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Derivatives

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  • August 2, 2022
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FV-CDS Spread

In relation to credit derivatives (credit default swaps, CDSs, and other similar products), FV-CDS spread (fair value CDS spread) is the average of the single-name CDS spreads (CDS spread for a single name) for all the constituent names in the CDS index, weighted by probability of default (PD). The fair value spread is the starting point for calculating the market spread (real spread/ intrinsic spread). The fair spread has to be adjusted using a flat credit curve.

This measure is also known as the theoretical spread.


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