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Want To Visualize Curves? Here You Go

10 April 2014 by HCM

Since the beginning of the week, you can use this grapple to visualize curves. Horizontally, you find the level of the 5 year CDS. Vertically, you get the difference between the 5 year CDS and the CDS that matches the maturity you selected at the top right of the screen. In this instance, you see the 3y/5y risk premium curve as a function of the 5 year risk premium. This grapple covers the investment grade space in the US. It is striking to see that there is very little dispersion in this universe. The 3 year risk premium is worth 50% of the 5 year risk premium, whichever name you are looking at. It is even more striking to see that it is always the case. Indeed, each dot represents today’s situation. The line that ends with the dot shows you how the curve you are looking at has been moving over the selected period. For instance, if you click on the green dot in the upper right corner, you see that SWY (Safeway Inc, the name appears at the upper right corner of your screen) has been moving nicely on that diagonal during the last year, even though the 5 year risk premium has been multiplied by 2 over that period.