Difference between revisions of "CDS options"

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Credit default swap options (or "credit swaptions") are options to buy or sell credit default swaps on single name stocks or traded indices.<ref>{{cite web|url=http://findarticles.com/p/articles/mi_m0EIN/is_2005_March_21/ai_n13455223/|name=Fitch Survey: Credit Default Swap CDS —Options: What They Are, Who Is Using Them, and Why|org=bnet|date=June 10, 2010}}</ref>
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Credit default swap options (or "credit swaptions") are options to buy or sell [[credit default swaps]] on single name [[stocks]] or traded indices.<ref>{{cite web|url=http://findarticles.com/p/articles/mi_m0EIN/is_2005_March_21/ai_n13455223/|name=Fitch Survey: Credit Default Swap CDS —Options: What They Are, Who Is Using Them, and Why|org=bnet|date=June 10, 2010}}</ref>
  
CDS index options are traded off the two main families of CDS indexes -- the U.S.-based CDX and the European-based iTraxx.  They work like U.S. equity index options. They provide users with the right to buy or sell protection at a specified time and spread level off the CDS indices.<ref>{{cite web|url=http://www.marketwatch.com/story/options-in-an-increasingly-volatile-market-2010-06-09?dist=countdown|name=Despite reform, CDS options go from toxic to tasty|org=Marketwatch|date=June 10, 2010}}</ref>  During periods of low credit activity, CDS options can provide market participants the ability to leverage volatility in a cost-effective way. <ref>{{cite web|url=http://www.prnewswire.co.uk/cgi/news/release?id=163854|name=Bloomberg Launches First Benchmark Analytic for CDS Index Options|org=Bloomberg|date=June 10, 2010}}</ref>
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CDS index [[options]] are traded off the two main families of CDS indexes -- the U.S.-based [[CDX]] and the European-based [[iTraxx]].  They work like U.S. equity index options. They provide users with the right to buy or sell protection at a specified time and spread level off the CDS indices.<ref>{{cite web|url=http://www.marketwatch.com/story/options-in-an-increasingly-volatile-market-2010-06-09?dist=countdown|name=Despite reform, CDS options go from toxic to tasty|org=Marketwatch|date=June 10, 2010}}</ref>  During periods of low credit activity, CDS options can provide market participants the ability to leverage volatility in a cost-effective way. <ref>{{cite web|url=http://www.prnewswire.co.uk/cgi/news/release?id=163854|name=Bloomberg Launches First Benchmark Analytic for CDS Index Options|org=Bloomberg|date=June 10, 2010}}</ref>
  
  

Revision as of 15:49, 10 June 2010


Credit default swap options (or "credit swaptions") are options to buy or sell credit default swaps on single name stocks or traded indices.[1]

CDS index options are traded off the two main families of CDS indexes -- the U.S.-based CDX and the European-based iTraxx. They work like U.S. equity index options. They provide users with the right to buy or sell protection at a specified time and spread level off the CDS indices.[2] During periods of low credit activity, CDS options can provide market participants the ability to leverage volatility in a cost-effective way. [3]


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References

  1. Fitch Survey: Credit Default Swap CDS —Options: What They Are, Who Is Using Them, and Why. bnet.
  2. Despite reform, CDS options go from toxic to tasty. Marketwatch.
  3. Bloomberg Launches First Benchmark Analytic for CDS Index Options. Bloomberg.