Credit default swap. More...

#include <creditdefaultswap.hpp>

Inheritance diagram for CreditDefaultSwap:

Collaboration diagram for CreditDefaultSwap:

Classes
class	arguments

class	engine

class	results

Public Types
enum	PricingModel { Midpoint , ISDA }

Public Types inherited from Observer
typedef set_type::iterator	iterator

Public Member Functions
Constructors
	CreditDefaultSwap (Protection::Side side, Real notional, Rate spread, const Schedule &schedule, BusinessDayConvention paymentConvention, const DayCounter &dayCounter, bool settlesAccrual=true, bool paysAtDefaultTime=true, const Date &protectionStart=Date(), ext::shared_ptr< Claim >=ext::shared_ptr< Claim >(), const DayCounter &lastPeriodDayCounter=DayCounter(), bool rebatesAccrual=true, const Date &tradeDate=Date(), Natural cashSettlementDays=3)
	CDS quoted as running-spread only. More...

	CreditDefaultSwap (Protection::Side side, Real notional, Rate upfront, Rate spread, const Schedule &schedule, BusinessDayConvention paymentConvention, const DayCounter &dayCounter, bool settlesAccrual=true, bool paysAtDefaultTime=true, const Date &protectionStart=Date(), const Date &upfrontDate=Date(), ext::shared_ptr< Claim >=ext::shared_ptr< Claim >(), const DayCounter &lastPeriodDayCounter=DayCounter(), bool rebatesAccrual=true, const Date &tradeDate=Date(), Natural cashSettlementDays=3)
	CDS quoted as upfront and running spread. More...

Inspectors
Protection::Side	side () const

Real	notional () const

Rate	runningSpread () const

ext::optional< Rate >	upfront () const

bool	settlesAccrual () const

bool	paysAtDefaultTime () const

const Leg &	coupons () const

const Date &	protectionStartDate () const
	The first date for which defaults will trigger the contract. More...

const Date &	protectionEndDate () const
	The last date for which defaults will trigger the contract. More...

bool	rebatesAccrual () const

const ext::shared_ptr< SimpleCashFlow > &	upfrontPayment () const

const ext::shared_ptr< SimpleCashFlow > &	accrualRebate () const

const Date &	tradeDate () const

Natural	cashSettlementDays () const

Results
Rate	fairUpfront () const

Rate	fairSpread () const

Real	couponLegBPS () const

Real	upfrontBPS () const

Real	couponLegNPV () const

Real	defaultLegNPV () const

Real	upfrontNPV () const

Real	accrualRebateNPV () const

Rate	impliedHazardRate (Real targetNPV, const Handle< YieldTermStructure > &discountCurve, const DayCounter &dayCounter, Real recoveryRate=0.4, Real accuracy=1.0e-8, PricingModel model=Midpoint) const
	Implied hazard rate calculation. More...

Rate	conventionalSpread (Real conventionalRecovery, const Handle< YieldTermStructure > &discountCurve, const DayCounter &dayCounter, PricingModel model=Midpoint) const
	Conventional/standard upfront-to-spread conversion. More...

Public Member Functions inherited from Instrument
	Instrument ()

Real	NPV () const
	returns the net present value of the instrument. More...

Real	errorEstimate () const
	returns the error estimate on the NPV when available. More...

const Date &	valuationDate () const
	returns the date the net present value refers to. More...

template<typename T >
T	result (const std::string &tag) const
	returns any additional result returned by the pricing engine. More...

const std::map< std::string, ext::any > &	additionalResults () const
	returns all additional result returned by the pricing engine. More...

void	setPricingEngine (const ext::shared_ptr< PricingEngine > &)
	set the pricing engine to be used. More...

Public Member Functions inherited from LazyObject
	LazyObject ()

	~LazyObject () override=default

void	update () override

bool	isCalculated () const

void	forwardFirstNotificationOnly ()

void	alwaysForwardNotifications ()

void	recalculate ()

void	freeze ()

void	unfreeze ()

Public Member Functions inherited from Observable
	Observable ()

	Observable (const Observable &)

Observable &	operator= (const Observable &)

	Observable (Observable &&)=delete

Observable &	operator= (Observable &&)=delete

virtual	~Observable ()=default

void	notifyObservers ()

Public Member Functions inherited from Observer
	Observer ()=default

	Observer (const Observer &)

Observer &	operator= (const Observer &)

virtual	~Observer ()

std::pair< iterator, bool >	registerWith (const ext::shared_ptr< Observable > &)

void	registerWithObservables (const ext::shared_ptr< Observer > &)

Size	unregisterWith (const ext::shared_ptr< Observable > &)

void	unregisterWithAll ()

virtual void	update ()=0

virtual void	deepUpdate ()

