5.14
CDS Basis Arbitrage
PYTHON PLUGIN
Fixed Income
Arbitrage
Description
Strategy 5.14: Trade CDS-bond basis when it deviates from zero
Strategy Logic
Strategy 5.14: CDS Basis Arbitrage.
Exploit the basis between the CDS spread and the bond spread.
CDS basis = CDS spread - bond spread.
If basis is positive (CDS expensive), sell CDS protection + buy bond.
If basis is negative (CDS cheap), buy CDS protection + sell bond.
Expects ``cds_spread`` and ``bond_spread`` columns.
Parameters
| Parameter | Default Value | Type |
|---|---|---|
| lookback | 60 | int |
| entry_z | 2.0 | float |
| exit_z | 0.5 | float |
Risk Configuration
| Risk Parameter | Value |
|---|---|
| Max Position Pct | 8.0% |
| Stop Loss Pct | 3.0% |
| Take Profit Pct | 5.0% |
| Max Drawdown Pct | 10.0% |