.g. 1000bp) for protection on the same risk.

<t>For CDS, can anyone advise on a suitable method for converting "an Upfront Payment + Running spread" into a single equivalent "Running spread"?I'm assuming simply equating the straight NPV of the cashflows is not good enough as in the first case the Upfront is received with probability = 1, where...

<t>Actually, since you asked about "the most accurate" method I should add that when the Bond is far from Par, the Asset Swap Spreads tends to become increasingly unreliable as a valuation of the bond. Obviously, this effects your calculated PD but then again you still need to make a big assumption ...

<t>If you use your Bond Price to first calculate the Bond's Asset Swap spread (i.e. convert the current price to a floating spread over LIBOR) you can then calculate the Probability of Default (PD) as follows...PD = (1 - exp(- s T) ) / (1 - RR)where:s = The Asset Swap Spread for the BondT = The Matu...

If you have access to market data e.g. Bond or CDS term structures for the obligor, you can generate a Market/Spread Implied Rating. This basically works by comparing which rating (or sector/rating) average curve the obligor's curve lies closest to.