The Muppet Show

Synopsis: Kermit the Frog is the manager of a cabaret-style theatre house, which invariably has more drama behind the stage than on it. He has to contend with wannabe-comedian bears, the smothering advances of Miss Piggy, crabby regular theatre patrons, homicidal chefs, livestock, not to mention making the weekly guest star feel welcome.

Finding the Bloomberg Security Type (Yellow Key)

Suppose you have a CUSIP but don't know the required Bloomberg Security type field aka "Yellow Key".

Enter the following in Excel to have it return the Yellow ticker key - 99999AB6(CUSIP)_Corp_CUSIP

Black Scholes: Dividend Payments

One way to think about modifiying B/S for dividend payments is to reduce the current share price by the PV of the dividends paid during the option's life and use this amount in place of the actual S in the model.

There is also a way to adjust the B/S model itself to accomodate dividend payments.

This post was to help me clarify a lunch-time conversation about GMDB hedging.

Notes on ABS CDS

Pay as you go (PAYG) are currently the most dominant type of ABSCDS. In PAYG contracts, the premium payments are calculated on the remaining notional. If some amount of the underlying ABS is written down, the premium will be calculated on the remaining amount outstanding. This is unlike Corporate CDS - where the premium is generally constant. Also, ABS CSD are security specific, while Corporate CDS can be thought of as more generic with respect to the underlying.

While ABSCDS and corporate CDS are both means to transfer credit risk, the two markets differ considerably because of differences in what constitutes a credit event and what counts as a reference obligation.

Dramatic growth of single name ABS CDS is the result of the ISDA's standard template.

Demand is being driven by CDO managers (sellers of protection), subprime loan originators hedging conduits (BBB paper bundled into mezanine CDOs), and hedge funds (express views on housing market, e.g., negative view on housing: sell BBB protection and buy BBB- protection)

Although a single name ABSCDS is not a TRR swap, it is important to note that the market value can change as the credit risk of the underlying reference obligation changes