CDS–bond basis calculator
The classic relative-value gap.
Interactive: CDS–bond basisHard
The same default risk trades in two markets: the bond's spread and the CDS premium. The gap between them — the basis — is credit's classic relative-value signal.
- Basis (CDS − bond)
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- Reading
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- Negative-basis package earns
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Negative basis: buy the bond, buy CDS protection, earn the difference with default risk (theoretically) hedged — the trade that "can't lose" until funding vanishes, as 2008's basis blow-out taught a generation of prop desks.
The idea behind it
This calculator belongs to Credit Derivatives, where the mechanism it computes is explained step by step, with the formula, what each input means and where the simple model stops being right. Everything is computed in your browser; nothing you type is sent anywhere.
Instruments it applies to
- Credit Default Swap — Insurance on a borrower's default — and the market's sharpest real-time gauge of credit fear.
- CDS Index — Default protection on 100+ names in one trade — the S&P 500 of credit risk.
- CDS Option — An option on the price of credit protection — the instrument that lets you be long the fear of a default without paying for it every day.
More calculators from Credit Derivatives
- Spread ⇄ default probability — the credit triangle.
- Spread-duration P&L — the credit trader's mental arithmetic.
- Tranche loss calculator — where a portfolio loss lands in the stack.
- Expected loss and the breakeven spread — default probability times the loss when it happens.
- Altman Z-score — the 1968 distress screen, still in use.
- Downgrade risk, not just default risk — most credit loss is the first, not the second.
- Distance to a contingent-convertible trigger — the headroom, and why the trigger is rarely what fires.