cdsoption.hpp

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/*
 Copyright (C) 2017 Quaternion Risk Management Ltd
 All rights reserved.
 
 This file is part of ORE, a free-software/open-source library
 for transparent pricing and risk analysis - http://opensourcerisk.org
 
 ORE is free software: you can redistribute it and/or modify it
 under the terms of the Modified BSD License.  You should have received a
 copy of the license along with this program.
 The license is also available online at <http://opensourcerisk.org>
 
 This program is distributed on the basis that it will form a useful
 contribution to risk analytics and model standardisation, but WITHOUT
 ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or
 FITNESS FOR A PARTICULAR PURPOSE. See the license for more details.
*/
 
/*
 Copyright (C) 2008 Roland Stamm
 Copyright (C) 2009 Jose Aparicio
 
 This file is part of QuantLib, a free-software/open-source library
 for financial quantitative analysts and developers - http://quantlib.org/
 
 QuantLib is free software: you can redistribute it and/or modify it
 under the terms of the QuantLib license.  You should have received a
 copy of the license along with this program; if not, please email
 <quantlib-dev@lists.sf.net>. The license is also available online at
 <http://quantlib.org/license.shtml>.
 
 This program is distributed in the hope that it will be useful, but WITHOUT
 ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS
 FOR A PARTICULAR PURPOSE.  See the license for more details.
*/
 
/*! \file cdsoption.hpp
    \brief CDS option, removed requirements (rec must knock out,
    no upfront amount), that should be taken care of in pricing engines
    \ingroup instruments
*/
 
#ifndef quantext_cds_option_hpp
#define quantext_cds_option_hpp
 
#include <ql/instruments/creditdefaultswap.hpp>
 
#include <ql/option.hpp>
 
namespace QuantLib {
class Quote;
class YieldTermStructure;
} // namespace QuantLib
 
namespace QuantExt {
using namespace QuantLib;
 
//! CDS option
/*! The side of the swaption is set by choosing the side of the CDS.
    A receiver CDS option is a right to buy an underlying CDS
    selling protection and receiving a coupon. A payer CDS option
    is a right to buy an underlying CDS buying protection and
    paying coupon.
 
    \ingroup instruments
*/
class CdsOption : public Option {
public:
    class arguments;
    class results;
    class engine;
 
    enum StrikeType { Price, Spread };
 
    CdsOption(const QuantLib::ext::shared_ptr<CreditDefaultSwap>& swap, const QuantLib::ext::shared_ptr<Exercise>& exercise,
              bool knocksOut = true, const Real strike = Null<Real>(),
              const StrikeType strikeType = StrikeType::Spread);
 
    //! \name Instrument interface
    //@{
    bool isExpired() const override;
    void setupArguments(PricingEngine::arguments*) const override;
    //@}
    //! \name Inspectors
    //@{
    const QuantLib::ext::shared_ptr<CreditDefaultSwap>& underlyingSwap() const { return swap_; }
    //@}
    //! \name Calculations
    //@{
    Rate atmRate() const;
    Real riskyAnnuity() const;
    Volatility impliedVolatility(Real price, const Handle<QuantLib::YieldTermStructure>& termStructure,
                                 const Handle<DefaultProbabilityTermStructure>&, Real recoveryRate,
                                 Real accuracy = 1.e-4, Size maxEvaluations = 100, Volatility minVol = 1.0e-7,
                                 Volatility maxVol = 4.0) const;
    //@}
 
private:
    QuantLib::ext::shared_ptr<CreditDefaultSwap> swap_;
    bool knocksOut_;
    Real strike_;
    StrikeType strikeType_;
 
    mutable Real riskyAnnuity_;
    void setupExpired() const override;
    void fetchResults(const PricingEngine::results*) const override;
};
 
//! %Arguments for CDS-option calculation
class CdsOption::arguments : public CreditDefaultSwap::arguments, public Option::arguments {
public:
    arguments() {}
 
    QuantLib::ext::shared_ptr<CreditDefaultSwap> swap;
    bool knocksOut;
    Real strike;
    StrikeType strikeType;
    void validate() const override;
};
 
//! %Results from CDS-option calculation
//! \ingroup instruments
class CdsOption::results : public Option::results {
public:
    Real riskyAnnuity;
    void reset() override;
};
 
//! base class for swaption engines
class CdsOption::engine : public GenericEngine<CdsOption::arguments, CdsOption::results> {};
} // namespace QuantExt
 
#endif