Term Structure of CDS Spreads

Once calibration of a term structure of hazard rates is completed, the target swap can be priced.  Currently, the model only allows fee payment at payment dates and does not allow accrued fee when default occurs.  If a payment date in the target default swap falls between two calibration pay dates, linear interpolation is employed in the model to find the hazard rate associated with the target payment date.  This is equivalent to using a time-weighted average of hazard rates in a payment period of the target swap as a flat hazard rate for that period that we employ, so long as the length of each payment period of the target swap is the same as that of the swaps for calibration.