/**
* Imply a single (pseudo) credit curve for an index that will give the same index values
* at a set of terms (supplied via pillarCDS) as the intrinsic value.
*
* @param pillarCDS Point to build the curve
* @param indexCoupon The index coupon
* @param yieldCurve The current yield curves
* @param intrinsicData credit curves, weights and recovery rates of the intrinsic names
* @return A (pseudo) credit curve for an index
*/
public PiecewiseconstantHazardRate impliedIndexCurve(
CDS[] pillarCDS,
double indexCoupon,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
if (intrinsicData.getNumOfDefaults() == intrinsicData.getIndexSize())
{
}
int n = pillarCDS.Length;
double[] puf = new double[n];
double indexFactor = intrinsicData.getIndexFactor();
for (int i = 0; i < n; i++)
{
// PUF are always given for full index
puf[i] = indexPV(pillarCDS[i], indexCoupon, yieldCurve, intrinsicData) / indexFactor;
}
CreditCurveCalibrator calibrator = new CreditCurveCalibrator(pillarCDS, yieldCurve);
double[] coupons = new double[n];
Array.ConvertAll <double, double>(coupons, b => b = indexCoupon);
return(calibrator.calibrate(coupons, puf));
}
public Index_Pricing_725()
{
TRADE_DATE = new DateTime(2016, 7, 25);
NOTIONAL = 1.0e6;
//Contract Detail
Read_Contract();
//Index Market Data
PRICES = CDSIndexProvider.CDX_NA_HY_20160725_PRICES;
PILLAR_PUF = new PointsUpFront[PRICES.Length];
//Build the Interest Rate Curve
Build_yield_curve(TRADE_DATE);
//Read constituent features, build credit curves
Build_credit_curves(TRADE_DATE);
//Build Index data bundle
INTRINSIC_DATA = new IntrinsicIndexDataBundle(CREDIT_CURVES, RECOVERY_RATES);
weights_ = new double[component_num];
weights_ = Enumerable.Repeat((double)1.0 / component_num, component_num).ToArray();
INTRINSIC_DATA._weights = weights_;
//Create CDX class
CdsAnalyticFactory FACTORY = new CdsAnalyticFactory(INDEX_RECOVERY);
int[] CDX_Tenor = new int[] { 12, 24, 36, 60, 84, 120 };
CDX = FACTORY.makeCdx(TRADE_DATE, CDX_Tenor);
}
/**
* The intrinsic annuity of a CDS portfolio (index) for a unit (initial) notional.
* The value of the premium leg is this multiplied by the <b> initial</b> notional of the index
* and the index coupon (as a fraction).
*
* @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 normalised intrinsic annuity of a CDS portfolio (index)
*/
public double indexAnnuity(
CDS indexCDS,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
return(indexAnnuity(indexCDS, yieldCurve, intrinsicData, CdsPriceType.CLEAN, indexCDS.getCashSettleTime()));
}
/**
* 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
* @return The normalised intrinsic value of the protection leg.
*/
public double indexProtLeg(
CDS indexCDS,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
return(indexProtLeg(indexCDS, yieldCurve, intrinsicData, indexCDS.getCashSettleTime()));
}
//Constructor
public Index_Pricing()
{
//User Input of Trade Date
TRADE_DATE = new DateTime(2014, 2, 13);
NOTIONAL = 1.0e6;
//Contract Detail
Read_Contract();
//Index Market Data
PRICES = CDSIndexProvider.CDX_NA_HY_20140213_PRICES;
PILLAR_PUF = new PointsUpFront[PRICES.Length];
//Build the Interest Rate Curve
Build_yield_curve(TRADE_DATE);
//Read constituent features, build credit curves
Build_credit_curves(TRADE_DATE);
//Build Index data bundle
INTRINSIC_DATA = new IntrinsicIndexDataBundle(CREDIT_CURVES, RECOVERY_RATES);
//Create CDX class
CdsAnalyticFactory FACTORY = new CdsAnalyticFactory(INDEX_RECOVERY);
CDX = FACTORY.makeCdx(TRADE_DATE, CDSIndexProvider.INDEX_TENORS);
}
/**
* The intrinsic annuity of a CDS portfolio (index) for a unit (initial) notional.
