public virtual void endedTest()
{
LocalDate valuationDate = PRODUCT.ProtectionEndDate.plusDays(1);
CreditRatesProvider provider = createCreditRatesProviderSingle(valuationDate, false);
double price = PRICER.price(PRODUCT, provider, SETTLEMENT_STD, CLEAN, REF_DATA);
assertEquals(price, 0d);
CurrencyAmount pv = PRICER.presentValue(PRODUCT, provider, SETTLEMENT_STD, CLEAN, REF_DATA);
assertEquals(pv, CurrencyAmount.zero(USD));
assertThrowsIllegalArg(() => PRICER.parSpread(PRODUCT, provider, SETTLEMENT_STD, REF_DATA));
CurrencyAmount rpv01 = PRICER.rpv01(PRODUCT, provider, SETTLEMENT_STD, CLEAN, REF_DATA);
assertEquals(rpv01, CurrencyAmount.zero(USD));
CurrencyAmount recovery01 = PRICER.recovery01(PRODUCT, provider, SETTLEMENT_STD, REF_DATA);
assertEquals(recovery01, CurrencyAmount.zero(USD));
PointSensitivityBuilder sensi = PRICER.presentValueSensitivity(PRODUCT, provider, SETTLEMENT_STD, REF_DATA);
assertEquals(sensi, PointSensitivityBuilder.none());
PointSensitivityBuilder sensiPrice = PRICER.priceSensitivity(PRODUCT, provider, SETTLEMENT_STD, REF_DATA);
assertEquals(sensiPrice, PointSensitivityBuilder.none());
assertThrowsIllegalArg(() => PRICER.parSpreadSensitivity(PRODUCT, provider, SETTLEMENT_STD, REF_DATA));
JumpToDefault jumpToDefault = PRICER.jumpToDefault(PRODUCT, provider, SETTLEMENT_STD, REF_DATA);
assertEquals(jumpToDefault, JumpToDefault.of(USD, ImmutableMap.of(INDEX_ID, 0d)));
CurrencyAmount expectedLoss = PRICER.expectedLoss(PRODUCT, provider);
assertEquals(expectedLoss, CurrencyAmount.zero(USD));
}
internal override DoubleArray computedBucketedCs01(ResolvedCdsTrade trade, IList <ResolvedCdsTrade> bucketCds, CreditRatesProvider ratesProvider, ReferenceData refData)
{
checkCdsBucket(trade, bucketCds);
ResolvedCds product = trade.Product;
Currency currency = product.Currency;
StandardId legalEntityId = product.LegalEntityId;
LocalDate valuationDate = ratesProvider.ValuationDate;
int nBucket = bucketCds.Count;
DoubleArray impSp = impliedSpread(bucketCds, ratesProvider, refData);
NodalCurve creditCurveBase = Calibrator.calibrate(bucketCds, impSp, DoubleArray.filled(nBucket), CurveName.of("baseImpliedCreditCurve"), valuationDate, ratesProvider.discountFactors(currency), ratesProvider.recoveryRates(legalEntityId), refData);
IsdaCreditDiscountFactors df = IsdaCreditDiscountFactors.of(currency, valuationDate, creditCurveBase);
CreditRatesProvider ratesProviderBase = ratesProvider.toImmutableCreditRatesProvider().toBuilder().creditCurves(ImmutableMap.of(Pair.of(legalEntityId, currency), LegalEntitySurvivalProbabilities.of(legalEntityId, df))).build();
double[][] res = new double[nBucket][];
PointSensitivities pointPv = Pricer.presentValueOnSettleSensitivity(trade, ratesProviderBase, refData);
DoubleArray vLambda = ratesProviderBase.singleCreditCurveParameterSensitivity(pointPv, legalEntityId, currency).Sensitivity;
for (int i = 0; i < nBucket; i++)
{
PointSensitivities pointSp = Pricer.parSpreadSensitivity(bucketCds[i], ratesProviderBase, refData);
res[i] = ratesProviderBase.singleCreditCurveParameterSensitivity(pointSp, legalEntityId, currency).Sensitivity.toArray();
}
DoubleMatrix jacT = MATRIX_ALGEBRA.getTranspose(DoubleMatrix.ofUnsafe(res));
LUDecompositionResult luRes = DECOMPOSITION.apply(jacT);
DoubleArray vS = luRes.solve(vLambda);
return(vS);
}
internal override DoubleArray computedBucketedCs01(ResolvedCdsTrade trade, IList <ResolvedCdsTrade> bucketCds, CreditRatesProvider ratesProvider, ReferenceData refData)
{
checkCdsBucket(trade, bucketCds);
ResolvedCds product = trade.Product;
Currency currency = product.Currency;
StandardId legalEntityId = product.LegalEntityId;
LocalDate valuationDate = ratesProvider.ValuationDate;
ImmutableCreditRatesProvider immutableRatesProvider = ratesProvider.toImmutableCreditRatesProvider();
int nBucket = bucketCds.Count;
double[] res = new double[nBucket];
DoubleArray impSp = impliedSpread(bucketCds, ratesProvider, refData);
NodalCurve creditCurveBase = Calibrator.calibrate(bucketCds, impSp, DoubleArray.filled(nBucket), CurveName.of("baseImpliedCreditCurve"), valuationDate, ratesProvider.discountFactors(currency), ratesProvider.recoveryRates(legalEntityId), refData);
Pair <StandardId, Currency> lePair = Pair.of(legalEntityId, currency);
IsdaCreditDiscountFactors df = IsdaCreditDiscountFactors.of(currency, valuationDate, creditCurveBase);
CreditRatesProvider ratesProviderBase = immutableRatesProvider.toBuilder().creditCurves(ImmutableMap.of(lePair, LegalEntitySurvivalProbabilities.of(legalEntityId, df))).build();
double pvBase = Pricer.presentValueOnSettle(trade, ratesProviderBase, PriceType.DIRTY, refData).Amount;
for (int i = 0; i < nBucket; ++i)
{
double[] bumpedSp = impSp.toArray();
bumpedSp[i] += bumpAmount;
