A Primer on Credit Default Swaps (CDS)

11 Pages Posted: 20 Feb 2010 Last revised: 4 Oct 2010

See all articles by Thomas Coleman

Thomas Coleman

University of Chicago - Harris School of Public Policy

Date Written: December 29, 2009

Abstract

The market for Credit Default Swaps (CDS) has grown from nothing just fifteen years ago to a huge market today. For a plain-vanilla single-name CDS this primer aims to answer the questions: What is a CDS? How does a CDS behave in response to changes in the markets? How does one value a CDS? What is the risk? The short answer to these questions is that a CDS behaves, in almost all respects, as a leveraged or financed floating-rate corporate bond. This means that anyone acquainted with corporate bonds understands the most important aspects of a CDS.

Keywords: Credit default swap, CDS, valuation, risk

JEL Classification: G10, G12

Suggested Citation

Coleman, Thomas, A Primer on Credit Default Swaps (CDS) (December 29, 2009). Available at SSRN: https://ssrn.com/abstract=1555118 or http://dx.doi.org/10.2139/ssrn.1555118

Thomas Coleman (Contact Author)

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States

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