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Synopsis

For traders trying to navigate the increasingly volatile credit default swap market, CDS Delivery Option provides worked-out examples, over 30 charts, a case study of Delphi, and detailed explanations of how the subprime crisis caused the credit crisis and the near collapse of the GSEs.  The book includes detailed information on:

  • how to value a CDS contract
  • how to value the delivery option
  • how contract value changes when the yield curve flattens or becomes steeper
  • how contract value changes with bullish or bearish market moves
  • how to figure out when to buy protection and when to sell protection
  • how to hedge CDS risk
  • when and how to unwind a contract prior to settlement
  • when to hold a trade through delivery
  • how to navigate a "squeeze" (when the notional value of contracts going through delivery is larger than the supply of the cheapest-to-deliver issue)
  • when buying contracts can make their prices go down
  • how to construct a basis trade
  • how to find arbitrage opportunities
  • how to analyze default probability and corporate debt
  • when to settle via auction and when to settle via physical delivery
  • which note is the cheapest to deliver

This book is an indispensable resource for all market professionals working in the CDS market.

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