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Rolling CDS Contracts and the Transition to New Series

Article Quant Q&A · Author: FelB
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Summary

The document defines rolling for credit default swap contracts, distinguishing the creation of a new series from the maturity of an existing contract. For CDS indices, a new series is introduced on semiannual dates, and its basket of reference entities may differ from the prior series. Rolling means closing the old series and opening the new one. The older series can still be held after the transition, but it becomes off-the-run and is generally less liquid.

It also summarizes the convention for single-name CDS. These contracts formerly rolled on quarterly IMM dates, but the stated convention has shifted to semiannual rolls as well. The explanation is brief and focuses on what the roll represents and its liquidity implication. It does not cover the mechanics of closing and reopening positions, contract pricing adjustments, or the full range of market conventions, so those details would require additional reference material.

Key ideas

  • A CDS index roll involves closing the existing series and opening the newly issued series.
  • New CDS index series generally appear semiannually, and their reference-entity baskets can change.
  • An older series may remain open after a roll but is then off-the-run and less liquid.
  • Single-name CDS formerly followed quarterly rolls and are described as now using semiannual rolls.

Tags

Fixed incomeDerivatives pricingMarket microstructure
Full text
# What does "rolling" for a CDS contract mean?


# What does "rolling" for a CDS contract mean?












I tried to google it but I only get results for ISDA intruducing a new rolling convention.

## Answer by msitt (score 5)

https://quant.stackexchange.com/a/34005

For CDS indices, a new series is created every 6 months (3/20 and 9/20). With each new series, the basket of reference entities will generally change, with some names replaced by others. Rolling is the act of closing the old contract and opening the new contract. The maturity of the CDS is typically much longer, with 5Y being the most commonly traded tenor. You can still own the old series past the roll date, but it will be off-the-run and less liquid.

Single name CDS used to roll on the quarterly IMM dates (3/20, 6/20, 9/20, 12/20) but the convention now is to also roll these semiannually.

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.