Please respond both questions, there is an excel where the answer needs to go

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Please respond both questions, there is an excel where the answer needs to go

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Ch18_CDS_Valuation.xlsm

probability structure

CDS pricing

CDS spread 37.818 bp
R (recovery) 50% Protection buyer's payments Protection seller's payments
Notional $1,000,000.00
QTR Zero price (Term-Structure) Survival Probability Default Probability Quarterly Exp payments by protection buyer PV of payments by protection buyer Exp accrual payments by protection buyer PV of accruals on notional PV of contingent payments by protection seller
(bp) (bp)
0 1 100%
3 0.99 99.90% 0.10% 37.818 37.78 3740.25 0.0189 1.87200 495 <-- =(1-$B$2)*D8*B8*1000000
6 0.98 99.60% 0.30% 37.818 37.67 3691.35 0.0567 5.55926 1470
9 0.97 99.10% 0.50% 37.818 37.48 3635.34 0.0945 9.17089 2425
12 0.96 98.40% 0.70% 37.818 37.21 3572.45 0.1324 12.70689 3360
15 0.95 97.50% 0.90% 37.818 36.87 3502.90 0.1702 16.16724 4275
18 0.94 96.40% 1.10% 37.818 36.46 3426.93 0.2080 19.55196 5170
21 0.93 95.20% 1.20% 37.818 36.00 3348.26 0.2269 21.10251 5580
24 0.92 94.00% 1.20% 37.818 35.55 3270.51 0.2269 20.87560 5520
28187.99366 107.00634 28295.00000
PV of protection buyer payments 28295.00000
PV of protection seller payments 28295.00000
Term Structure (Estimated outside this model)
Determined by solver
Computed using Quarterly payments and survival probability
Computed using Quarterly payments and Zero Price (discount factors from Term structure)
Computed using default probability and notional
Estimated from Survival probability
Estimated using default probability, notional and recovery rate

Sheet3

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