* The value of the premium leg is this multiplied by the <b> initial</b> notional of the index
* and the index coupon (as a fraction).
*
* @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 intrinsic annuity of a CDS portfolio (index)
*/
public double indexAnnuity(
CDS indexCDS,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData,
double valuationTime)
{
return(indexAnnuity(indexCDS, yieldCurve, intrinsicData, CdsPriceType.CLEAN, valuationTime));
}
/**
* Intrinsic (normalised) price an index from the credit curves of the individual single names.
* To get the actual index value, this multiplied by the <b>initial</b> notional of the index.
*
* @param indexCDS analytic description of a CDS traded at a certain time
* @param indexCoupon The coupon of the index (as a fraction)
* @param yieldCurve The yield curve
* @param intrinsicData credit curves, weights and recovery rates of the intrinsic names
* @return The index value for a unit notional.
*/
public double indexPV(
CDS indexCDS,
double indexCoupon,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
double prot = indexProtLeg(indexCDS, yieldCurve, intrinsicData);
double annuity = indexAnnuity(indexCDS, yieldCurve, intrinsicData);
return(prot - indexCoupon * annuity);
}
/**
* The Points-Up-Front (PUF) of an index. This is the (clean) price of a unit notional index.
* The actual clean price is this multiplied by the (current) index notional
* (i.e. the initial notional times the index factor).
*
* @param indexCDS analytic description of a CDS traded at a certain time
* @param indexCoupon The coupon of the index (as a fraction)
* @param yieldCurve The yield curve
* @param intrinsicData credit curves, weights and recover
* @return PUF of an index
*/
public double indexPUF(
CDS indexCDS,
double indexCoupon,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
if (intrinsicData.getNumOfDefaults() == intrinsicData.getIndexSize())
{
}
return(indexPV(indexCDS, indexCoupon, yieldCurve, intrinsicData) / intrinsicData.getIndexFactor());
}
/**
* The intrinsic index spread. this is defined as the ratio of the intrinsic protection leg to the intrinsic annuity.
*
* @see #averageSpread
* @param indexCDS analytic description of a CDS traded at a certain time
* @param yieldCurve The yield curve
* @param intrinsicData credit curves, weights and recovery rates of the intrinsic names
* @return intrinsic index spread (as a fraction)
*/
public double intrinsicIndexSpread(
CDS indexCDS,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
if (intrinsicData.getNumOfDefaults() == intrinsicData.getIndexSize())
{
}
double prot = indexProtLeg(indexCDS, yieldCurve, intrinsicData);
double annuity = indexAnnuity(indexCDS, yieldCurve, intrinsicData);
return(prot / annuity);
}
/**
* Intrinsic (normalised) price an index from the credit curves of the individual single names.
* To get the actual index value, this multiplied by the <b>initial</b> notional of the index.
*
* @param indexCDS analytic description of a CDS traded at a certain time
* @param indexCoupon The coupon of the index (as a fraction)
* @param yieldCurve The yield curve
* @param intrinsicData credit curves, weights and recovery rates of the intrinsic names
* @param priceType Clean or dirty price
* @param valuationTime 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 index value for a unit notional.
*/
public double indexPV(
CDS indexCDS,
double indexCoupon,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData,
CdsPriceType priceType,
double valuationTime)
{
double prot = indexProtLeg(indexCDS, yieldCurve, intrinsicData, valuationTime);
double annuity = indexAnnuity(indexCDS, yieldCurve, intrinsicData, priceType, valuationTime);
return(prot - indexCoupon * annuity);
}
//*******************************************************************************************************************
//* Forward values adjusted for defaults
//****************************************************************************************************************
/**
* For a future expiry date, the default adjusted forward index value is the expected (full)
* value of the index plus the cash settlement of any defaults before
* the expiry date, valued on the (forward) cash settlement date (usually 3 working days after
* the expiry date - i.e. the expiry settlement date).
