/** * The average spread of a CDS portfolio (index), defined as the weighted average of the * (implied) par spreads of the constituent names. * * @see #intrinsicIndexSpread * @param indexCDS representation of the index cashflows (seen from today). * @param yieldCurve The current yield curves * @param intrinsicData credit curves, weights and recovery rates of the intrinsic names * @return The average spread */ public double averageSpread( CDS indexCDS, YieldTermStructure yieldCurve, IntrinsicIndexDataBundle intrinsicData) { if (intrinsicData.getNumOfDefaults() == intrinsicData.getIndexSize()) { } CDS cds = indexCDS.withRecoveryRate(0.0); int n = intrinsicData.getIndexSize(); double sum = 0; for (int i = 0; i < n; i++) { if (!intrinsicData.isDefaulted(i)) { double protLeg = intrinsicData.getLGD(i) * _pricer.protectionLeg(cds, yieldCurve, intrinsicData.getCreditCurve(i)); double annuity = _pricer.annuity(cds, yieldCurve, intrinsicData.getCreditCurve(i)); double s = protLeg / annuity; sum += intrinsicData.getWeight(i) * s; } } sum /= intrinsicData.getIndexFactor(); return(sum); }
/** * The normalised intrinsic value of the protection leg of a CDS portfolio (index). * The actual value of the leg is this multiplied by the <b>initial</b> notional of the index. * * @param indexCDS representation of the index cashflows (seen from today). * @param yieldCurve The current yield curves * @param intrinsicData credit curves, weights and recovery rates of the intrinsic names * @param valuationTime Valuation time. The leg value is calculated for today (t=0), * then rolled forward (using the risk free yield curve) to the valuation time. * This is because cash payments occur on the cash-settlement-date, which is usually * three working days after the trade date (today) * @return The normalised intrinsic value of the protection leg. */ public double indexProtLeg( CDS indexCDS, YieldTermStructure yieldCurve, IntrinsicIndexDataBundle intrinsicData, double valuationTime) { CDS cds = indexCDS.withRecoveryRate(0.0); int n = intrinsicData.getIndexSize(); double protLeg = 0; for (int i = 0; i < n; i++) { if (!intrinsicData.isDefaulted(i)) { protLeg += intrinsicData.getWeight(i) * intrinsicData.getLGD(i) * _pricer.protectionLeg(cds, yieldCurve, intrinsicData.getCreditCurve(i), 0); } } protLeg /= Math.Exp(-yieldCurve.getRT_(valuationTime)); return(protLeg); }
/** * Sensitivity of the intrinsic value of a CDS index to intrinsic CDS recovery rates. * * @param indexCDS The CDS index * @param indexCoupon The index coupon * @param yieldCurve The yield curve * @param intrinsicData Credit curves, weights and recovery rates of the intrinsic names * @return The sensitivity */ public double[] recovery01( CDS indexCDS, double indexCoupon, YieldTermStructure yieldCurve, IntrinsicIndexDataBundle intrinsicData) { CDS zeroRR = indexCDS.withRecoveryRate(0.0); int indexSize = intrinsicData.getIndexSize(); double[] res = new double[indexSize]; for (int i = 0; i < indexSize; ++i) { if (intrinsicData.isDefaulted(i)) { res[i] = 0.0; } else { res[i] = -_pricer.protectionLeg(zeroRR, yieldCurve, intrinsicData.getCreditCurve(i)) * intrinsicData.getWeight(i); } } return(res); }