18. The main reason for the difference is the upward sloping swap curve in February 2011, which rises from 0.46% at six months to 2.4% at five years. This is not consistent with our assumption of a flat swap curve. Using a maturity-weighted average swap rate of 1.67%, we obtained a valuation with an error of less than 0.1%.

19. Strictly speaking, the CDS index contract would cancel if all of the credits in the reference portfolio experienced a credit event. However given that the reference portfolio usually consists of 50–125 individual credits, the probability of this happening within the lifetime of a typical CDS index contract is considered to be close to zero.