*
* @param fwdStartingCDS A forward starting CDS to represent cash flows in the index.
* The stepin date should be one day after the expiry and the cashSettlement
* date (usually) 3 working days after expiry.
* @param timeToExpiry the time in years between the trade date and expiry.
* This should use the same DCC as the curves (ACT365F unless manually changed).
* @param yieldCurve The yield curve
* @param indexCoupon The coupon of the index
* @param intrinsicData credit curves, weights and recovery rates of the intrinsic names
* initially 100 entries, and the realised recovery rates are 0.2 and 0.35, the this value is (0.8 + 0.65)/100 )
* @return the default adjusted forward index value
*/
public double defaultAdjustedForwardIndexValue(
CDS fwdStartingCDS,
double timeToExpiry,
YieldTermStructure yieldCurve,
double indexCoupon,
IntrinsicIndexDataBundle intrinsicData)
{
//the expected value of the index (not including default settlement) at the expiry settlement date
double indexPV1 = indexPV(fwdStartingCDS, indexCoupon, yieldCurve, intrinsicData);
double d = expectedDefaultSettlementValue(timeToExpiry, intrinsicData);
return(indexPV1 + d);
}
public IntrinsicIndexDataBundle adjustCurves(
double indexPUF,
CDS indexCDS,
double indexCoupon,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
Func <double, double> func = getHazardRateAdjFunction(indexPUF, indexCDS, indexCoupon, yieldCurve, intrinsicData);
double x = ROOTFINDER.getRoot(func, 1.0);
PiecewiseconstantHazardRate[] adjCC = adjustCurves(intrinsicData.getCreditCurves(), x);
return(intrinsicData.withCreditCurves(adjCC));
}
private double decomposedValueOnDefault(
CDS indexCDS,
double indexCoupon,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData,
int singleName)
{
double weight = intrinsicData.getWeight(singleName);
double protection = intrinsicData.getLGD(singleName);
double singleNamePV = _pricer.pv(indexCDS, yieldCurve, intrinsicData.getCreditCurves()[singleName], indexCoupon);
return(weight * (protection - singleNamePV));
}
private Func <double, double> getHazardRateAdjFunction(
double indexPUF,
CDS indexCDS,
double indexCoupon,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
PiecewiseconstantHazardRate[] creditCurves = intrinsicData.getCreditCurves();
double clean = intrinsicData.getIndexFactor() * indexPUF;
Func <double, double> function = x => _pricer.indexPV(indexCDS, indexCoupon,
yieldCurve, intrinsicData.withCreditCurves(adjustCurves(creditCurves, x))) - clean;
return(function);
}
/**
* The (default adjusted) intrinsic forward spread of an index.
* This is defined as the ratio of expected value of the protection leg and default settlement to
* the expected value of the annuity at expiry.
*
* @param fwdStartingCDS forward starting CDS to represent cash flows in the index.
* The stepin date should be one day after the expiry and the cashSettlement
* date (usually) 3 working days after expiry the time in years between the trade date and expiry.
* This should use the same DCC as the curves (ACT365F unless manually changed).
* @param timeToExpiry the time in years between the trade date and expiry.
* This should use the same DCC as the curves (ACT365F unless manually changed).
