public double ProtectionLegNPV_Exact(CDS cds, double notional, PiecewiseconstantHazardRate hazard,
YieldTermStructure yt, DateTime tradedate, DateTime settlementDate, double recoveryrate, List <double> Jumps, List <double> creditCurveKnot)
{
DateTime Stepindate = tradedate.AddDays(1);
OMLib.Conventions.DayCount.Actual360 dc = new OMLib.Conventions.DayCount.Actual360();
double t0 = 0;
double T = cds.getProtectionEnd();
List <double> JumpNodes = new List <double>();
JumpNodes.Add(t0);
for (int j = 0; j < Jumps.Count; j++)
{
if (Jumps[j] < T)
{
JumpNodes.Add(Jumps[j]);
}
}
JumpNodes.Add(T);
double ht0 = hazard.getRT_(JumpNodes[0]);
double rt0 = yt.getRT_(JumpNodes[0]);
double b0 = Math.Exp(-ht0 - rt0); // risky discount factor
double pv = 0.0;
double dPV = 0.0;
for (int i = 1; i < JumpNodes.Count; ++i)
{
double ht1 = hazard.getRT_(JumpNodes[i]);
double rt1 = yt.getRT_(JumpNodes[i]);
double b1 = Math.Exp(-ht1 - rt1);
double dht = ht1 - ht0;
double drt = rt1 - rt0;
double dhrt = dht + drt;
// The formula has been modified from ISDA (but is equivalent) to avoid log(exp(x)) and explicitly
// calculating the time step - it also handles the limit
if (Math.Abs(dhrt) < 1e-5)
{
dPV = dht * b0 * (Math.Exp(-dhrt) - 1) / (-dhrt);
}
else
{
dPV = (b0 - b1) * dht / dhrt;
}
pv += dPV;
ht0 = ht1;
rt0 = rt1;
b0 = b1;
}
return(pv * notional * (1 - recoveryrate) / yt.discount(settlementDate));
}
public void testMethod()
{
for (int i = 0; i < PRICES.Length; i++)
{
PILLAR_PUF[i] = new PointsUpFront(INDEX_COUPON, 1 - PRICES[i]);
}
int pos = 1; // target CDX is 5Y
CDS targentCDX = CDX[pos];
int n = PILLAR_PUF.Length;
double[] indexPUF = new double[n];
for (int i = 0; i < n; i++)
{
indexPUF[i] = PILLAR_PUF[i].getPointsUpFront();
}
int accrualDays = targentCDX.getAccuredDays();
double accruedPremium = targentCDX.getAccruedPremium(INDEX_COUPON) * INTRINSIC_DATA.getIndexFactor() * NOTIONAL; // indexFactor = (initialIndexSize - numDefaults) / initialIndexSize
/*
* Using credit curves for constituent single name CDSs.
* The curves are adjusted by using only the target CDX.
*/
IntrinsicIndexDataBundle adjCurves = PSA.adjustCurves(indexPUF[pos], CDX[pos], INDEX_COUPON, YIELD_CURVE,
INTRINSIC_DATA);
double cleanPV = INDEX_CAL.indexPV(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurves) * NOTIONAL; // should be consistent with 1 - PRICES[pos]
double dirtyPV = INDEX_CAL.indexPV(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurves, CdsPriceType.DIRTY) * NOTIONAL;
double expectedLoss = INDEX_CAL.expectedDefaultSettlementValue(targentCDX.getProtectionEnd(), adjCurves) * NOTIONAL;
double cleanRPV01 = INDEX_CAL.indexAnnuity(targentCDX, YIELD_CURVE, adjCurves);
double dirtyRPV01 = INDEX_CAL.indexAnnuity(targentCDX, YIELD_CURVE, adjCurves, CdsPriceType.DIRTY);
double durationWeightedAverageSpread = INDEX_CAL.intrinsicIndexSpread(targentCDX, YIELD_CURVE, adjCurves) *
TEN_THOUSAND;
double parallelIR01 = INDEX_CAL.parallelIR01(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurves) * NOTIONAL;
double[] jumpToDefault = INDEX_CAL.jumpToDefault(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurves);
for (int i = 0; i < jumpToDefault.Length; ++i)
{
jumpToDefault[i] *= NOTIONAL;
}
double[] recovery01 = INDEX_CAL.recovery01(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurves);
for (int i = 0; i < recovery01.Length; ++i)
{
recovery01[i] *= NOTIONAL;
}
}
public void testMethod1()
{
for (int i = 0; i < PRICES.Length; i++)
{
PILLAR_PUF[i] = new PointsUpFront(INDEX_COUPON, 1 - PRICES[i]);
}
int pos = 1; // target CDX is 5Y
CDS targentCDX = CDX[pos];
int n = PILLAR_PUF.Length;
double[] indexPUF = new double[n];
for (int i = 0; i < n; i++)
{
indexPUF[i] = PILLAR_PUF[i].getPointsUpFront();
}
IntrinsicIndexDataBundle dataDefaulted = INTRINSIC_DATA;
int accrualDays = targentCDX.getAccuredDays();
double accruedPremium = targentCDX.getAccruedPremium(INDEX_COUPON) * NOTIONAL * dataDefaulted.getIndexFactor();
/*
* Using credit curves for constituent single name CDSs.
