27.14 Sensitivity to Recovery rate Vanilla cds is not very sensitive to the recovery rate providing the same recovery rate is used to estimate default probabilities and calculate payoffs Binary swaps, which provide a fixed payoff in the event of a default, are much more sensitive to recovery rates Options, Futures, and other Derivatives, 5th edition 2002 by John C. HullOptions, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 27.14 Sensitivity to Recovery Rate • Vanilla CDS is not very sensitive to the recovery rate providing the same recovery rate is used to estimate default probabilities and calculate payoffs • Binary swaps, which provide a fixed payoff in the event of a default, are much more sensitive to recovery rates