* @param yieldCurve The yield curve
* @param intrinsicData credit curves, weights and recovery rates of the intrinsic names
* initially 100 entries, and the realised recovery rates are 0.2 and 0.35, the this value is (0.8 + 0.65)/100 )
* @return The (default adjusted) forward spread (as a fraction)
*/
public double defaultAdjustedForwardSpread(
CDS fwdStartingCDS,
double timeToExpiry,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
// Note: these values are all calculated for payment on the (forward) cash settlement date
// there is no point discounting to today
double protLeg = indexProtLeg(fwdStartingCDS, yieldCurve, intrinsicData);
double defSettle = expectedDefaultSettlementValue(timeToExpiry, intrinsicData);
double ann = indexAnnuity(fwdStartingCDS, yieldCurve, intrinsicData);
return((protLeg + defSettle) / ann);
}
/**
* The normalised expected default settlement value paid on the exercise settlement date.
* The actual default settlement is this multiplied by the (initial) index notional.
*
* @param timeToExpiry Time to expiry
* @param intrinsicData credit curves, weights and recovery rates of the intrinsic names
* @return The normalised expected default settlement value
*/
public double expectedDefaultSettlementValue(
double timeToExpiry,
IntrinsicIndexDataBundle intrinsicData)
{
int indexSize = intrinsicData.getIndexSize();
double d = 0.0; //computed the expected default settlement amount (paid on the expiry settlement date)
for (int i = 0; i < indexSize; i++)
{
double qBar = intrinsicData.isDefaulted(i) ? 1.0 : 1.0 - Math.Exp(-intrinsicData.getCreditCurve(i).getRT_(
timeToExpiry));
d += intrinsicData.getWeight(i) * intrinsicData.getLGD(i) * qBar;
}
return(d);
}
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;
}
}
/**
* The change in the intrinsic value of a CDS index when zero rate at node points of the yield curve is bumped by 1bps.
* If the index is priced as a single name CDS, use {@link InterestRateSensitivityCalculator}.
*
* @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 bucketed IR01
*/
public double[] bucketedIR01(
CDS indexCDS,
double indexCoupon,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
double basePV = indexPV(indexCDS, indexCoupon, yieldCurve, intrinsicData, CdsPriceType.DIRTY);
int n = yieldCurve.t.Count;
double[] res = new double[n];
for (int i = 0; i < n; ++i)
{
YieldTermStructure bumpedYieldCurve = yieldCurve.withRate(yieldCurve.getZeroRateAtIndex(i) + ONE_BPS, i);
double bumpedPV = indexPV(indexCDS, indexCoupon, bumpedYieldCurve, intrinsicData, CdsPriceType.DIRTY);
res[i] = bumpedPV - basePV;
}
return(res);
}
/**
* The change in the intrinsic value of a CDS index when the yield curve is bumped by 1bps.
* If the index is priced as a single name CDS, use {@link InterestRateSensitivityCalculator}.
*
* @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 parallel IR01
*/
public double parallelIR01(
CDS indexCDS,
double indexCoupon,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
double pv = indexPV(indexCDS, indexCoupon, yieldCurve, intrinsicData, CdsPriceType.DIRTY);
int nKnots = yieldCurve.t.Count;
double[] rates = yieldCurve.getKnotZeroRates().ToArray();
for (int i = 0; i < nKnots; ++i)
{
rates[i] += ONE_BPS;
}
YieldTermStructure yieldCurveUp = yieldCurve.withRates(rates.ToList());
double pvUp = indexPV(indexCDS, indexCoupon, yieldCurveUp, intrinsicData, CdsPriceType.DIRTY);
return(pvUp - pv);
}
/**
* 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);
}
/**
* The intrinsic annuity of a CDS portfolio (index) for a unit (initial) notional.
* The value of the premium leg is this multiplied by the <b> initial</b> notional of the index
* and the index coupon (as a fraction).
