Talk:Credit default swap/to do

CDS Calculation As an example, a A Bank (The Buyer) buys the 3 Times Enhanced Credit Return Investment –the 3 Times ECRI (or a Credit Default Swap) from B Bank (The Seller), where the reference entity is bond. The following definitions are given in their Confirmation: 1.	Issue amount      :   USD10 mio. (or the Investment by B Bank deposited to A Bank in 5 years with 6 month Euribor per annum payable semi-annually) 2.	Incremental Issue amount : USD20 mio. 3.	Reference Credit Default Swap Notional: USD30mio ( or Issue amount plus Incremental Issue amount) 4.	Dealing CDS Spread at effective date: 40 basis points (Premium) 5.	Reference CDS Top up Trigger : 300 basis points ( or upon occurrence of a Top-Up Event, B Bank has two choices: increase Issue amount from USD10 mio to USD30mio. or fail to exercise its Top-Up Option and its Investment will be redeemed by paying the Early Redemption Amount) During the course of transaction, the Buyer makes periodic semi-annual payment 3 Times x 40 basis points = 120 basis points plus 6M Euribor for Issue amount of USD 10mio. (10M x (6M Euribor + 3x40 bps x 0.01%)/2 ) to the Seller. However, due to not exercise of Top Up Option, the Seller terminates ECRI at the prevailing CDS price at 350 bps and receives the Early Redemption Amount (100%-CDS Unwind Cost) : For calculation Market value of Reference CDS Unwind Cost, the questions are: 1.	Reference Credit Default Swap Notional is USD10 mio.? or USD30mio.? 2.	Premium is 40 bps? or 120 bps? 3.	The following formula of Reference CDS Unwind Cost is right? USD30mio. x 310 bps widening (350 bps – 40 bps) x 0.0353% (Sprd DV01/USD30mio. or CDS Price Sensitivity equals 0.0353% per 1 bp) – interest accrued