What is a CDS reference obligation?
Definition. CDS Reference Obligation. The underlying obligation against which the Credit Default Swap provides Credit Protection. The Reference Obligation is a financial instrument that is either issued or guaranteed by the reference entity.
What is red code CDS?
RED codes are used to confirm trades on MarkitSERV and other trade matching and clearing platforms, facilitating straight-through processing. Counterparties can rapidly agree on transactions and have confidence in the integrity of the underlying CDS reference data.
Which of the following can be a reference obligation?
The reference obligation is the specific issue of a debt security upon which the two parties in the credit derivative transaction are betting against each other. For example, the 5-year bond of a company, bank or country.
What is a reference entity?
A reference entity is the issuer of the debt that underlies a credit derivative. The reference entity is the organization that issued the reference asset (bond or other debt-backed security) that, in turn, is the subject of a credit derivative.
Who is reference entity in CDS?
Definition: Credit default swaps (CDS) are a type of insurance against default risk by a particular company. The company is called the reference entity and the default is called credit event. It is a contract between two parties, called protection buyer and protection seller.
What is iTraxx crossover?
The iTraxx Crossover index comprises the 75 most liquid sub-investment grade entities. Total Return indices are calculated and published hourly for iTraxx Europe, Asia and Crossover. These indices measure the performance of the respective on-the-run iTraxx CDS contracts.
How many reference entities are in a basket CD?
Basket credit default swaps typically include five to ten reference obligations.
What is reference asset?
A reference asset is an underlying asset used in credit derivatives to protect a debt holder against a potentially risky borrower. A reference asset is also known as a reference entity, a reference obligation, or a covered obligation. A reference asset can be an asset, like a bond, note, or other debt-backed security.
What does 5 year CDS mean?
If someone doesn’t specify the duration or the type of debt, he is usually referring to a 5-year CDS on senior debt. That means that the contract will be open for 5 years, during which one party (the insured) pays premiums and the other (the insurer) promises to pay off if Citigroup defaults.
How many reference entities are in a basket credit default swap?
Basket credit default swaps typically include five to ten reference obligations. This swap is associated with higher default risk, especially when the default probabilities of the obligations in the basket have a low correlation.
How does CDS contract work?
In a CDS, one party “sells” risk and the counterparty “buys” that risk. The “seller” of credit risk – who also tends to own the underlying credit asset – pays a periodic fee to the risk “buyer.” In return, the risk “buyer” agrees to pay the “seller” a set amount if there is a default (technically, a credit event).
How are CDS prices quoted?
CDS prices are often quoted in terms of credit spreads, the implied number of basis points that the credit protection seller receives from the credit protection buyer to justify providing the protection.
How do CDS contracts work?
The term credit default swap (CDS) refers to a financial derivative that allows an investor to swap or offset their credit risk with that of another investor. To swap the risk of default, the lender buys a CDS from another investor who agrees to reimburse the lender in the case the borrower defaults.
How many reference entities are being replaced by IHS Markit?
Unchanged Reference Entities and Obligations 82 CDX.NA.HY.37 Reference Obligations Being Replaced: 15 IHS Markit ticker Reference Entity Instrument Name ISIN Tier Instrument Name ISIN Tier
What is reference entity data for CDS service?
The Reference Entity Data (RED) for CDS service confirms the relationship between a reference entity and a reference obligation, as well as corporate actions, CDS succession events and credit events.
Who is the Markit CDS pricing director?
Nolan played a key role in developing the Markit CDS pricing product, the leading service in the CDS market. Prior to joining Markit in 2003, now IHS Markit, he worked at J.P. Morgan and TD Securities in a variety of fixed-income roles. Mr. Nolan holds a Bachelor of Science in Economics from Queen Mary College, University of London, UK.
What companies are included in the Markit CDX index?
SIRIUS XM RADIO INC. TEGNA INC. TESLA, INC. THE GAP, INC. T-MOBILE USA, INC. TOLL BROTHERS, INC. UNITED RENTALS (NORTH AMERICA), INC. UNIVERSAL HEALTH SERVICES, INC. YUM! BRANDS, INC. The reference obligations that will be included in the upcoming Markit CDX.NA.HY.37 index are available below.