NodalCurve creditCurveBump = Calibrator.calibrate(bucketCds, DoubleArray.ofUnsafe(bumpedSp), DoubleArray.filled(nBucket), CurveName.of("bumpedImpliedCreditCurve"), valuationDate, ratesProvider.discountFactors(currency), ratesProvider.recoveryRates(legalEntityId), refData);
IsdaCreditDiscountFactors dfBump = IsdaCreditDiscountFactors.of(currency, valuationDate, creditCurveBump);
CreditRatesProvider ratesProviderBump = immutableRatesProvider.toBuilder().creditCurves(ImmutableMap.of(lePair, LegalEntitySurvivalProbabilities.of(legalEntityId, dfBump))).build();
double pvBumped = Pricer.presentValueOnSettle(trade, ratesProviderBump, PriceType.DIRTY, refData).Amount;
res[i] = (pvBumped - pvBase) / bumpAmount;
}
return(DoubleArray.ofUnsafe(res));
}
//-------------------------------------------------------------------------
private System.Func <ResolvedCdsTrade, CdsQuote> createQuoteValueFunction(CreditRatesProvider ratesProviderNew, CdsQuoteConvention targetConvention, ReferenceData refData)
{
System.Func <ResolvedCdsTrade, CdsQuote> quoteValueFunction;
if (targetConvention.Equals(CdsQuoteConvention.POINTS_UPFRONT))
{
quoteValueFunction = (ResolvedCdsTrade x) =>
{
double puf = pointsUpfront(x, ratesProviderNew, refData);
return(CdsQuote.of(targetConvention, puf));
};
}
else if (targetConvention.Equals(CdsQuoteConvention.QUOTED_SPREAD))
{
quoteValueFunction = (ResolvedCdsTrade x) =>
{
double puf = pointsUpfront(x, ratesProviderNew, refData);
return(quotedSpreadFromPointsUpfront(x, CdsQuote.of(CdsQuoteConvention.POINTS_UPFRONT, puf), ratesProviderNew, refData));
};
}
else
{
throw new System.ArgumentException("unsuported CDS quote convention");
}
return(quoteValueFunction);
}
//-------------------------------------------------------------------------
public override CurrencyAmount parallelCs01(ResolvedCdsTrade trade, IList <ResolvedCdsTrade> bucketCds, CreditRatesProvider ratesProvider, ReferenceData refData)
{
checkCdsBucket(trade, bucketCds);
ResolvedCds product = trade.Product;
Currency currency = product.Currency;
StandardId legalEntityId = product.LegalEntityId;
LocalDate valuationDate = ratesProvider.ValuationDate;
ImmutableCreditRatesProvider immutableRatesProvider = ratesProvider.toImmutableCreditRatesProvider();
int nBucket = bucketCds.Count;
DoubleArray impSp = impliedSpread(bucketCds, ratesProvider, refData);
NodalCurve creditCurveBase = Calibrator.calibrate(bucketCds, impSp, DoubleArray.filled(nBucket), CurveName.of("baseImpliedCreditCurve"), valuationDate, ratesProvider.discountFactors(currency), ratesProvider.recoveryRates(legalEntityId), refData);
Pair <StandardId, Currency> lePair = Pair.of(legalEntityId, currency);
IsdaCreditDiscountFactors df = IsdaCreditDiscountFactors.of(currency, valuationDate, creditCurveBase);
CreditRatesProvider ratesProviderBase = immutableRatesProvider.toBuilder().creditCurves(ImmutableMap.of(lePair, LegalEntitySurvivalProbabilities.of(legalEntityId, df))).build();
CurrencyAmount pvBase = Pricer.presentValueOnSettle(trade, ratesProviderBase, PriceType.DIRTY, refData);
DoubleArray bumpedSp = DoubleArray.of(nBucket, i => impSp.get(i) + bumpAmount);
NodalCurve creditCurveBump = Calibrator.calibrate(bucketCds, bumpedSp, DoubleArray.filled(nBucket), CurveName.of("bumpedImpliedCreditCurve"), valuationDate, ratesProvider.discountFactors(currency), ratesProvider.recoveryRates(legalEntityId), refData);
IsdaCreditDiscountFactors dfBump = IsdaCreditDiscountFactors.of(currency, valuationDate, creditCurveBump);
CreditRatesProvider ratesProviderBump = immutableRatesProvider.toBuilder().creditCurves(ImmutableMap.of(lePair, LegalEntitySurvivalProbabilities.of(legalEntityId, dfBump))).build();
CurrencyAmount pvBumped = Pricer.presentValueOnSettle(trade, ratesProviderBump, PriceType.DIRTY, refData);
return(CurrencyAmount.of(currency, (pvBumped.Amount - pvBase.Amount) / bumpAmount));
}
internal virtual double recoveryRate(ResolvedCds cds, CreditRatesProvider ratesProvider)
{
RecoveryRates recoveryRates = ratesProvider.recoveryRates(cds.LegalEntityId);
ArgChecker.isTrue(recoveryRates is ConstantRecoveryRates, "recoveryRates must be ConstantRecoveryRates");
return(recoveryRates.recoveryRate(cds.ProtectionEndDate));
}
private double getIndexFactor(ResolvedCds cds, CreditRatesProvider ratesProvider)
{
LegalEntitySurvivalProbabilities survivalProbabilities = ratesProvider.survivalProbabilities(cds.LegalEntityId, cds.Currency);
// instance is checked in pricer
double indexFactor = ((IsdaCreditDiscountFactors)survivalProbabilities.SurvivalProbabilities).Curve.Metadata.getInfo(CurveInfoType.CDS_INDEX_FACTOR);
return(indexFactor);
}
//-------------------------------------------------------------------------
/// <summary>
/// Computes the first order sensitivities of a function of a {@code CreditRatesProvider} to a double by finite difference.
/// <para>
/// The finite difference is computed by forward type.
/// The function should return a value in the same currency for any rates provider of {@code CreditRatesProvider}.
