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CDS Spread


premium which is paid quarterly by the protection buyer in a credit default swap (CDS) to the protection seller. It is quoted in basis points per annum on a specified notional amount. More specifically, CDS spreads are quoted on Act/360 basis (unlike bond spreads which are quoted on 30/360 basis).

For example, a CDS spread of 750 basis points for five-year Greek sovereign debt of one million dollar would cost $75,000 per annum. Because the CDS premium is conventionally paid quarterly, a sum of $18,750 should be paid every three months to the protection seller.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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