Instrument interface
Protection::Side	side_

Real	notional_

ext::optional< Rate >	upfront_

Rate	runningSpread_

bool	settlesAccrual_

bool	paysAtDefaultTime_

ext::shared_ptr< Claim >	claim_

Leg	leg_

ext::shared_ptr< SimpleCashFlow >	upfrontPayment_

ext::shared_ptr< SimpleCashFlow >	accrualRebate_

Date	protectionStart_

Date	tradeDate_

Natural	cashSettlementDays_

Date	maturity_

Rate	fairUpfront_

Rate	fairSpread_

Real	couponLegBPS_

Real	couponLegNPV_

Real	upfrontBPS_

Real	upfrontNPV_

Real	defaultLegNPV_

Real	accrualRebateNPV_

bool	isExpired () const override
	returns whether the instrument might have value greater than zero. More...

void	setupArguments (PricingEngine::arguments *) const override

void	fetchResults (const PricingEngine::results *) const override

void	setupExpired () const override

void	init (const Schedule &schedule, BusinessDayConvention paymentConvention, const DayCounter &dayCounter, const DayCounter &lastPeriodDayCounter, bool rebatesAccrual, const Date &upfrontDate=Date())
	Shared initialisation. More...

Additional Inherited Members
Protected Member Functions inherited from Instrument
void	calculate () const override

void	performCalculations () const override

Protected Member Functions inherited from LazyObject
Protected Attributes inherited from Instrument
Real	NPV_

Real	errorEstimate_

Date	valuationDate_

std::map< std::string, ext::any >	additionalResults_

ext::shared_ptr< PricingEngine >	engine_

Protected Attributes inherited from LazyObject
bool	calculated_ = false

bool	frozen_ = false

bool	alwaysForward_

Detailed Description

Credit default swap.

Note: This instrument currently assumes that the issuer did not default until today's date.

Warning:: if Settings::includeReferenceDateCashFlows() is set to true, payments occurring at the settlement date of the swap might be included in the NPV and therefore affect the fair-spread calculation. This might not be what you want.

Warning:: conventionalSpread (and impliedHazardRate) by default use the mid-point engine, which is not ISDA conform.

Examples: CDS.cpp.

Definition at line 56 of file creditdefaultswap.hpp.

Member Enumeration Documentation

◆ PricingModel

enum PricingModel

Enumerator
Midpoint
ISDA

Definition at line 61 of file creditdefaultswap.hpp.

Constructor & Destructor Documentation

◆ CreditDefaultSwap() [1/2]

CreditDefaultSwap	(	Protection::Side	side,
		Real	notional,
		Rate	spread,
		const Schedule &	schedule,
		BusinessDayConvention	paymentConvention,
		const DayCounter &	dayCounter,
		bool	settlesAccrual = `true`,
		bool	paysAtDefaultTime = `true`,
		const Date &	protectionStart = `Date()`,
		ext::shared_ptr< Claim >	claim = `ext::shared_ptr<Claim>()`,
		const DayCounter &	lastPeriodDayCounter = `DayCounter()`,
		bool	rebatesAccrual = `true`,
		const Date &	tradeDate = `Date()`,
		Natural	cashSettlementDays = `3`
	)

CDS quoted as running-spread only.

Parameters

side	Whether the protection is bought or sold.
notional	Notional value
spread	Running spread in fractional units.
schedule	Coupon schedule.
paymentConvention	Business-day convention for payment-date adjustment.
dayCounter	Day-count convention for accrual.
settlesAccrual	Whether or not the accrued coupon is due in the event of a default.
paysAtDefaultTime	If set to true, any payments triggered by a default event are due at default time. If set to false, they are due at the end of the accrual period.
protectionStart	The first date where a default event will trigger the contract. Before the CDS Big Bang 2009, this was typically trade date (T) + 1 calendar day. After the CDS Big Bang 2009, protection is typically effective immediately i.e. on trade date so this is what should be entered for protection start. Notice that there is no default lookback period and protection start here. In the way it determines the dirty amount it is more like the trade execution date.
lastPeriodDayCounter	Day-count convention for accrual in last period
rebatesAccrual	The protection seller pays the accrued scheduled current coupon at the start of the contract. The rebate date is not provided but computed to be two days after protection start.
tradeDate	The contract's trade date. It will be used with the `cashSettlementDays` to determine the date on which the cash settlement amount is paid. If not given, the trade date is guessed from the protection start date and `schedule` date generation rule.
cashSettlementDays	The number of business days from `tradeDate` to cash settlement date.

Definition at line 39 of file creditdefaultswap.cpp.

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◆ CreditDefaultSwap() [2/2]

CreditDefaultSwap	(	Protection::Side	side,
		Real	notional,
		Rate	upfront,
		Rate	spread,
		const Schedule &	schedule,
		BusinessDayConvention	paymentConvention,
		const DayCounter &	dayCounter,
		bool	settlesAccrual = `true`,
		bool	paysAtDefaultTime = `true`,
		const Date &	protectionStart = `Date()`,
		const Date &	upfrontDate = `Date()`,
		ext::shared_ptr< Claim >	claim = `ext::shared_ptr<Claim>()`,
		const DayCounter &	lastPeriodDayCounter = `DayCounter()`,
		bool	rebatesAccrual = `true`,
		const Date &	tradeDate = `Date()`,
		Natural	cashSettlementDays = `3`
	)

CDS quoted as upfront and running spread.