*
* @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 priceType Clean or dirty
* @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 intrinsic annuity of a CDS portfolio (index)
*/
public double indexAnnuity(
CDS indexCDS,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData,
CdsPriceType priceType,
double valuationTime)
{
int n = intrinsicData.getIndexSize();
double a = 0;
for (int i = 0; i < n; i++)
{
if (!intrinsicData.isDefaulted(i))
{
a += intrinsicData.getWeight(i) * _pricer.annuity(indexCDS, yieldCurve, intrinsicData.getCreditCurve(i), priceType, 0);
}
}
a /= Math.Exp(-yieldCurve.getRT_(valuationTime));
return(a);
}
/**
* Values on per-name default
* @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 jump to default
*/
public double[] jumpToDefault(
CDS indexCDS,
double indexCoupon,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
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] = decomposedValueOnDefault(indexCDS, indexCoupon, yieldCurve, intrinsicData, i);
}
}
return(res);
}
/**
* 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);
}
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 IntrinsicIndexDataBundle adjustCurves(
double[] indexPUF,
CDS[] indexCDS,
double indexCoupon,
YieldTermStructure yieldCurve,
IntrinsicIndexDataBundle intrinsicData)
{
int nIndexTerms = indexCDS.Length;
if (nIndexTerms == 1)
{
return(adjustCurves(indexPUF[0], indexCDS[0], indexCoupon, yieldCurve, intrinsicData));
}
double[] indexKnots = new double[nIndexTerms];
for (int i = 0; i < nIndexTerms; i++)
{
indexKnots[i] = indexCDS[i].getProtectionEnd();
}
PiecewiseconstantHazardRate[] creditCurves = intrinsicData.getCreditCurves();
int nCurves = creditCurves.Length;
//we cannot assume that all the credit curves have knots at the same times or that the terms of the indices fall on these knots.
PiecewiseconstantHazardRate[] modCreditCurves = new PiecewiseconstantHazardRate[nCurves];
int[,] indexMap = new int[nCurves, nIndexTerms];
for (int i = 0; i < nCurves; i++)
{
if (creditCurves[i] == null)
{
modCreditCurves[i] = null; //null credit curves correspond to defaulted names, so are ignored
}
else
{
double[] ccKnots = creditCurves[i].t.ToArray();
double[] comKnots = DoublesScheduleGenerator.combineSets(ccKnots, indexKnots);
int nKnots = comKnots.Length;
if (nKnots == ccKnots.Length)
{
modCreditCurves[i] = creditCurves[i];
}
else
{
double[] rt = new double[nKnots];
for (int j = 0; j < nKnots; j++)
{
rt[j] = creditCurves[i].getRT_(comKnots[j]);
}
PiecewiseconstantHazardRate hazard = new PiecewiseconstantHazardRate(creditCurves[i].latestReference_, null, null, null, null);
modCreditCurves[i] = hazard.makeFromRT(comKnots.ToList(), rt);
}
for (int j = 0; j < nIndexTerms; j++)
{
int index = Array.BinarySearch(modCreditCurves[i].t.ToArray(), indexKnots[j]);
indexMap[i, j] = index;
}
}
}
int[] startKnots = new int[nCurves];
int[] endKnots = new int[nCurves];
double alpha = 1.0;
for (int i = 0; i < nIndexTerms; i++)
{
if (i == (nIndexTerms - 1))
{
for (int jj = 0; jj < nCurves; jj++)
{
if (modCreditCurves[jj] != null)
{
endKnots[jj] = modCreditCurves[jj].t.Count;
}
}
}
else
{
for (int jj = 0; jj < nCurves; jj++)
{
if (modCreditCurves[jj] != null)
{
endKnots[jj] = indexMap[jj, i] + 1;
}
}
}
IntrinsicIndexDataBundle modIntrinsicData = intrinsicData.withCreditCurves(modCreditCurves);
Func <double, double> func = getHazardRateAdjFunction(indexPUF[i], indexCDS[i], indexCoupon, yieldCurve,
modIntrinsicData, startKnots, endKnots);
alpha = ROOTFINDER.getRoot(func, alpha);
modCreditCurves = adjustCurves(modCreditCurves, alpha, startKnots, endKnots);
startKnots = endKnots;
}
return(intrinsicData.withCreditCurves(modCreditCurves));
}
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;
}
}