credit-derivatives

To bootstrap survival curves from CDS spreads, you derive hazard rates using a bootstrapping workflow that aligns standard ISDA conventions with market spreads to construct matching discount factors and survival probabilities.

You price a 5-year CDS by applying standard ISDA conventions and typical recovery assumptions like 40% for investment-grade credits, using bootstrapped survival curves to calculate the protection leg and premium leg values.

Yes, you can evaluate CDX and iTraxx credit indices for relative value trades by aligning single-name survival curves with index spreads to identify basis trade opportunities across different maturities.

For pricing credit derivatives, standard recovery assumptions are 40% for investment-grade credits and 25% for high-yield credits, which are applied during the survival curve construction and sensitivity analysis process.

Yes, the framework supports CDO tranche pricing and synthetic securitization risk management by evaluating market-implied default correlation and capital allocations across tranches using calibrated survival curves.

CDS curve calibration mismatches occur when bootstrapped hazard rates fail to align with market spreads, requiring adjustment of survival probabilities and discount factors to ensure consistency with traded spread levels across all maturities.