APPENDIX I
Description of Bloomberg Screen CDSW
Screen CDSW on the BLOOMBERG PROFESSIONAL® service, an example of which was shown in Figure 1.7, is an implementation of the procedure for pricing a CDS described in Hull and White (2000). The input used in the model to price the CDS contract is one of the three described in Chapter 1. The Bloomberg links the market in CDS prices and the cash bond market with issuer default probabilities.
To calculate the present value of the CDS fee leg (premium leg), the Bloomberg uses the curve of probabilities of default of the reference entity. To calculate the expected present value of the CDS contingent leg, it requires additionally an assumption on the payoff in the case of default; for this, it uses [(par− ...
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