Please refer to the spreadsheet titled $$Ch$18\_$CDS$\_$Valuation.xlsm$.$ Assume the following:

Recovery rate $=40\%$

Notional $=$ $$1,000,000$

$4$ quarters $=$ Dec to March, March to June, June to September and September to

December.

Zero price $=$ Use the zero prices below

QTR

Zero price

$($Term$-$

Structure$)$

$01$

$30\mathrm{.}997381873$

$60\mathrm{.}994435856$

$90\mathrm{.}991251461$

$120\mathrm{.}987720361$

Survival probability

QTR Survival

Probability

$0100\%$

$198\%$

$295\%$

$391\%$

$485\%$

Compute the CDS spread.

$2.$ Given the above probability structure, what is the probability of a default in QTR $3$ if not

default has earlier? What is the estimated probability a default occurrence in QTR $3$ independent

of the history? HW$5$

Fall $2024$

Fin $445/545$

$1.$ Please refer to the spreadsheet titled $\text{'}$Ch$18\_$CDS$\_$Valuation.xlsm$\text{'}.$ Assume the following:

Recovery rate $\backslash (=40\backslash \%\backslash )$

Notional $\backslash (\backslash$quad$=\backslash$$ $1,000,000\backslash )$

$4$ quarters $=$ Dec to March, March to June, June to September and September to December.

Zero price $\backslash (\backslash$quad$=\backslash )$ Use the zero prices below

Survival probability

Compute the CDS spread.

$2.$ Given the above probability structure, what is the probability of a default in QTR $3$ if not default has earlier? What is the estimated probability a default occurrence in QTR $3$ independent of the history?