Credit Default Swap Option
A credit default swap (CDS) option, or credit default swaption, is a contract that provides
the holder with the right, but not the obligation, to enter into a credit default swap
in the future. CDS options can either be payer swaptions or receiver swaptions. If a
payer swaption, the option holder has the right to enter into a CDS where they pay
premiums; and, if a receiver swaption, the option holder receives premiums. Financial Instruments Toolbox™ software provides
CDSOption for pricing
payer and receiver credit default swaptions. Also, with some additional steps,
CDSOption can be used
for pricing multi-name CDS index options.
O'Kane, D., Modelling Single-name and Multi-name Credit Derivatives, Wiley, 2008.
- Pricing a Single-Name CDS Option
- Pricing a CDS Index Option
- Credit Default Swap (CDS)
- Price Multiple CDS Option Instruments Using CDS Black Model and CDS Black Pricer