Credit sensitivity on floating rate bond

yktsui · January 19th, 2017, 1:49 pm

Was Credit sensitivity calculation method the same for fixed rate bond & floating rate bond?

For fixed rate bond, its easy to imagine to calculate credit sensitivity by shifting the yield-to-maturity upwards by e.g. 1bp and reprice to calculate CS01.
But for floating rate bond, how to do this? (value on fixing date and also on non-fixing dates?)

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pimpel · January 19th, 2017, 10:31 pm

Typically the forward coupons you determine from a different curve than the discounting one, so simply shift the discounting curve and that should do the job. If you have only one risk free discounting curve, and then shift the asset swap spread on top of it and leave the basis spread for floating coupons constant.

Credit sensitivity on floating rate bond

Credit sensitivity on floating rate bond

Re: Credit sensitivity on floating rate bond