The Credit Default Swap Basis


The growth of the credit derivatives market has meant that credit default swaps (CDSs) have been playing a big part in the credit market situation. An understanding of how these instruments work and what they can, and cannot, offer is vital to knowing how to best use them.

This book investigates the close ...

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The growth of the credit derivatives market has meant that credit default swaps (CDSs) have been playing a big part in the credit market situation. An understanding of how these instruments work and what they can, and cannot, offer is vital to knowing how to best use them.

This book investigates the close relationship between the synthetic and cash markets in credit, which manifests in the credit default swap basis. Choudhry covers:

  • factors that drive the basis
  • implications for market participants
  • the CDS index basis
  • trading the basis

Credit market investors and traders as well as anyone with an interest in the global debt markets will find The Credit Default Swap Basis insightful and rewarding.

Illustrated with real-world examples, case studies, and trading strategies, this handbook defines the credit default swap basis and shows how it works and how to trade it.

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What People Are Saying

From the Publisher
"A timely and well-researched book on a key aspect of the creditderivatives market. Investors will gain much valuable insight fromMoorad Choudhry's landmark text on the credit default swap basis,its drivers, and its behavior."
Suleman Baig
Deutsche Bank Global Markets

"As credit default swaps become ever more important as a bankrisk-management tool, so market participants will need tounderstand the credit market cash-synthetic basis. This is anexcellent treatment of the subject that provides valuable detailfor investors and traders alike."
Mohamoud Barre Dualeh
Abu Dhabi Commercial Bank

"An excellent account and one sure to be of inestimable value tomarket practitioners."
Mark Burgess
Synthetic ABCP Operations, KBC Financial Products

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Product Details

  • ISBN-13: 9781576602362
  • Publisher: Wiley
  • Publication date: 10/28/2006
  • Series: Bloomberg Financial Series , #45
  • Edition number: 1
  • Pages: 195
  • Product dimensions: 5.72 (w) x 8.58 (h) x 0.82 (d)

Meet the Author

Dr. Moorad Choudhry is head of Treasury at KBC Financial Products in London. He is a visiting professor at the Department of Economics, London Metropolitan University, a visiting research fellow at the ICMA Centre, University of Reading; a senior fellow at the Centre for Mathematical Trading and Finance, Cass Business School; and a fellow of the Securities and Investment Institute. Choudhry is the author of numerous books, including Fixed-Income Securities and Derivatives Handbook.

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Table of Contents



About the Author.

1 A Primer on Credit Default Swaps.

2 Bond Spreads and Relative Value.

3 The CDS Basis I: The Relationship Between Cash and SyntheticCredit Markets.

4 Supply and Demand and the Credit Default Swap Basis.

5  The CDS Basis II: Further Analysis of the Cash andSynthetic Credit Market Differential.

6 Trading the CDS Basis: Illustrating Positive and NegativeBasis Arbitrage Trades.

Appendix I Description of Bloomberg Screen CDSW.

Appendix II The Market Approach to CDS Pricing.

Appendix III Market-Implied Timing of Default from CDSPrices.



CFA Institute Professional Development QualifiedActivity (7 hours).

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