Fixed-Income Toolbox

Credit Default Swap Pricing and Valuation

Fixed Income Toolbox includes functions to price new and existing credit default swap (CDS) agreements. You can value running spread CDS contracts with no upfront payments and standard spread contracts that require an upfront payment.

The toolbox simplifies common CDS valuation tasks. You can:

• Estimate the default probability term structure by bootstrapping CDS market data
• Price new CDS contracts by calculating the breakeven spreads for multiple maturity dates and recovery rates
• Calculate the mark-to-market value of a CDS contract with either accrued or no accrued premium payment
• Convert between market quotes using running spreads and contracts valued using upfront payments and standard spreads

Code (top) and plots of pricing a CDS contract by bootstrapping hazard rates from CDS market data (bottom, left) and estimating CDS spreads with different recovery rates (bottom, right).