Hello guys - when I was reading CDS section of FI part I’m confused on the purpose of CDS price as given by the formula. My understanding is when we are purchasing the contract, we need to sort out the upfront premium either paying or receiving and the coupon rate. So why we need to use the price of CDS (100-upfront premium) rather than just use upfront premium during communication and what’s the use case for the price here?
Thanks a lot
They are equivalent, given a price you get the upfront and vice versa.
My guess, using one or the other just depends on how the specific market (IG,HY etc) quotes the CDS.
Thanks EG_KCM. The reason I feel confused is that the price quoted is not the price actually paid - like the bond, the share etc. The upfront premium which is actually paid is not used. But thanks anyway!
Are you doing EOC 24? It’s an immediate fall for spread. The only change at right at beginning is with spread change and our upfront payments. Our fixed coupon each year do not change and are same each year.
We compare both before and after to find mark-mark loss.