///
/// </para>
/// </summary>
/// <param name="provider"> the rates provider </param>
/// <param name="valueFn"> the function from a rate provider to a currency amount for which the sensitivity should be computed </param>
/// <returns> the curve sensitivity </returns>
public virtual CurrencyParameterSensitivities sensitivity(CreditRatesProvider provider, System.Func <ImmutableCreditRatesProvider, CurrencyAmount> valueFn)
{
ImmutableCreditRatesProvider immutableProvider = provider.toImmutableCreditRatesProvider();
CurrencyAmount valueInit = valueFn(immutableProvider);
CurrencyParameterSensitivities discounting = sensitivityDiscountCurve(immutableProvider, valueFn, ImmutableCreditRatesProvider.meta().discountCurves(), valueInit);
CurrencyParameterSensitivities credit = sensitivityCreidtCurve(immutableProvider, valueFn, ImmutableCreditRatesProvider.meta().creditCurves(), valueInit);
return(discounting.combinedWith(credit));
}
public virtual void test_singleDiscountCurveParameterSensitivity()
{
ZeroRateSensitivity zeroPt = ZeroRateSensitivity.of(USD, 10d, 5d);
CreditCurveZeroRateSensitivity creditPt = CreditCurveZeroRateSensitivity.of(LEGAL_ENTITY_ABC, JPY, 2d, 3d);
FxForwardSensitivity fxPt = FxForwardSensitivity.of(CurrencyPair.of(JPY, USD), USD, LocalDate.of(2017, 2, 14), 15d);
CreditRatesProvider test = ImmutableCreditRatesProvider.builder().creditCurves(ImmutableMap.of(Pair.of(LEGAL_ENTITY_ABC, USD), LegalEntitySurvivalProbabilities.of(LEGAL_ENTITY_ABC, CRD_ABC_USD), Pair.of(LEGAL_ENTITY_ABC, JPY), LegalEntitySurvivalProbabilities.of(LEGAL_ENTITY_ABC, CRD_ABC_JPY), Pair.of(LEGAL_ENTITY_DEF, JPY), LegalEntitySurvivalProbabilities.of(LEGAL_ENTITY_DEF, CRD_DEF))).discountCurves(ImmutableMap.of(USD, DSC_USD, JPY, DSC_JPY)).recoveryRateCurves(ImmutableMap.of(LEGAL_ENTITY_ABC, RR_ABC, LEGAL_ENTITY_DEF, RR_DEF)).valuationDate(VALUATION).build();
CurrencyParameterSensitivities computed = CurrencyParameterSensitivities.of(test.singleDiscountCurveParameterSensitivity(zeroPt.combinedWith(creditPt).combinedWith(fxPt).build(), USD));
CurrencyParameterSensitivities expected = DSC_USD.parameterSensitivity(zeroPt);
assertTrue(computed.equalWithTolerance(expected, 1.0e-14));
}
//-------------------------------------------------------------------------
/// <summary>
/// Calculates the risky annuity, which is RPV01 per unit notional.
/// </summary>
/// <param name="cds"> the product </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="referenceDate"> the reference date </param>
/// <param name="priceType"> the price type </param>
/// <param name="refData"> the reference data </param>
/// <returns> the risky annuity </returns>
public virtual double riskyAnnuity(ResolvedCds cds, CreditRatesProvider ratesProvider, LocalDate referenceDate, PriceType priceType, ReferenceData refData)
{
if (isExpired(cds, ratesProvider))
{
return(0d);
}
LocalDate stepinDate = cds.StepinDateOffset.adjust(ratesProvider.ValuationDate, refData);
LocalDate effectiveStartDate = cds.calculateEffectiveStartDate(stepinDate);
Pair <CreditDiscountFactors, LegalEntitySurvivalProbabilities> rates = reduceDiscountFactors(cds, ratesProvider);
return(riskyAnnuity(cds, rates.First, rates.Second, referenceDate, stepinDate, effectiveStartDate, priceType));
}
//-------------------------------------------------------------------------
/// <summary>
/// Calculates the par spread of the CDS product.
/// <para>
/// The par spread is a coupon rate such that the clean PV is 0.
/// The result is represented in decimal form.
///
/// </para>
/// </summary>
/// <param name="cds"> the product </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="referenceDate"> the reference date </param>
/// <param name="refData"> the reference data </param>
/// <returns> the par spread </returns>
public virtual double parSpread(ResolvedCds cds, CreditRatesProvider ratesProvider, LocalDate referenceDate, ReferenceData refData)
{
ArgChecker.isTrue(cds.ProtectionEndDate.isAfter(ratesProvider.ValuationDate), "CDS already expired");
LocalDate stepinDate = cds.StepinDateOffset.adjust(ratesProvider.ValuationDate, refData);
LocalDate effectiveStartDate = cds.calculateEffectiveStartDate(stepinDate);
double recoveryRate = this.recoveryRate(cds, ratesProvider);
Pair <CreditDiscountFactors, LegalEntitySurvivalProbabilities> rates = reduceDiscountFactors(cds, ratesProvider);
double protectionLeg = this.protectionLeg(cds, rates.First, rates.Second, referenceDate, effectiveStartDate, recoveryRate);
double riskyAnnuity = this.riskyAnnuity(cds, rates.First, rates.Second, referenceDate, stepinDate, effectiveStartDate, PriceType.CLEAN);
return(protectionLeg / riskyAnnuity);
}
/// <summary>
/// Calculates the expected loss of the CDS product.
/// <para>
/// The expected loss is the (undiscounted) expected default settlement value paid by the protection seller.
/// The resulting value is always positive.
///
/// </para>
/// </summary>
/// <param name="cds"> the product </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <returns> the expected loss </returns>
public virtual CurrencyAmount expectedLoss(ResolvedCds cds, CreditRatesProvider ratesProvider)
{
if (isExpired(cds, ratesProvider))
{
return(CurrencyAmount.of(cds.Currency, 0d));
}
double recoveryRate = this.recoveryRate(cds, ratesProvider);
Pair <CreditDiscountFactors, LegalEntitySurvivalProbabilities> rates = reduceDiscountFactors(cds, ratesProvider);
double survivalProbability = rates.Second.survivalProbability(cds.ProtectionEndDate);
double el = (1d - recoveryRate) * (1d - survivalProbability);
return(CurrencyAmount.of(cds.Currency, Math.Abs(cds.Notional) * el));
}
//-------------------------------------------------------------------------
/// <summary>
/// Calculates the present value of the trade.
/// <para>
/// The present value of the product is based on the valuation date.
