CDS DV01
Posted: December 3rd, 2006, 5:02 pm
by jamesnowak
Does the DV01 of a CDS match the DV01 of a Bond?Any papers/examples on the above notion would be handy..Thanks
CDS DV01
Posted: December 4th, 2006, 3:53 am
by AlphaNumericus
If the DV01 of the CDS is calculated as the change in mtm from bumping the CDS spread 1bp; and the DV01 of the bond is calculated as the change in the model price (using Duffie-Singleton - present value of the bond's cash flows as if they were a CDS) from bumping the CDS spread (not the same as yield01); then they will be comparable. However not every change in a bond's price is fully explained by the changes in the CDS spread and the risk-free rate.