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CDS Spread Term Structure If a term structure of default swap spreads is provided in the first format, calibration is independent on the target default swap we want to price. Time to the value date in years must be divisible by 0.25 so that quarterly payment dates can be generated; otherwise the program will give an error message. In the second format, maturity dates of the market default swaps are provided. We first copy all the payment dates of the target default swap to the payment dates used for calibration. If the target default swap is forward starting, quarterly calibration payment dates will be generated from the first payment date of the target default swap backward to the value date. If the target default swap finishes before the last maturity date in the term structure file, quarterly calibration payment dates will be generated from the maturity date of the target default swap forward to the last maturity date in the term structure file. The payment dates used for calibration are therefore built. We require that each of these maturity dates in the term structure file match one of the generated calibration payment dates. If one of these maturity dates cannot match any payment date of the target default swap, this maturity date will be replaced by the closest calibration payment date with the corresponding spread unchanged. It can be seen that if the second format is provided, calibration is dependent on the target default swap. Regardless which format is provided, we will assume those market default swaps have the same contract specifications as the target default swap, where payment is made at the payment date when default occurs and no accrued fee is allowed in the current model. The value of the default swap to the buyer, if payment is made at the payment date when default occurs and no accrued fee is allowed
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