/// </para>
/// <para>
/// This method can calculate the clean or dirty present value, see <seealso cref="PriceType"/>.
/// If calculating the clean value, the accrued interest is calculated based on the step-in date.
///
/// </para>
/// </summary>
/// <param name="trade"> the trade </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="priceType"> the price type </param>
/// <param name="refData"> the reference data </param>
/// <returns> the price </returns>
public virtual CurrencyAmount presentValue(ResolvedCdsTrade trade, CreditRatesProvider ratesProvider, PriceType priceType, ReferenceData refData)
{
CurrencyAmount pvProduct = productPricer.presentValue(trade.Product, ratesProvider, ratesProvider.ValuationDate, priceType, refData);
if (!trade.UpfrontFee.Present)
{
return(pvProduct);
}
Payment upfront = trade.UpfrontFee.get();
CurrencyAmount pvUpfront = upfrontPricer.presentValue(upfront, ratesProvider.discountFactors(upfront.Currency).toDiscountFactors());
return(pvProduct.plus(pvUpfront));
}
public virtual void pricePufTest()
{
double premium = 150d * ONE_BP;
Cds product = Cds.of(BUY, LEGAL_ENTITY, GBP, 1.0e6, START_DATE, END_DATE, Frequency.P3M, DEFAULT_CALENDAR, premium);
TradeInfo info = TradeInfo.builder().tradeDate(TODAY).settlementDate(product.SettlementDateOffset.adjust(TODAY, REF_DATA)).build();
ResolvedCdsTrade trade = CdsTrade.builder().product(product).info(info).build().resolve(REF_DATA);
NodalCurve cc = CALIB.calibrate(ImmutableList.of(trade), DoubleArray.of(0.0123), DoubleArray.of(0.0), CurveName.of("test"), TODAY, DSC_CURVE, REC_RATES, REF_DATA);
CreditRatesProvider rates = RATES_PROVIDER.toImmutableCreditRatesProvider().toBuilder().creditCurves(ImmutableMap.of(Pair.of(LEGAL_ENTITY, GBP), LegalEntitySurvivalProbabilities.of(LEGAL_ENTITY, IsdaCreditDiscountFactors.of(GBP, TODAY, cc)))).build();
double pointsUpFront = CONV.pointsUpfront(trade, rates, REF_DATA);
double cleanPrice = CONV.cleanPrice(trade, rates, REF_DATA);
double cleanPriceRe = CONV.cleanPriceFromPointsUpfront(pointsUpFront);
assertEquals(cleanPrice, cleanPriceRe, TOL);
}
/// <summary>
/// Calculates the expected loss of the CDS index product.
/// <para>
/// The expected loss is the (undiscounted) expected default settlement value paid by the protection seller.
/// The resulting value is always positive.
///
/// </para>
/// </summary>
/// <param name="cdsIndex"> the product </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <returns> the expected loss </returns>
public virtual CurrencyAmount expectedLoss(ResolvedCdsIndex cdsIndex, CreditRatesProvider ratesProvider)
{
if (isExpired(cdsIndex, ratesProvider))
{
return(CurrencyAmount.of(cdsIndex.Currency, 0d));
}
ResolvedCds cds = cdsIndex.toSingleNameCds();
double recoveryRate = underlyingPricer.recoveryRate(cds, ratesProvider);
Triple <CreditDiscountFactors, LegalEntitySurvivalProbabilities, double> rates = reduceDiscountFactors(cds, ratesProvider);
double survivalProbability = rates.Second.survivalProbability(cds.ProtectionEndDate);
double el = (1d - recoveryRate) * (1d - survivalProbability) * rates.Third;
return(CurrencyAmount.of(cds.Currency, Math.Abs(cds.Notional) * el));
}
/// <summary>
/// Calculates the par spread sensitivity of the product.
/// <para>
/// The par spread sensitivity of the product is the sensitivity of par spread to the underlying curves.
/// The resulting sensitivity is based on the currency of the CDS product.
///
/// </para>
/// </summary>
/// <param name="cds"> the product </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="referenceDate"> the reference date </param>
/// <param name="refData"> the reference data </param>
/// <returns> the par spread </returns>
public virtual PointSensitivityBuilder parSpreadSensitivity(ResolvedCds cds, CreditRatesProvider ratesProvider, LocalDate referenceDate, ReferenceData refData)
{
ArgChecker.isTrue(cds.ProtectionEndDate.isAfter(ratesProvider.ValuationDate), "CDS already expired");
LocalDate stepinDate = cds.StepinDateOffset.adjust(ratesProvider.ValuationDate, refData);
LocalDate effectiveStartDate = cds.calculateEffectiveStartDate(stepinDate);
double recoveryRate = this.recoveryRate(cds, ratesProvider);
Pair <CreditDiscountFactors, LegalEntitySurvivalProbabilities> rates = reduceDiscountFactors(cds, ratesProvider);
double protectionLeg = this.protectionLeg(cds, rates.First, rates.Second, referenceDate, effectiveStartDate, recoveryRate);
double riskyAnnuityInv = 1d / riskyAnnuity(cds, rates.First, rates.Second, referenceDate, stepinDate, effectiveStartDate, PriceType.CLEAN);
PointSensitivityBuilder protectionLegSensi = protectionLegSensitivity(cds, rates.First, rates.Second, referenceDate, effectiveStartDate, recoveryRate).multipliedBy(riskyAnnuityInv);
PointSensitivityBuilder riskyAnnuitySensi = riskyAnnuitySensitivity(cds, rates.First, rates.Second, referenceDate, stepinDate, effectiveStartDate).multipliedBy(-protectionLeg * riskyAnnuityInv * riskyAnnuityInv);
return(protectionLegSensi.combinedWith(riskyAnnuitySensi));
}
// internal price computation with specified coupon rate
internal virtual double price(ResolvedCds cds, CreditRatesProvider ratesProvider, double fractionalSpread, LocalDate referenceDate, PriceType priceType, ReferenceData refData)
{
if (!cds.ProtectionEndDate.isAfter(ratesProvider.ValuationDate))
{ //short cut already expired CDSs
return(0d);
}
LocalDate stepinDate = cds.StepinDateOffset.adjust(ratesProvider.ValuationDate, refData);
LocalDate effectiveStartDate = cds.calculateEffectiveStartDate(stepinDate);
double recoveryRate = this.recoveryRate(cds, ratesProvider);
Pair <CreditDiscountFactors, LegalEntitySurvivalProbabilities> rates = reduceDiscountFactors(cds, ratesProvider);
double protectionLeg = this.protectionLeg(cds, rates.First, rates.Second, referenceDate, effectiveStartDate, recoveryRate);
double rpv01 = riskyAnnuity(cds, rates.First, rates.Second, referenceDate, stepinDate, effectiveStartDate, priceType);
return(protectionLeg - rpv01 * fractionalSpread);
}
//-------------------------------------------------------------------------
/// <summary>
/// Calculates the recovery01 of the CDS product.
