Basic Q simple math

If CDS price change per 100 face value goes from 103 to 101 due to spread widening, book say contract price changes by -2. But they say mark-to-market gain is 2%. To find change we use relative to face value of 100 to get 2%.

We do not use 103 price initially? I would have found mark-to-market gain of (103 - 101) / 103.

Try to understand basics. Help appreciate.

Greetings friend! A brief disclaimer - I am not sure I understand your question wording but I will try to respond as best I can…

The contract price changes by -2 because a CDS investor (the buyer of protection) now can pay “2 less” to buy the protection than they could previously.

For CDS you’re generally looking at things in terms of notional (par) value. The CDS is an OTC instrument that’s agreed bi-laterally between a buyer and seller based on some expected risk and the par value. So that’s why they seem to be using 100 and not 103 here.

Cheers - good luck - you got this :+1:

thank you. That help much.

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