11.5
CDO Carry CDS Hedging
PYTHON PLUGIN
Structured
Carry
Description
Strategy 11.5: Buy low-quality tranche, sell single-name CDS to hedge
Strategy Logic
Strategy 11.5: CDO Carry - CDS Hedging.
Buy a low-quality CDO tranche and sell single-name CDS to hedge.
Hedge delta = D_tranche / D_CDS.
Signal: enter when the tranche premium exceeds the CDS premium by
more than a configurable threshold (measured in bps).
Required columns: tranche_spread, cds_spread, risky_duration,
cds_duration
Parameters
| Parameter | Default Value | Type |
|---|---|---|
| lookback | 90 | int |
| spread_threshold_bps | 100 | int |
| exit_threshold_bps | 20 | int |
Risk Configuration
| Risk Parameter | Value |
|---|---|
| Max Position Pct | 5.0% |
| Stop Loss Pct | 10.0% |
| Take Profit Pct | 15.0% |
| Max Drawdown Pct | 20.0% |