/// <para>
/// The recovery01 is defined as the present value sensitivity to the recovery rate.
/// Since the ISDA standard model requires the recovery rate to be constant throughout the lifetime of the CDS,
/// one currency amount is returned by this method.
///
/// </para>
/// </summary>
/// <param name="cds"> the product </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="referenceDate"> the reference date </param>
/// <param name="refData"> the reference data </param>
/// <returns> the recovery01 </returns>
public virtual CurrencyAmount recovery01(ResolvedCds cds, CreditRatesProvider ratesProvider, LocalDate referenceDate, ReferenceData refData)
{
if (isExpired(cds, ratesProvider))
{
return(CurrencyAmount.of(cds.Currency, 0d));
}
LocalDate stepinDate = cds.StepinDateOffset.adjust(ratesProvider.ValuationDate, refData);
LocalDate effectiveStartDate = cds.calculateEffectiveStartDate(stepinDate);
validateRecoveryRates(cds, ratesProvider);
Pair <CreditDiscountFactors, LegalEntitySurvivalProbabilities> rates = reduceDiscountFactors(cds, ratesProvider);
double protectionFull = this.protectionFull(cds, rates.First, rates.Second, referenceDate, effectiveStartDate);
return(CurrencyAmount.of(cds.Currency, -cds.BuySell.normalize(cds.Notional) * protectionFull));
}
//-------------------------------------------------------------------------
/// <summary>
/// Calculates the risky PV01 of the CDS index product.
/// <para>
/// RPV01 is defined as minus of the present value sensitivity to coupon rate.
///
/// </para>
/// </summary>
/// <param name="cdsIndex"> the product </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="referenceDate"> the reference date </param>
/// <param name="priceType"> the price type </param>
/// <param name="refData"> the reference date </param>
/// <returns> the RPV01 </returns>
public virtual CurrencyAmount rpv01(ResolvedCdsIndex cdsIndex, CreditRatesProvider ratesProvider, LocalDate referenceDate, PriceType priceType, ReferenceData refData)
{
if (isExpired(cdsIndex, ratesProvider))
{
return(CurrencyAmount.of(cdsIndex.Currency, 0d));
}
ResolvedCds cds = cdsIndex.toSingleNameCds();
LocalDate stepinDate = cds.StepinDateOffset.adjust(ratesProvider.ValuationDate, refData);
LocalDate effectiveStartDate = cds.calculateEffectiveStartDate(stepinDate);
Triple <CreditDiscountFactors, LegalEntitySurvivalProbabilities, double> rates = reduceDiscountFactors(cds, ratesProvider);
double riskyAnnuity = underlyingPricer.riskyAnnuity(cds, rates.First, rates.Second, referenceDate, stepinDate, effectiveStartDate, priceType);
double amount = cds.BuySell.normalize(cds.Notional) * riskyAnnuity * rates.Third;
return(CurrencyAmount.of(cds.Currency, amount));
}
/// <summary>
/// Calculates the price sensitivity of the product.
/// <para>
/// The price sensitivity of the product is the sensitivity of price to the underlying curves.
///
/// </para>
/// </summary>
/// <param name="cds"> the product </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="referenceDate"> the reference date </param>
/// <param name="refData"> the reference data </param>
/// <returns> the present value sensitivity </returns>
public virtual PointSensitivityBuilder priceSensitivity(ResolvedCds cds, CreditRatesProvider ratesProvider, LocalDate referenceDate, ReferenceData refData)
{
if (isExpired(cds, ratesProvider))
{
return(PointSensitivityBuilder.none());
}
LocalDate stepinDate = cds.StepinDateOffset.adjust(ratesProvider.ValuationDate, refData);
LocalDate effectiveStartDate = cds.calculateEffectiveStartDate(stepinDate);
double recoveryRate = this.recoveryRate(cds, ratesProvider);
Pair <CreditDiscountFactors, LegalEntitySurvivalProbabilities> rates = reduceDiscountFactors(cds, ratesProvider);
PointSensitivityBuilder protectionLegSensi = protectionLegSensitivity(cds, rates.First, rates.Second, referenceDate, effectiveStartDate, recoveryRate);
PointSensitivityBuilder riskyAnnuitySensi = riskyAnnuitySensitivity(cds, rates.First, rates.Second, referenceDate, stepinDate, effectiveStartDate).multipliedBy(-cds.FixedRate);
return(protectionLegSensi.combinedWith(riskyAnnuitySensi));
}
//-------------------------------------------------------------------------
// extract CDS trades from credit curve
private ImmutableList <ResolvedCdsTrade> getBucketCds(ResolvedCds product, CreditRatesProvider ratesProvider)
{
CreditDiscountFactors creditCurve = ratesProvider.survivalProbabilities(product.LegalEntityId, product.Currency).SurvivalProbabilities;
int nNodes = creditCurve.ParameterCount;
ImmutableList.Builder <ResolvedCdsTrade> builder = ImmutableList.builder();
for (int i = 0; i < nNodes; ++i)
{
ParameterMetadata metadata = creditCurve.getParameterMetadata(i);
ArgChecker.isTrue(metadata is ResolvedTradeParameterMetadata, "ParameterMetadata of credit curve must be ResolvedTradeParameterMetadata");
ResolvedTradeParameterMetadata tradeMetadata = (ResolvedTradeParameterMetadata)metadata;
ResolvedTrade trade = tradeMetadata.Trade;
ArgChecker.isTrue(trade is ResolvedCdsTrade, "ResolvedTrade must be ResolvedCdsTrade");
builder.add((ResolvedCdsTrade)trade);
}
return(builder.build());
}
public virtual void test_bondDiscountingProvider()
{
LocalDate valDate = LocalDate.of(2015, 6, 30);
