Function to calculate the spread in a credit default swap.
cdswap()The spread in a credit default swap.
The user inputs are as follows: Notional: to be entered in numbers for e.g. 1000000 Risk free rate: entered in decimals for e.g. 0.05 for 5 per cent Maturity in yrs: entered for e.g. 5 for 5 years Probability of Default: entered in decimals for e.g. 0.02 for 2 per cent Default assumption: chosen amongst End of Q1/End of half year/End of Q3/End of Year recovery rate: Clicking on "+/-" incrases/decreases the recovery rate.
John C. Hull, "Options, Futures, and Other Derivatives", 8/E, Prentice Hall, 2012.