Credit Default Swaps
Credit Default Swaps
Credit Default Swaps
Folie 2
Folie 3
Folie 4
-40%
Folie 5
Apr 04 Greenspan
announces possibility of
Fed rate increase
Oct 97 Asian crisis
hits Indonesia, Japan
and Korea
Folie 7
4500
4000
3500
3000
2500
2000
1500
1000
500
Brazil 09
Folie 8
CDS Brazil
May-04
Mar-04
Jan-04
Nov-03
Sep-03
Jul-03
May-03
Mar-03
Jan-03
Nov-02
Sep-02
Jul-02
May-02
Mar-02
Jan-02
Nov-01
Sep-01
Jul-01
May-01
0
Mar-01
Folie 9
Folie 10
Folie 11
Folie 12
Folie 13
PV [fixed payments] =
D(ti )q(ti)Sdi
=4
1 4244
i1
3
PV [contingent payments] =
(1 R )
123
Compensation payment
D(t )
i
i =1
di
D(ti){q(ti 1 ) q(ti)}S
2
=4
1 444244443
i1
Note that the two parties enter the CDS trade if the value of the
swap transaction is set to zero, i.e. (1)=(2)
Folie 14
(1)