Curve ccAUsd = ConstantNodalCurve.of(Curves.zeroRates(CC_A_USD.CurveName, ACT_365F), 0.5d, 1.5d);
Curve ccBGbp = ConstantNodalCurve.of(Curves.zeroRates(CC_B_GBP.CurveName, ACT_365F), 0.5d, 2d);
Curve ccAGbp = ConstantNodalCurve.of(Curves.zeroRates(CC_A_GBP.CurveName, ACT_365F), 0.5d, 3d);
Curve dcGbp = ConstantNodalCurve.of(Curves.zeroRates(DC_GBP.CurveName, ACT_365F), 0.5d, 0.1d);
Curve dcUsd = ConstantNodalCurve.of(Curves.zeroRates(DC_USD.CurveName, ACT_365F), 0.5d, 0.05d);
Curve rcA = ConstantCurve.of(Curves.recoveryRates(RC_A.CurveName, ACT_365F), 0.5d);
Curve rcB = ConstantCurve.of(Curves.recoveryRates(RC_B.CurveName, ACT_365F), 0.4234d);
IDictionary <CurveId, Curve> curveMap = new Dictionary <CurveId, Curve>();
curveMap[CC_A_USD] = ccAUsd;
curveMap[CC_B_GBP] = ccBGbp;
curveMap[CC_A_GBP] = ccAGbp;
curveMap[DC_USD] = dcUsd;
curveMap[DC_GBP] = dcGbp;
curveMap[RC_A] = rcA;
curveMap[RC_B] = rcB;
MarketData md = ImmutableMarketData.of(valDate, ImmutableMap.copyOf(curveMap));
CreditRatesProvider provider = LOOKUP_WITH_SOURCE.creditRatesProvider(md);
assertEquals(provider.ValuationDate, valDate);
assertEquals(provider.findData(CC_A_USD.CurveName), ccAUsd);
assertEquals(provider.findData(DC_USD.CurveName), dcUsd);
assertEquals(provider.findData(RC_B.CurveName), rcB);
assertEquals(provider.findData(CurveName.of("Rubbish")), null);
// check credit curve
LegalEntitySurvivalProbabilities cc = provider.survivalProbabilities(ISSUER_A, GBP);
IsdaCreditDiscountFactors ccUnder = (IsdaCreditDiscountFactors)cc.SurvivalProbabilities;
assertEquals(ccUnder.Curve.Name, ccAGbp.Name);
assertThrowsRuntime(() => provider.survivalProbabilities(ISSUER_B, USD));
assertThrowsRuntime(() => provider.survivalProbabilities(ISSUER_C, USD));
// check discount curve
IsdaCreditDiscountFactors dc = (IsdaCreditDiscountFactors)provider.discountFactors(USD);
assertEquals(dc.Curve.Name, dcUsd.Name);
assertThrowsRuntime(() => provider.discountFactors(EUR));
// check recovery rate curve
ConstantRecoveryRates rc = (ConstantRecoveryRates)provider.recoveryRates(ISSUER_B);
assertEquals(rc.RecoveryRate, rcB.getParameter(0));
assertThrowsRuntime(() => provider.recoveryRates(ISSUER_C));
}
/// <summary>
/// Converts points upfront to quoted spread.
/// <para>
/// Thus {@code quote} must be {@code CdsQuoteConvention.POINTS_UPFRONT}.
/// </para>
/// <para>
/// The relevant discount curve and recovery rate curve must be stored in {@code ratesProvider}.
/// The credit curve is internally calibrated to convert one quote type to the other quote type.
///
/// </para>
/// </summary>
/// <param name="trade"> the trade </param>
/// <param name="quote"> the quote </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="refData"> the reference data </param>
/// <returns> the quote </returns>
public virtual CdsQuote quotedSpreadFromPointsUpfront(ResolvedCdsTrade trade, CdsQuote quote, CreditRatesProvider ratesProvider, ReferenceData refData)
{
ArgChecker.notNull(trade, "trade");
ArgChecker.notNull(quote, "quote");
ArgChecker.notNull(ratesProvider, "ratesProvider");
ArgChecker.notNull(refData, "refData");
ArgChecker.isTrue(quote.QuoteConvention.Equals(CdsQuoteConvention.POINTS_UPFRONT), "quote must be points upfront");
ResolvedCds product = trade.Product;
Currency currency = product.Currency;
StandardId legalEntityId = product.LegalEntityId;
LocalDate valuationDate = ratesProvider.ValuationDate;
NodalCurve creditCurve = calibrator.calibrate(ImmutableList.of(trade), DoubleArray.of(product.FixedRate), DoubleArray.of(quote.QuotedValue), CurveName.of("temp"), valuationDate, ratesProvider.discountFactors(currency), ratesProvider.recoveryRates(legalEntityId), refData);
CreditRatesProvider ratesProviderNew = ratesProvider.toImmutableCreditRatesProvider().toBuilder().creditCurves(ImmutableMap.of(Pair.of(legalEntityId, currency), LegalEntitySurvivalProbabilities.of(legalEntityId, IsdaCreditDiscountFactors.of(currency, valuationDate, creditCurve)))).build();
double sp = pricer.parSpread(trade, ratesProviderNew, refData);
return(CdsQuote.of(CdsQuoteConvention.QUOTED_SPREAD, sp));
}
//-------------------------------------------------------------------------
//JAVA TO C# CONVERTER TODO TASK: Most Java annotations will not have direct .NET equivalent attributes:
//ORIGINAL LINE: @Test public void sensitivity_credit_isda()
public virtual void sensitivity_credit_isda()
{
LocalDate valuationDate = LocalDate.of(2014, 1, 3);
CreditRatesProvider rates = CreditRatesProviderDataSets.createCreditRatesProvider(valuationDate);
CurrencyParameterSensitivities sensiComputed = FD_CALCULATOR.sensitivity(rates, this.creditFunction);
IList <IsdaCreditDiscountFactors> curves = CreditRatesProviderDataSets.getAllDiscountFactors(valuationDate);
assertEquals(sensiComputed.size(), curves.Count);
foreach (IsdaCreditDiscountFactors curve in curves)
{
DoubleArray time = curve.ParameterKeys;
DoubleArray sensiValueComputed = sensiComputed.getSensitivity(curve.Curve.Name, USD).Sensitivity;
assertEquals(sensiValueComputed.size(), time.size());
for (int i = 0; i < time.size(); i++)
{
assertEquals(time.get(i), sensiValueComputed.get(i), TOLERANCE_DELTA);
}
}
}
//-------------------------------------------------------------------------
/// <summary>
/// Calculates the jump-to-default of the CDS product.
