Credit Default Swaps
Free CFA Level II lesson in Fixed Income. 11 min read, ~1,723 words.
CDS: protection buyer pays periodic premium; seller makes contingent payment on a credit event, transferring credit risk to the seller. Standardized coupons: 100 bps (IG), 500 bps (HY). An upfront payment settles the difference between market spread and fixed coupon. Upfront = (Market spread - Fixed coupon) x EffSpreadDur x...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- credit default swaps
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