Credit Default Swap Data: CDS Pricing Datasets & Data Sources (2024)

FAQs

How is a credit default swap priced? ›

Valuation of a CDS is determined by estimating the present value of the payment leg, which is the series of payments made from the protection buyer to the protection seller, and the present value of the protection leg, which is the payment from the protection seller to the protection buyer in event of default.

Q. Where can I find credit default swaps (CDS)?

In Bloomberg, enter CDSW <GO> [Credit Default Swap Valuation]. You can use the deal information section to enter CDS deal terms, the market data section to choose the curves used to price your transaction, and the calculator section to evaluate the deal.

The party with the greater present value makes a payment to the counterparty. CDS prices are often quoted as credit spreads. The convention in the CDS market for the fixed payments made from the CDS buyer to the CDS seller is to use standardized coupons of 1% for investment-grade debt and 5% for high-yield debt.

Popular Credit Default Swap (CDS) data providers that you might want to buy Credit Default Swap (CDS) data from are Exchange Data International, FinPricing, Tradeweb, DTCC, and Quandl.

As a conclusion the price of a CDS = 1- (CDS spread -fixed coupon) * effective duration of the CDS. You notice here that if the CDS spread is higher than the coupon the buyer must pay the difference between what he receives (the spread) and the coupon (what it pays) because he receive more than par.

They quote CDS in terms of "spread" That 400bps you refer to is the "spread" you pay on the total amount (notional) you would like to insure. The higher the spread, the higher the perceived credit risk of the company you are lending money to.

Data about the historical credit default swap market is available from three main sources. Data on an annual and semi-annual basis is available from the International Swaps and Derivatives Association (ISDA), which dates back to 2001, and from the Bank for International Settlements (BIS) since 2004.

Investors can pick CDS contracts to hedge against exposure to individual bonds, portfolios, or even customized credit indices depending on their risk appetite.

In a CDS, one party “sells” risk and the counterparty “buys” that risk. The “seller” of credit risk – who also tends to own the underlying credit asset – pays a periodic fee to the risk “buyer.” In return, the risk “buyer” agrees to pay the “seller” a set amount if there is a default (technically, a credit event).

The CDS is a derivative contract that allows one investor to transfer credit risk on an underlying fixed-income instrument or loan to another counterparty. For example, a lender might buy a CDS from another investor who agrees to pay the lender/buyer should the borrower (bond issuer) default.

How do banks price CDS? ›

How banks set CD rates. CD rates can be influenced by numerous factors, including the current economic climate, inflation and market dynamics. For example, when inflation is low, interest rates tend to be lower.

Risks of Credit Default Swap

One of the risks of a credit default swap is that the buyer may default on the contract, thereby denying the seller the expected revenue. The seller transfers the CDS to another party as a form of protection against risk, but it may lead to default.

CDDB, short for Compact Disc Database, is a database for software applications to look up audio CD (compact disc) information over the Internet. This is performed by a client which calculates a (nearly) unique disc ID and then queries the database.

Put simply the Common Data Service (CDS) is a solution for securely storing and managing data that's being utilised by business applications, most notably those of the Power Platform. Think of CDS as a cloud database, made up of many tables.

The upfront premium for a credit default swap (CDS) is equal to the difference between the present value of the premium leg and the present value of the protection leg. The premium leg is the payments made by the protection buyer to the protection seller.

The percentage of the notional principal paid per year—even if the premiums are paid quarterly or semiannually — as a premium is the CDS spread. So if a CDS buyer is paying 50 basis points quarterly, then the CDS spread is 200 basis points, or 2%, of the notional principal.

Notional Value: refers to the face value of the underlying fixed income securities. Reference Obligation: the underlying security against which the CDS provides default protection. Premium: since a CDS functions as a type of insurance, the buyer pays a premium to the seller, typically on a quarterly basis.

In a CDS, one party “sells” risk and the counterparty “buys” that risk. The “seller” of credit risk – who also tends to own the underlying credit asset – pays a periodic fee to the risk “buyer.” In return, the risk “buyer” agrees to pay the “seller” a set amount if there is a default (technically, a credit event).