/// <para>
/// The jump-to-default is the value of the product in case of immediate default.
///
/// </para>
/// </summary>
/// <param name="cds"> the product </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="referenceDate"> the reference date </param>
/// <param name="refData"> the reference data </param>
/// <returns> the jump-to-default </returns>
public virtual JumpToDefault jumpToDefault(ResolvedCds cds, CreditRatesProvider ratesProvider, LocalDate referenceDate, ReferenceData refData)
{
StandardId legalEntityId = cds.LegalEntityId;
Currency currency = cds.Currency;
if (isExpired(cds, ratesProvider))
{
return(JumpToDefault.of(currency, ImmutableMap.of(legalEntityId, 0d)));
}
LocalDate stepinDate = cds.StepinDateOffset.adjust(ratesProvider.ValuationDate, refData);
LocalDate effectiveStartDate = cds.calculateEffectiveStartDate(stepinDate);
double recoveryRate = this.recoveryRate(cds, ratesProvider);
Pair <CreditDiscountFactors, LegalEntitySurvivalProbabilities> rates = reduceDiscountFactors(cds, ratesProvider);
double protectionFull = this.protectionFull(cds, rates.First, rates.Second, referenceDate, effectiveStartDate);
double lgd = 1d - recoveryRate;
double rpv01 = riskyAnnuity(cds, rates.First, rates.Second, referenceDate, stepinDate, effectiveStartDate, PriceType.CLEAN);
double jtd = lgd - (lgd * protectionFull - cds.FixedRate * rpv01);
return(JumpToDefault.of(currency, ImmutableMap.of(legalEntityId, cds.BuySell.normalize(cds.Notional) * jtd)));
}
/// <summary>
/// The par spread quotes are converted to points upfronts or quoted spreads.
/// <para>
/// The relevant discount curve and recovery rate curve must be stored in {@code ratesProvider}.
/// The credit curve is internally calibrated to par spread values.
/// </para>
/// <para>
/// {@code trades} must be sorted in ascending order in maturity and coherent to {@code quotes}.
/// </para>
/// <para>
/// The resultant quote is specified by {@code targetConvention}.
///
/// </para>
/// </summary>
/// <param name="trades"> the trades </param>
/// <param name="quotes"> the quotes </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="targetConvention"> the target convention </param>
/// <param name="refData"> the reference data </param>
/// <returns> the quotes </returns>
public virtual IList <CdsQuote> quotesFromParSpread(IList <ResolvedCdsTrade> trades, IList <CdsQuote> quotes, CreditRatesProvider ratesProvider, CdsQuoteConvention targetConvention, ReferenceData refData)
{
ArgChecker.noNulls(trades, "trades");
ArgChecker.noNulls(quotes, "quotes");
ArgChecker.notNull(ratesProvider, "ratesProvider");
ArgChecker.notNull(targetConvention, "targetConvention");
ArgChecker.notNull(refData, "refData");
int nNodes = trades.Count;
ArgChecker.isTrue(quotes.Count == nNodes, "trades and quotes must be the same size");
quotes.ForEach(q => ArgChecker.isTrue(q.QuoteConvention.Equals(CdsQuoteConvention.PAR_SPREAD), "quote must be par spread"));
//JAVA TO C# CONVERTER TODO TASK: Most Java stream collectors are not converted by Java to C# Converter:
IEnumerator <StandardId> legalEntities = trades.Select(t => t.Product.LegalEntityId).collect(Collectors.toSet()).GetEnumerator();
//JAVA TO C# CONVERTER TODO TASK: Java iterators are only converted within the context of 'while' and 'for' loops:
StandardId legalEntityId = legalEntities.next();
//JAVA TO C# CONVERTER TODO TASK: Java iterators are only converted within the context of 'while' and 'for' loops:
ArgChecker.isFalse(legalEntities.hasNext(), "legal entity must be common to trades");
//JAVA TO C# CONVERTER TODO TASK: Most Java stream collectors are not converted by Java to C# Converter:
IEnumerator <Currency> currencies = trades.Select(t => t.Product.Currency).collect(Collectors.toSet()).GetEnumerator();
//JAVA TO C# CONVERTER TODO TASK: Java iterators are only converted within the context of 'while' and 'for' loops:
Currency currency = currencies.next();
//JAVA TO C# CONVERTER TODO TASK: Java iterators are only converted within the context of 'while' and 'for' loops:
ArgChecker.isFalse(currencies.hasNext(), "currency must be common to trades");
LocalDate valuationDate = ratesProvider.ValuationDate;
CreditDiscountFactors discountFactors = ratesProvider.discountFactors(currency);
RecoveryRates recoveryRates = ratesProvider.recoveryRates(legalEntityId);
NodalCurve creditCurve = calibrator.calibrate(trades, DoubleArray.of(nNodes, q => quotes[q].QuotedValue), DoubleArray.filled(nNodes), CurveName.of("temp"), valuationDate, discountFactors, recoveryRates, refData);
CreditRatesProvider ratesProviderNew = ratesProvider.toImmutableCreditRatesProvider().toBuilder().creditCurves(ImmutableMap.of(Pair.of(legalEntityId, currency), LegalEntitySurvivalProbabilities.of(legalEntityId, IsdaCreditDiscountFactors.of(currency, valuationDate, creditCurve)))).build();
System.Func <ResolvedCdsTrade, CdsQuote> quoteValueFunction = createQuoteValueFunction(ratesProviderNew, targetConvention, refData);
//JAVA TO C# CONVERTER TODO TASK: Most Java stream collectors are not converted by Java to C# Converter:
ImmutableList <CdsQuote> result = trades.Select(c => quoteValueFunction(c)).collect(Collectors.collectingAndThen(Collectors.toList(), ImmutableList.copyOf));
return(result);
}
//-------------------------------------------------------------------------
/// <summary>
/// Calculates the jump-to-default of the CDS index product.
