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Re: CDS upfront

Posted by Simon Ibbotson on Jun 04, 2008; 4:39pm
URL: http://quantlib.414.s1.nabble.com/CDS-upfront-tp11924p11928.html

I don't understand why - if the market is quoting the upfront (as a % notional) - we can't use this in a curve as a quote? Obviously, some work would have to be done first to create an appropriate credit ratehelper class.
 
Simon
 


 
On 6/4/08, a akpitidis <[hidden email]> wrote:

Hi ,

 

The curve is always using  the real spread  (upfront+running), so, any bootstrapping should not deal with the upfront trades/quotes.

 

Remember a financial institution may have a mixture of trades (upfront and not upfront ) for a single name(i.e. the non upfront trades booked year ago and the upfront trades the last few months), they have to MTM all those trades using the same curve. 

 

 

 

T.


--- On Wed, 4/6/08, Simon Ibbotson <[hidden email]> wrote:

From: Simon Ibbotson <[hidden email]>
Subject: Re: [Quantlib-dev] CDS upfront
To: "Luca Billi" <[hidden email]>
Cc: [hidden email]
Date: Wednesday, 4 June, 2008, 8:15 AM


Just a quick note on this (if anyone is thinking of implementing something) - it is also quite common for a contract to be both... i.e. have an upfront payment plus a running spread. So, incorporating a simple payment at the front of a CDS could be the simplest way of allowing upfront prices.
 
Simon

 
On 6/3/08, Luca Billi <[hidden email]> wrote:
Since sometimes CDS quotes are based on upfront (price) rather then premium,
it would be nice to have the possibility to use directly that upfront
when bootstrapping credit curves and when pricing CDS contracts.

I was wondering if anyone has thought about adding this feature or is
willing to share any ideas.

Thanks,
Luca

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