What is CR01 risk?
It stands for credit risk spread; a measure of credit default swap (CDS) value sensitivity. It measures the credit sensitivity of a CDS’s value to a one basis point change in its premium (CDS premium or the credit spreads). In other words, it captures the CDS price change for a 1bp shift in the credit par spread.
What is CS01 risk?
A common measure of the risk of a CDS is its “credit spread ’01” or CS01, which is defined as the change in the value of 100 notional amount of a CDS if the CDS spread falls by one basis point.
What is CR01 finance?
compared to a decrease in the bond’s? yield. CR01: Credit Sensitivity? Credit Default Swap [CDS] price change for 1bp shift in Credit par spread — same as DV01, but applied to CDS instead of a bond.
How is SDV01 calculated?
The formula of a SDV01 is: SDV01 = – (Δ MTM), for 1 bp in credit spread. A positive SDV01 means that the CDS position will shed value in response to a 1 basis point upward shift in the CDS seller’s spread curve.
What does widening spreads mean?
The direction of the yield spread can increase, or “widen,” which means that the yield difference between two bonds or sectors is increasing. When spreads narrow, it means the yield difference is decreasing.
What is ir01 risk?
An interest rate risk measure that captures sensitivity to changes in the interest rate yield curve (e.g. the LIBOR curve). It gauges the change in value of an interest-sensitive contract or instrument for a one basis point (01 or 1 bp) upward or downward parallel shift in the LIBOR curve.
How do CDS indices work?
The CDX index rolls over every six months, and its 125 names enter and leave the index as appropriate. For example, if one of the names is upgraded from below investment grade to investment grade, it will move from the high-yield index to the investment-grade index when the rebalance occurs.
What is credit exposure formula?
Credit exposure is calculated as – Total of receivablesspecial G/L transactions relevant to the credit limitoutstanding order value.
What causes spread to widen?
Credit spreads often widen during times of financial stress wherein the flight-to-safety occurs towards safe-haven assets such as U.S. treasuries and other sovereign instruments. This causes credit spreads to increase for corporate bonds as investors perceive corporate bonds to be riskier in such times.
What DV01 means?
Dollar duration is often referred to formally as DV01 (i.e. dollar value per 01). Remember, 0.01 is equivalent to 1 percent, which is often denoted as 100 basis points (bps). To calculate the dollar duration of a bond you need to know its duration, the current interest rate, and the change in interest rates.