Converting CDS Upfront Points to Standard Spread Quotes

Summary

The document explains how to translate a credit default swap quote stated in points or as an upfront price into the market standard annual spread, usually expressed in basis points. It identifies the CDS standard model as the conversion method rather than giving a fixed points-to-basis-points formula.

The conversion depends on model inputs, especially the assumed recovery rate, and to a smaller extent on risk-free interest rates. As a result, a quote such as an upfront amount cannot be converted to a unique spread from the stated points alone. The note provides no worked calculation or numerical conversion, so readers must supply the relevant assumptions and use the standard model to obtain a specific result.

Key ideas

• CDS upfront prices are converted to standard annual spread quotes using the CDS standard model.
• The conversion depends on the recovery assumption and, to a lesser degree, risk-free rates.
• A points quote alone is insufficient to determine a unique basis-point spread.

Tags

# Credit default swap price quote conversion


# Credit default swap price quote conversion












How to convert cds prices quoted in PTS or PRICE to BPS? Eg. If CDS price quoted as 37 PTS then what is the equivalent in BPS and how to calculate that?

## Answer by Dimitri Vulis (score 0)

https://quant.stackexchange.com/a/49894

You convert between the upfront fee and the "market standard quote" annual spread using the CDS standard model. https://www.cdsmodel.com/cdsmodel/ the numbers are affected by your recovery assumption and (a little) by the risk-free interest rates.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.