FRM: Valuation of credit default swap (CDS) 

It is an assumption made by J.Hall. If the default occurs, buyer then needs to pay 50% of the premium to the seller. Since the buyer will have a small chance to pay this accrual, the spread will be lower than pricing CDS without counting the accrual.

2021 and this video keeps helping people, thanks a lot

Thank you a lot @bionicturtle !!!

Can you also share how you could replicate the ISDA Standard CDS Model in Excel which uses a piecewise constant hazard rate implied from the say 5Y CDS with a term structure of rates and not just a flat risk free rate?

big help on my final exam thx

how many times you can short one particular CDO? that is how many investors can buy cds on the same cdo

just want to say thank you. well done

Great Video!!!! Thank you :) Do you think it is possible to have the Excel Thank you

Expected accrual part is not clear. Why should we take half-percent of PDs in the calculation?

can this be performed in matlab?

How can we calculate CDS when we have two countries' treasury bond rate such as USA and a developing country ?

Can I have the spreedsheet to examine the calculation in detail please?

After ascertaining the basis point from this excel and you are told to get profit. How I do I go about it. I have the real market CDs value to be 18.353 and from my excel computation I got another basis point of 6.618 and my risk free rate is 0.426%. So if I add my rf to my excel basis point to get the coupon. How do I get the profit made from the transaction.

sir what is the name of the book. and could you recommend some good text books which helps to get an intuition as to how derivatives work. not applications but the mechanics behind them. thank you sir.

great video - would you always use the risk-free rate for discounting both sides?

Love you

Hi David Thanks for detailing every component involved in valuation of a CDS. I am beginner in the credit derivatives market, hence I would like to understand the basis for arriving the discounting factor which is used to weight the PV of expected payments/pay offs. In the example I understand that the buyer has to pay a sum of $124 (1000 * 0.124) per annum for the next five years, of course when there is no default by the reference entity. Please confirm whether my understanding is correct 2. I was in an impression that the premium the buyer pays is equal to the interest rate of the bond (say 6.5 %) less the risk free rate i.e., ( 6.5 - 5.0) = 1.5 % or 150 basis points. So I am wondering why the risk free return is not involved in the calculation of spread. I kindly request you to clarify my above queries. Thanks Saravana

what does 124 basis point represents

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Sorry how do you calculate discounts factors? Mathematically please

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Very informative , but that sound of gulping spit ugh! Change your mic man.

doesn't make any sense, at all!!