cds

Syntax

cds(settlement, maturity, evalDate, notional, spread, riskFree, recovery, isSeller, frequency, calendar, [convention='Following'], [termDateConvention='Following'], [rule='CDS'], [basis=1])

Details

Value a Credit Default Swap (CDS) contract.

Return value: A DOUBLE scalar or vector.

Arguments

Note: Scalar inputs will be automatically expanded to match the length of other vector inputs. All vector inputs must be of equal length.

settlement is a DATE scalar or vector indicating the settlement date.

maturity is a DATE scalar or vector indicating the maturity date.

evalDate is a DATE scalar or vector indicating the evaluation date of the CDS contract. Note that evalDate should be no later than settlement.

notional is a non-negative numeric scalar or vector indicating the notional principal of the CDS contract.

spread is a numeric scalar or vector indicating the CDS spread. The CDS spread is the amount the buyer pays to the seller each period, which is quoted as a percentage of the contract’s notional principal in basis points (bps).

riskFree is a numeric scalar or vector indicating the risk-free interest rate.

recovery is a numeric scalar or vector in [0,1), indicating the recovery rate. It is the estimated percentage of par value that the bondholder will receive after a credit event (e.g., default).

isSeller is a BOOLEAN scalar or vector indicating whether the party is the buyer or the seller. true for the seller and false for the buyer.

frequency is an INT scalar/vector indicating the number of payments, or a STRING scalar/vector indicating payment frequency. It can be:
  • 0/"Once": Bullet payment at maturity.
  • 1/"Annual": Annual payments.
  • 2/"Semiannual": Semi-annual payments.
  • 4/"Quarterly": Quarterly payments.
  • 12/"Monthly": Monthly payments.

calendar is a STRING scalar or vector indicating the trading calendar(s). See Trading Calendar for more information.

convention (optional) is a STRING scalar or vector indicating how cash flows that fall on a non-trading day are treated. The following options are available. Defaults to 'Following'.

  • 'Following': The following trading day.
  • 'ModifiedFollowing': The following trading day. If that day is in a different month, the preceding trading day is adopted instead.
  • 'Preceding': The preceding trading day.
  • 'ModifiedPreceding': The preceding trading day. If that day is in a different month, the following trading day is adopted instead.
  • 'Unadjusted': Unadjusted.
  • 'HalfMonthModifiedFollowing': The following trading day. If that day crosses the mid-month (15th) or the end of month, the preceding trading day is adopted instead.
  • 'Nearest': The nearest trading day. If both the preceding and following trading days are equally far away, default to following trading day.

termDateConvention (optional) is a STRING scalar or vector indicating how maturity date that falls on a non-trading day is treated. Parameter options and the default value are the same as convention.

rule (optional) is a STRING scalar or vector indicating how the list of dates is generated. It can be:

  • 'Backward': Backward from maturity date to settlement date.
  • 'Forward': Forward from settlement date to maturity date.
  • 'Zero': No intermediate dates between settlement date and maturity date.
  • 'ThirdWednesday': All dates but settlement date and maturity date are taken to be on the third Wednesday of their month (with forward calculation).
  • 'ThirdWednesdayInclusive': All dates are taken to be on the third Wednesday of their month (with forward calculation).
  • 'Twentieth': All dates but the settlement date are taken to be the twentieth of their month (used for CDS schedules in emerging markets). The maturity date is also modified.
  • 'TwentiethIMM': All dates but the settlement date are taken to be the twentieth of an IMM (International Money Market) month(used for CDS schedules). The maturity date is also modified.
  • 'OldCDS': Same as TwentiethIMM with unrestricted date ends and long/short stub coupon period (old CDS convention).

  • 'CDS' (default): Credit derivatives standard rule defined in the "Big Bang" Protocol in 2009.

  • 'CDS2015': Ammended credit derivatives standard rule that took effect on December 20, 2015.

Examples

The following example values the specified CDS contract based on the input.

valDate = 2007.05.15     
settlement = 2007.05.16
maturity = 2007.08.16
notional = 1000000.0
spread = 0.0150
riskFreeRate = 0.01
recoveryRate = 0.5
isSeller = true
frequency = 4
convention = 'Following'
termDateConvention = 'Unadjusted'
rule = 'TwentiethIMM'
basis = 3
cds(settlement, maturity, valDate, notional, spread, riskFreeRate, recoveryRate, isSeller, frequency, 'CCFX', convention, termDateConvention, rule, basis)
// Output: -5.448913728297157