//-------------------------------------------------------------------------
/**
* Hedge a CDS with other CDSs on the same underlying (single-name or index) at different maturities.
* <p>
* The hedge is such that the total portfolio (the CDS <b>minus</b> the hedging CDSs, with notionals of the
* CDS notional times the computed hedge ratios) is insensitive to infinitesimal changes to the the credit curve.
* <p>
* Here the credit curve is built using the hedging CDSs as pillars.
*
* @param cds the CDS to be hedged
* @param coupon the coupon of the CDS to be hedged
* @param hedgeCDSs the CDSs to hedge with - these are also used to build the credit curve
* @param hedgeCDSCoupons the coupons of the CDSs to hedge with/build credit curve
* @param hegdeCDSPUF the PUF of the CDSs to build credit curve
* @param yieldCurve the yield curve
* @return the hedge ratios,
* since we use a unit notional, the ratios should be multiplied by -notional to give the hedge notional amounts
*/
public double[] getHedgeRatios(
CDS cds,
double coupon,
CDS[] hedgeCDSs,
double[] hedgeCDSCoupons,
double[] hegdeCDSPUF,
YieldTermStructure yieldCurve)
{
PiecewiseconstantHazardRate cc = _builder.calibrateCreditCurve(hedgeCDSs, hedgeCDSCoupons, yieldCurve, hegdeCDSPUF);
return(getHedgeRatios(cds, coupon, hedgeCDSs, hedgeCDSCoupons, cc, yieldCurve));
}
/**
* The analytic CS01 (or credit DV01).
*
* @param cds the analytic description of a CDS traded at a certain time
* @param coupon the of the traded CDS (expressed as <b>fractions not basis points</b>)
* @param yieldCurve the yield (or discount) curve
* @param puf the points up-front (as a fraction)
* @return the credit DV01
*/
public double parallelCS01FromPUF(CDS cds, double coupon, YieldTermStructure yieldCurve, double puf)
{
PiecewiseconstantHazardRate cc = _curveBuilder.calibrateCreditCurve(cds, coupon, yieldCurve, puf);
double a = _pricer.protectionLeg(cds, yieldCurve, cc);
double b = _pricer.annuity(cds, yieldCurve, cc, CdsPriceType.CLEAN);
double aPrime = _pricer.protectionLegCreditSensitivity(cds, yieldCurve, cc, 0);
double bPrime = _pricer.pvPremiumLegCreditSensitivity(cds, yieldCurve, cc, 0);
double s = a / b;
double dPVdh = aPrime - coupon * bPrime;
double dSdh = (aPrime - s * bPrime) / b;
return(dPVdh / dSdh);
}