//double fixedRate = 0.001;
//double notional = 10000.0;
//double recoveryRate = 0.4;
////////////////////////////////////////////////////////////////////////////////////////////////////
/// <summary> Calculates the cds. </summary>
///
/// <param name="msg"> [in,out] The message. </param>
/// <param name="fixedRate"> The fixed rate. </param>
/// <param name="notional"> The notional. </param>
/// <param name="recoveryRate"> The recovery rate. </param>
///
/// <returns> True if it succeeds, false if it fails. </returns>
////////////////////////////////////////////////////////////////////////////////////////////////////
public bool CalcCDS(ref CreditDefaultSwapRequestMessage msg, double fixedRate, double notional, double recoveryRate)
{
// Testing fair-spread calculation for credit-default swaps...
using (SavedSettings backup = new SavedSettings())
{
// Initialize curves
Calendar calendar = new TARGET();
Date today = calendar.adjust(Date.Today);
Settings.setEvaluationDate(today);
Handle <Quote> hazardRate = new Handle <Quote>(new SimpleQuote(0.01234));
RelinkableHandle <DefaultProbabilityTermStructure> probabilityCurve =
new RelinkableHandle <DefaultProbabilityTermStructure>();
probabilityCurve.linkTo(new FlatHazardRate(0, calendar, hazardRate, new Actual360()));
RelinkableHandle <YieldTermStructure> discountCurve =
new RelinkableHandle <YieldTermStructure>();
discountCurve.linkTo(new FlatForward(today, 0.06, new Actual360()));
// Build the schedule
Date issueDate = calendar.advance(today, -1, TimeUnit.Years);
Date maturity = calendar.advance(issueDate, 10, TimeUnit.Years);
BusinessDayConvention convention = BusinessDayConvention.Following;
Schedule schedule = new MakeSchedule().from(issueDate)
.to(maturity)
.withFrequency(Frequency.Quarterly)
.withCalendar(calendar)
.withTerminationDateConvention(convention)
.withRule(DateGeneration.Rule.TwentiethIMM).value();
// Build the CDS
DayCounter dayCount = new Actual360();
IPricingEngine engine = new MidPointCdsEngine(probabilityCurve, recoveryRate, discountCurve);
CreditDefaultSwap cds = new CreditDefaultSwap(Protection.Side.Seller, notional, fixedRate,
schedule, convention, dayCount, true, true);
cds.setPricingEngine(engine);
double fairRate = cds.fairSpread();
CreditDefaultSwap fairCds = new CreditDefaultSwap(Protection.Side.Seller, notional, fairRate,
schedule, convention, dayCount, true, true);
fairCds.setPricingEngine(engine);
double fairNPV = fairCds.NPV();
double tolerance = 1e-10;
msg.fairRate = fairRate;
msg.fairNPV = fairNPV;
return(Math.Abs(fairNPV) <= tolerance);
}
}
public void testFairUpfront()
{
// Testing fair-upfront calculation for credit-default swaps...
using (SavedSettings backup = new SavedSettings())
{
// Initialize curves
Calendar calendar = new TARGET();
Date today = calendar.adjust(Date.Today);
Settings.setEvaluationDate(today);
Handle <Quote> hazardRate = new Handle <Quote>(new SimpleQuote(0.01234));
RelinkableHandle <DefaultProbabilityTermStructure> probabilityCurve =
new RelinkableHandle <DefaultProbabilityTermStructure>();
probabilityCurve.linkTo(new FlatHazardRate(0, calendar, hazardRate, new Actual360()));
RelinkableHandle <YieldTermStructure> discountCurve =
new RelinkableHandle <YieldTermStructure>();
discountCurve.linkTo(new FlatForward(today, 0.06, new Actual360()));
// Build the schedule
Date issueDate = today;
Date maturity = calendar.advance(issueDate, 10, TimeUnit.Years);
BusinessDayConvention convention = BusinessDayConvention.Following;
Schedule schedule =
new MakeSchedule().from(issueDate)
.to(maturity)
.withFrequency(Frequency.Quarterly)
.withCalendar(calendar)
.withTerminationDateConvention(convention)
.withRule(DateGeneration.Rule.TwentiethIMM).value();
// Build the CDS
double fixedRate = 0.05;
double upfront = 0.001;
DayCounter dayCount = new Actual360();
double notional = 10000.0;
double recoveryRate = 0.4;
IPricingEngine engine = new MidPointCdsEngine(probabilityCurve, recoveryRate, discountCurve, true);
CreditDefaultSwap cds = new CreditDefaultSwap(Protection.Side.Seller, notional, upfront, fixedRate,
schedule, convention, dayCount, true, true);
cds.setPricingEngine(engine);
double fairUpfront = cds.fairUpfront();
CreditDefaultSwap fairCds = new CreditDefaultSwap(Protection.Side.Seller, notional,
fairUpfront, fixedRate, schedule, convention, dayCount, true, true);
fairCds.setPricingEngine(engine);
double fairNPV = fairCds.NPV();
double tolerance = 1e-10;
if (Math.Abs(fairNPV) > tolerance)
{
Assert.Fail(
"Failed to reproduce null NPV with calculated fair upfront\n"
+ " calculated upfront: " + fairUpfront + "\n"
+ " calculated NPV: " + fairNPV);
}
// same with null upfront to begin with
upfront = 0.0;
CreditDefaultSwap cds2 = new CreditDefaultSwap(Protection.Side.Seller, notional, upfront, fixedRate,
schedule, convention, dayCount, true, true);
cds2.setPricingEngine(engine);
fairUpfront = cds2.fairUpfront();
CreditDefaultSwap fairCds2 = new CreditDefaultSwap(Protection.Side.Seller, notional,
fairUpfront, fixedRate, schedule, convention, dayCount, true, true);
fairCds2.setPricingEngine(engine);
fairNPV = fairCds2.NPV();
if (Math.Abs(fairNPV) > tolerance)
{
Assert.Fail(
"Failed to reproduce null NPV with calculated fair upfront\n"
+ " calculated upfront: " + fairUpfront + "\n"
+ " calculated NPV: " + fairNPV);
}
}
}
internal static global::System.Runtime.InteropServices.HandleRef getCPtr(MidPointCdsEngine obj)
{
return((obj == null) ? new global::System.Runtime.InteropServices.HandleRef(null, global::System.IntPtr.Zero) : obj.swigCPtr);
}
internal static global::System.Runtime.InteropServices.HandleRef getCPtr(MidPointCdsEngine obj) {
return (obj == null) ? new global::System.Runtime.InteropServices.HandleRef(null, global::System.IntPtr.Zero) : obj.swigCPtr;
}
