Complex Asset Pricer · Credit

Credit default swap

Protection against a borrower's default, paid for with a running coupon.

ProductCredit default swapCredit

Interest rates

Target redemption forward (TARF)Monthly FX forwards that stop once gains reach a target.

Commodities

Equities

Inflation

Zero-coupon inflation swapInflation against a fixed rate, settled once at maturity.

Credit

Credit default swapProtection against a borrower's default.

All products

Terms

Protection

Coupon

MaturityNotionalAny amount; values scale with it.

Fixed in this demo.

Market data

Coupon payments: Quarterly
Interest rate: 3%
Hazard rate: 2%
Recovery rate: 40%

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Present value · Reduced form · Integration

9,013.52

for a notional of 1,000,000

Fair spread (bp): 120.451
Protection leg: 53,087.81
Premium leg: −44,074.29
Coupon accrued at default: −110.37
Payments: 20

Across the hazard rate

By period

Payment (years)	Survival	Discount factor	Coupon PV	Accrual PV	Protection PV
0.25	99.5%	0.99253	−2,475.14	−6.20	2,981.33
0.5	99%	0.98511	−2,444.40	−6.12	2,944.29
0.75	98.51%	0.97775	−2,414.03	−6.05	2,907.72
1	98.02%	0.97045	−2,384.04	−5.97	2,871.60
1.25	97.53%	0.96319	−2,354.43	−5.90	2,835.93
1.5	97.04%	0.956	−2,325.18	−5.82	2,800.70
1.75	96.56%	0.94885	−2,296.30	−5.75	2,765.91
2	96.08%	0.94176	−2,267.77	−5.68	2,731.55
2.25	95.6%	0.93473	−2,239.60	−5.61	2,697.62
2.5	95.12%	0.92774	−2,211.78	−5.54	2,664.11
2.75	94.65%	0.92081	−2,184.31	−5.47	2,631.01
3	94.18%	0.91393	−2,157.17	−5.40	2,598.33
3.25	93.71%	0.9071	−2,130.38	−5.33	2,566.05
3.5	93.24%	0.90032	−2,103.91	−5.27	2,534.18
3.75	92.77%	0.8936	−2,077.78	−5.20	2,502.70
4	92.31%	0.88692	−2,051.97	−5.14	2,471.61
4.25	91.85%	0.88029	−2,026.48	−5.07	2,440.90
4.5	91.39%	0.87372	−2,001.30	−5.01	2,410.58
4.75	90.94%	0.86719	−1,976.44	−4.95	2,380.64
5	90.48%	0.86071	−1,951.89	−4.89	2,351.07

Greeks · 2

: 263.216; per 1bp
: −1.60821; per 1bp

Model values for illustration, from fixed market data. They are not quotes.

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About this product

The protection buyer pays a coupon each quarter. If the borrower defaults, the seller pays the lost part of the notional, and the coupon accrued since the last payment is due.

Default is assumed to arrive at a constant intensity, the hazard rate. The coupon that makes the swap worth nothing today is the fair spread.

What you can change

The contract terms above. Market data, model parameters and numerical settings are fixed for this demo and shown with each result.

The Greeks

Hazard 01 per 1bp: How much the contract's value changes when the default intensity rises by 1bp. Default intensity is the model's yearly rate of default.
Rate 01 per 1bp: How much the value changes when interest rates rise by 1bp (0.01%).

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