* The curves are adjusted by using only the target CDX.
*/
double cleanPV = INDEX_CAL.indexPV(targentCDX, INDEX_COUPON, YIELD_CURVE, dataDefaulted) * NOTIONAL;
double dirtyPV = INDEX_CAL.indexPV(targentCDX, INDEX_COUPON, YIELD_CURVE, dataDefaulted, CdsPriceType.DIRTY) * NOTIONAL; // should be consistent with 1 - PRICES[pos]
double expectedLoss = INDEX_CAL.expectedDefaultSettlementValue(targentCDX.getProtectionEnd(), dataDefaulted) * NOTIONAL;
double cleanRPV01 = INDEX_CAL.indexAnnuity(targentCDX, YIELD_CURVE, dataDefaulted);
double dirtyRPV01 = INDEX_CAL.indexAnnuity(targentCDX, YIELD_CURVE, dataDefaulted, CdsPriceType.DIRTY);
double durationWeightedAverageSpread = INDEX_CAL.intrinsicIndexSpread(targentCDX, YIELD_CURVE, dataDefaulted) *
TEN_THOUSAND;
double parallelIR01 = INDEX_CAL.parallelIR01(targentCDX, INDEX_COUPON, YIELD_CURVE, dataDefaulted) * NOTIONAL;
double[] jumpToDefault = INDEX_CAL.jumpToDefault(targentCDX, INDEX_COUPON, YIELD_CURVE, dataDefaulted);
for (int i = 0; i < jumpToDefault.Length; ++i)
{
jumpToDefault[i] *= NOTIONAL;
}
double[] recovery01 = INDEX_CAL.recovery01(targentCDX, INDEX_COUPON, YIELD_CURVE, dataDefaulted);
for (int i = 0; i < recovery01.Length; ++i)
{
recovery01[i] *= NOTIONAL;
}
IntrinsicIndexDataBundle adjCurvesAll = PSA.adjustCurves(indexPUF, CDX, INDEX_COUPON, YIELD_CURVE,
dataDefaulted);
double cleanPVAll = INDEX_CAL.indexPV(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurvesAll) * NOTIONAL;
double dirtyPVAll = INDEX_CAL.indexPV(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurvesAll, CdsPriceType.DIRTY) *
NOTIONAL; // should be consistent with 1 - PRICES[pos]
double expectedLossAll = INDEX_CAL.expectedDefaultSettlementValue(targentCDX.getProtectionEnd(), adjCurvesAll) *
NOTIONAL;
double cleanRPV01All = INDEX_CAL.indexAnnuity(targentCDX, YIELD_CURVE, adjCurvesAll);
double dirtyRPV01All = INDEX_CAL.indexAnnuity(targentCDX, YIELD_CURVE, adjCurvesAll, CdsPriceType.DIRTY);
double durationWeightedAverageSpreadAll = INDEX_CAL.intrinsicIndexSpread(targentCDX, YIELD_CURVE, adjCurvesAll) *
TEN_THOUSAND;
double parallelIR01All = INDEX_CAL.parallelIR01(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurvesAll) * NOTIONAL;
double[] jumpToDefaultAll = INDEX_CAL.jumpToDefault(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurvesAll);
for (int i = 0; i < jumpToDefaultAll.Length; ++i)
{
jumpToDefaultAll[i] *= NOTIONAL;
}
double[] recovery01All = INDEX_CAL.recovery01(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurvesAll);
for (int i = 0; i < recovery01All.Length; ++i)
{
recovery01All[i] *= NOTIONAL;
}
PiecewiseconstantHazardRate indexCurve = (new Commons.FastCreditCurveBuilder()).calibrateCreditCurve(targentCDX,
INDEX_COUPON, YIELD_CURVE, indexPUF[pos]); // single node index curve, indexFactors cancel out
double cleanPriceIndexCurve = PRICER_OG_FIX.pv(targentCDX, YIELD_CURVE, indexCurve, INDEX_COUPON) *
dataDefaulted.getIndexFactor() * NOTIONAL;
double dirtyPriceIndexCurve = PRICER_OG_FIX.pv(targentCDX, YIELD_CURVE, indexCurve, INDEX_COUPON,