/// <para>
/// The jump-to-default is the value of the product in case of immediate default of a constituent single name.
/// </para>
/// <para>
/// Under the homogeneous pool assumption, the jump-to-default values are the same for all of the undefaulted names,
/// and zero for defaulted names. Thus the resulting object contains a single number.
///
/// </para>
/// </summary>
/// <param name="cdsIndex"> the product </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="referenceDate"> the reference date </param>
/// <param name="refData"> the reference data </param>
/// <returns> the recovery01 </returns>
public virtual JumpToDefault jumpToDefault(ResolvedCdsIndex cdsIndex, CreditRatesProvider ratesProvider, LocalDate referenceDate, ReferenceData refData)
{
StandardId indexId = cdsIndex.CdsIndexId;
Currency currency = cdsIndex.Currency;
if (isExpired(cdsIndex, ratesProvider))
{
return(JumpToDefault.of(currency, ImmutableMap.of(indexId, 0d)));
}
ResolvedCds cds = cdsIndex.toSingleNameCds();
LocalDate stepinDate = cds.StepinDateOffset.adjust(ratesProvider.ValuationDate, refData);
LocalDate effectiveStartDate = cds.calculateEffectiveStartDate(stepinDate);
double recoveryRate = underlyingPricer.recoveryRate(cds, ratesProvider);
Triple <CreditDiscountFactors, LegalEntitySurvivalProbabilities, double> rates = reduceDiscountFactors(cds, ratesProvider);
double protectionFull = underlyingPricer.protectionFull(cds, rates.First, rates.Second, referenceDate, effectiveStartDate);
double rpv01 = underlyingPricer.riskyAnnuity(cds, rates.First, rates.Second, referenceDate, stepinDate, effectiveStartDate, PriceType.CLEAN);
double lgd = 1d - recoveryRate;
double numTotal = cdsIndex.LegalEntityIds.size();
double jtd = (lgd - (lgd * protectionFull - cds.FixedRate * rpv01)) / numTotal;
return(JumpToDefault.of(currency, ImmutableMap.of(indexId, cds.BuySell.normalize(cds.Notional) * jtd)));
}
/// <summary>
/// Calculates the market quote sensitivities from parameter sensitivity.
/// <para>
/// This calculates the market quote sensitivities of credit derivatives.
/// The input parameter sensitivities must be computed based on the credit rates provider.
///
/// </para>
/// </summary>
/// <param name="paramSensitivities"> the curve parameter sensitivities </param>
/// <param name="provider"> the credit rates provider, containing Jacobian calibration information </param>
/// <returns> the market quote sensitivities </returns>
public virtual CurrencyParameterSensitivities sensitivity(CurrencyParameterSensitivities paramSensitivities, CreditRatesProvider provider)
{
CurrencyParameterSensitivities result = CurrencyParameterSensitivities.empty();
foreach (CurrencyParameterSensitivity paramSens in paramSensitivities.Sensitivities)
{
// find the matching calibration info
Curve curve = provider.findData(paramSens.MarketDataName).filter(v => v is Curve).map(v => (Curve)v).orElseThrow(() => new System.ArgumentException("Market Quote sensitivity requires curve: " + paramSens.MarketDataName));
JacobianCalibrationMatrix info = curve.Metadata.findInfo(CurveInfoType.JACOBIAN).orElseThrow(() => new System.ArgumentException("Market Quote sensitivity requires Jacobian calibration information"));
// calculate the market quote sensitivity using the Jacobian
DoubleMatrix jacobian = info.JacobianMatrix;
DoubleArray paramSensMatrix = paramSens.Sensitivity;
DoubleArray marketQuoteSensMatrix = (DoubleArray)MATRIX_ALGEBRA.multiply(paramSensMatrix, jacobian);
DoubleArray marketQuoteSens = marketQuoteSensMatrix;
// split between different curves
IDictionary <CurveName, DoubleArray> split = info.splitValues(marketQuoteSens);
foreach (KeyValuePair <CurveName, DoubleArray> entry in split.SetOfKeyValuePairs())
{
CurveName curveName = entry.Key;
CurrencyParameterSensitivity maketQuoteSens = provider.findData(curveName).map(c => c.createParameterSensitivity(paramSens.Currency, entry.Value)).orElse(CurrencyParameterSensitivity.of(curveName, paramSens.Currency, entry.Value));
result = result.combinedWith(maketQuoteSens);
}
}
return(result);
}
/// <summary>
/// Computes the market clean price.
/// <para>
/// The market clean price is usually expressed in percentage.
/// Here a fraction of notional is returned, e.g., 0.98 is 98(%) clean price.
/// </para>
/// <para>
/// A relevant credit curve must be pre-calibrated and stored in {@code ratesProvider}.
///
/// </para>
/// </summary>
/// <param name="trade"> the trade </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="refData"> the reference data </param>
/// <returns> the clean price </returns>
public virtual double cleanPrice(ResolvedCdsTrade trade, CreditRatesProvider ratesProvider, ReferenceData refData)
{
double puf = pointsUpfront(trade, ratesProvider, refData);
return(1d - puf);
}
/// <summary>
/// Computes the points upfront.
/// <para>
/// The points upfront quote is usually expressed in percentage.
/// Here a fraction of notional is returned, e.g., 0.01 is 1(%) points up-front
/// </para>
/// <para>
/// The relevant credit curve must be pre-calibrated and stored in {@code ratesProvider}.
///
/// </para>
/// </summary>
/// <param name="trade"> the trade </param>
/// <param name="ratesProvider"> the rates provider </param>
/// <param name="refData"> the reference data </param>
/// <returns> the points upfront </returns>
public virtual double pointsUpfront(ResolvedCdsTrade trade, CreditRatesProvider ratesProvider, ReferenceData refData)
{
return(pricer.price(trade, ratesProvider, PriceType.CLEAN, refData));
}