CS01
Dollar change in value for a 1 basis point move in credit spread.
CS01 (Credit Spread 01) measures credit risk sensitivity in dollar terms: it tells you how much money you make or lose if the bond's credit spread widens or tightens by 1bp, holding the risk-free curve constant. For example, a corporate bond with CS01 = $500 loses $500 if its spread widens 1bp (from say +150bp to +151bp over Treasuries). CS01 differs from DV01: DV01 measures total yield sensitivity (rates + spread), while CS01 isolates spread risk only. It's most useful when bonds are priced as 'Treasury benchmark + credit spread,' allowing you to separate rate risk from credit risk. Traders use CS01 to hedge credit exposure independently of rate exposure.
Formula
Where
=Spread duration
=Market value of position
Variables
| CS01 | P&L impact per 1bp spread move (notional currency) |
| P(s) | Price at current spread s |
| P(s+1bp) | Price at spread s + 1bp |
Assumptions
- One-sided difference (spread up only)
- UST benchmark held constant
- Represents credit-specific risk separate from rates