
 Bond Implied CDS Spread and CDSBond Basis by Richard Zhou of the Depository Trust & Clearing Corporation August 15, 2008 Abstract: We derive a simple formula for calculating the CDS spread implied by the bond market price. Using noarbitrage argument, the formula expresses the bond implied CDS spread as the sum of bond price, bond coupon and Libor zero curve weighted by risky annuities. We show that the bond implied CDS spread is consistent with the standard CDS pricing model if the survival probabilities and recovery are consistent with the bond price. Keywords: Bond Implied CDS Spread, CDS Spread, Asset Swap Spread, CDSBond Basis. 