CdsPriceType.DIRTY) * dataDefaulted.getIndexFactor() * NOTIONAL;
double cleanRPV01IndexCurve = PRICER_OG_FIX.annuity(targentCDX, YIELD_CURVE, indexCurve) *
dataDefaulted.getIndexFactor();
double dirtyRPV01IndexCurve = PRICER_OG_FIX.annuity(targentCDX, YIELD_CURVE, indexCurve, CdsPriceType.DIRTY) *
dataDefaulted.getIndexFactor();
double spreadIndexCurve = PRICER_OG_FIX.parSpread(targentCDX, YIELD_CURVE, indexCurve) * TEN_THOUSAND;
}
public void Pricing()
{
for (int i = 0; i < PRICES.Length; i++)
{
PILLAR_PUF[i] = new PointsUpFront(INDEX_COUPON, 1 - PRICES[i]);
}
int pos = 1; // target CDX is 5Y
CDS targentCDX = CDX[pos];
int n = PILLAR_PUF.Length;
double[] indexPUF = new double[n];
for (int i = 0; i < n; i++)
{
indexPUF[i] = PILLAR_PUF[i].getPointsUpFront();
}
defaultedNames = new int[] { 2, 15, 37, 51 };
IntrinsicIndexDataBundle dataDefaulted = INTRINSIC_DATA.withDefault(defaultedNames);
int accrualDays = targentCDX.getAccuredDays();
double accruedPremium = targentCDX.getAccruedPremium(INDEX_COUPON) * NOTIONAL * dataDefaulted.getIndexFactor();
/*
* Using credit curves for constituent single name CDSs.
* The curves are adjusted by using only the target CDX.
*/
IntrinsicIndexDataBundle adjCurves = PSA.adjustCurves(indexPUF[pos], CDX[pos], INDEX_COUPON, YIELD_CURVE,
dataDefaulted);
cleanPV = INDEX_CAL.indexPV(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurves) * NOTIONAL;
dirtyPV = INDEX_CAL.indexPV(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurves, CdsPriceType.DIRTY) * NOTIONAL; // should be consistent with 1 - PRICES[pos]
expectedLoss = INDEX_CAL.expectedDefaultSettlementValue(targentCDX.getProtectionEnd(), adjCurves) * NOTIONAL;
cleanRPV01 = INDEX_CAL.indexAnnuity(targentCDX, YIELD_CURVE, adjCurves);
dirtyRPV01 = INDEX_CAL.indexAnnuity(targentCDX, YIELD_CURVE, adjCurves, CdsPriceType.DIRTY);
durationWeightedAverageSpread = INDEX_CAL.intrinsicIndexSpread(targentCDX, YIELD_CURVE, adjCurves) *
TEN_THOUSAND;
parallelIR01 = INDEX_CAL.parallelIR01(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurves) * NOTIONAL;
double[] jumpToDefault = INDEX_CAL.jumpToDefault(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurves);
for (int i = 0; i < jumpToDefault.Length; ++i)
{
jumpToDefault[i] *= NOTIONAL;
}
recovery01 = INDEX_CAL.recovery01(targentCDX, INDEX_COUPON, YIELD_CURVE, adjCurves);
//Build Cash flow
QLNet.UnitedStates cal = new QLNet.UnitedStates();
CdsCoupon[] coupons = targentCDX.getCoupons();
int npayments = coupons.Count();
cashflow = new List <CouponPayment>();
for (int i = 0; i < npayments; i++)
{
CouponPayment cf = new CouponPayment();
cf.Amount = (-coupons[i].getEffStart() + coupons[i].getEffEnd()) * NOTIONAL * INDEX_COUPON;
cf.Amount = Math.Round(cf.Amount, 2);
double days = coupons[i].getEffEnd() * 365;
cf.CashFlowDate = i == 0? CdsAnalyticFactory.getNextIMMDate(TRADE_DATE):
CdsAnalyticFactory.getNextIMMDate(cashflow[i - 1].CashFlowDate);
cf.CashFlowDate = cal.adjust(cf.CashFlowDate);
cashflow.Add(cf);
}
for (int i = 0; i < recovery01.Length; ++i)
{
recovery01[i] *= NOTIONAL;
}
}