isdacdsengine.hpp

/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
 
/*
 Copyright (C) 2014 Jose Aparicio
 Copyright (C) 2014 Peter Caspers
 
 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.
*/
 
#ifndef quantlib_isda_cds_engine_hpp
#define quantlib_isda_cds_engine_hpp
 
#include <ql/instruments/creditdefaultswap.hpp>
#include <ql/termstructures/yieldtermstructure.hpp>
#include <ql/termstructures/defaulttermstructure.hpp>
#include <ql/optional.hpp>
 
namespace QuantLib {
 
    class IsdaCdsEngine : public CreditDefaultSwap::engine {
 
      public:
        enum NumericalFix {
            None,  // as in [1] footnote 26 (i.e. 10^{-50} is added to
                   // denominators $f_i+h_i$$)
            Taylor // as in [2] i.e. for $f_i+h_i < 10^{-4}$ a Taylor expansion
                   // is used to avoid zero denominators
        };
 
        enum AccrualBias {
            HalfDayBias, // as in [1] formula (50), second (error) term is
                         // included
            NoBias // as in [1], but second term in formula (50) is not included
        };
 
        enum ForwardsInCouponPeriod {
            Flat, // as in [1], formula (52), second (error) term is included
            Piecewise // as in [1], but second term in formula (52) is not
                      // included
        };
 
        IsdaCdsEngine(Handle<DefaultProbabilityTermStructure> probability,
                      Real recoveryRate,
                      Handle<YieldTermStructure> discountCurve,
                      const ext::optional<bool>& includeSettlementDateFlows = ext::nullopt,
                      NumericalFix numericalFix = Taylor,
                      AccrualBias accrualBias = HalfDayBias,
                      ForwardsInCouponPeriod forwardsInCouponPeriod = Piecewise);
 
        Handle<YieldTermStructure> isdaRateCurve() const { return discountCurve_; }
        Handle<DefaultProbabilityTermStructure> isdaCreditCurve() const { return probability_; }
 
        void calculate() const override;
 
      private:
        Handle<DefaultProbabilityTermStructure> probability_;
        const Real recoveryRate_;
        Handle<YieldTermStructure> discountCurve_;
        const ext::optional<bool> includeSettlementDateFlows_;
        const NumericalFix numericalFix_;
        const AccrualBias accrualBias_;
        const ForwardsInCouponPeriod forwardsInCouponPeriod_;
    };
}
 
#endif