Upfront Point
A one-time lump-sum payment exchanged at CDS trade inception to reconcile a standardized running coupon (typically fixed at 100 or 500 basis points post-2009 standardization) with the prevailing par spread. If the par spread is above the running coupon, the protection buyer pays an upfront point; if below, the seller pays. Often abbreviated UFP. The upfront-plus-coupon convention replaced free-floating CDS coupons as part of the 2009 ISDA "Big Bang" + "Small Bang" reforms that simplified the contract and enabled mandatory clearing.
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Related terms
American Option · Asian Option · Barrier Option · Basket Option · Butterfly Spread · Calendar Spread
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