# Bootstrapping Credit Default Swap Data

Bootstrapping Credit Default Swap Data

Bootstrapping is a resampling method that has a wide variety of applications. It can be used to simulate the trajectories of sample paths, to determine if an estimator generated from real-world data has an approximate distribution, or to derive standard errors of a complicated estimator.

We obtain credit default swap index data developed by Datastream, a Thomson Financial product, covering the corporate debt of the automobile and automobile parts sector from January 1, 2004 through July 21, 2008. The credit default swap index used in this analysis should be interpreted as the average number of basis points per year required to insure against default on the debt obligations of companies in the U.S. domestic automobile sector (the average is taken at each point in time with respect to the relative weights of the then-current market value of the underlying debt issues). Using a bootstrapping technique, we simulate future trajectories of this particular credit default swap index.