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Converting CDS Upfronts into a running spread
Posted: June 1st, 2005, 12:00 pm
by Hebridean
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, whereas if it's wrapped up in the spread it is subject to the default probability.
Converting CDS Upfronts into a running spread
Posted: June 1st, 2005, 5:51 pm
by Pat
It's a bad idea ... small changes in the underlying credits lead to much larger changes in the running spread ....
Converting CDS Upfronts into a running spread
Posted: June 1st, 2005, 6:49 pm
by Hebridean
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.
Converting CDS Upfronts into a running spread
Posted: June 2nd, 2005, 9:36 am
by yes
H do you know how to compute the PV of a CDS?
Converting CDS Upfronts into a running spread
Posted: August 12th, 2005, 11:21 am
by CDO2
did you guys managem to convert the upfront to runnign spreads?Regards,
Converting CDS Upfronts into a running spread
Posted: August 12th, 2005, 11:21 am
by CDO2
did you guys managem to convert the upfront to runnign spreads?Regards,
Converting CDS Upfronts into a running spread
Posted: August 12th, 2005, 11:22 am
by CDO2
did you guys managed to convert the upfront to running spreads?Regards,