Parameters

side	Whether the protection is bought or sold.
notional	Notional value
upfront	Upfront in fractional units.
spread	Running spread in fractional units.
schedule	Coupon schedule.
paymentConvention	Business-day convention for payment-date adjustment.
dayCounter	Day-count convention for accrual.
settlesAccrual	Whether or not the accrued coupon is due in the event of a default.
paysAtDefaultTime	If set to true, any payments triggered by a default event are due at default time. If set to false, they are due at the end of the accrual period.
protectionStart	The first date where a default event will trigger the contract. Before the CDS Big Bang 2009, this was typically trade date (T) + 1 calendar day. After the CDS Big Bang 2009, protection is typically effective immediately i.e. on trade date so this is what should be entered for protection start. Notice that there is no default lookback period and protection start here. In the way it determines the dirty amount it is more like the trade execution date.
upfrontDate	Settlement date for the upfront and accrual rebate (if any) payments. Typically T+3, this is also the default value.
lastPeriodDayCounter	Day-count convention for accrual in last period
rebatesAccrual	The protection seller pays the accrued scheduled current coupon at the start of the contract. The rebate date is not provided but computed to be two days after protection start.
tradeDate	The contract's trade date. It will be used with the `cashSettlementDays` to determine the date on which the cash settlement amount is paid if `upfrontDate` is empty. If not given, the trade date is guessed from the protection start date and `schedule` date generation rule.
cashSettlementDays	The number of business days from `tradeDate` to cash settlement date.

Definition at line 62 of file creditdefaultswap.cpp.

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Member Function Documentation

◆ isExpired()

bool isExpired ( ) const

overridevirtual

returns whether the instrument might have value greater than zero.

Implements Instrument.

Definition at line 207 of file creditdefaultswap.cpp.

◆ setupArguments()

void setupArguments ( PricingEngine::arguments * ) const

overridevirtual

When a derived argument structure is defined for an instrument, this method should be overridden to fill it. This is mandatory in case a pricing engine is used.

Reimplemented from Instrument.

Definition at line 222 of file creditdefaultswap.cpp.

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◆ fetchResults()

void fetchResults ( const PricingEngine::results * r ) const

overridevirtual

When a derived result structure is defined for an instrument, this method should be overridden to read from it. This is mandatory in case a pricing engine is used.

Reimplemented from Instrument.

Definition at line 242 of file creditdefaultswap.cpp.

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◆ side()

Protection::Side side ( ) const

Definition at line 178 of file creditdefaultswap.cpp.

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◆ notional()

Real notional ( ) const

Definition at line 182 of file creditdefaultswap.cpp.

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◆ runningSpread()

Rate runningSpread ( ) const

Definition at line 186 of file creditdefaultswap.cpp.

◆ upfront()

ext::optional< Rate > upfront ( ) const

Definition at line 190 of file creditdefaultswap.cpp.

◆ settlesAccrual()

bool settlesAccrual ( ) const

Definition at line 194 of file creditdefaultswap.cpp.

◆ paysAtDefaultTime()

bool paysAtDefaultTime ( ) const

Definition at line 198 of file creditdefaultswap.cpp.

◆ coupons()

const Leg & coupons ( ) const

Definition at line 202 of file creditdefaultswap.cpp.

◆ protectionStartDate()

const Date & protectionStartDate ( ) const

The first date for which defaults will trigger the contract.

Definition at line 426 of file creditdefaultswap.cpp.

◆ protectionEndDate()

const Date & protectionEndDate ( ) const

The last date for which defaults will trigger the contract.

Definition at line 430 of file creditdefaultswap.cpp.

◆ rebatesAccrual()

bool rebatesAccrual ( ) const

Definition at line 187 of file creditdefaultswap.hpp.

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◆ upfrontPayment()

const ext::shared_ptr< SimpleCashFlow > & upfrontPayment ( ) const

Definition at line 435 of file creditdefaultswap.cpp.

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◆ accrualRebate()

const ext::shared_ptr< SimpleCashFlow > & accrualRebate ( ) const

Definition at line 439 of file creditdefaultswap.cpp.

◆ tradeDate()

const Date & tradeDate ( ) const

Definition at line 443 of file creditdefaultswap.cpp.

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◆ cashSettlementDays()

Natural cashSettlementDays ( ) const

Definition at line 447 of file creditdefaultswap.cpp.

◆ fairUpfront()

Rate fairUpfront ( ) const

Returns the upfront spread that, given the running spread and the quoted recovery rate, will make the instrument have an NPV of 0.

Definition at line 259 of file creditdefaultswap.cpp.

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◆ fairSpread()

Rate fairSpread ( ) const

Returns the running spread that, given the quoted recovery rate, will make the running-only CDS have an NPV of 0.

Note: This calculation does not take any upfront into account, even if one was given.

Examples: CDS.cpp.

Definition at line 266 of file creditdefaultswap.cpp.

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◆ couponLegBPS()

Real couponLegBPS ( ) const

Returns the variation of the fixed-leg value given a one-basis-point change in the running spread.

Definition at line 273 of file creditdefaultswap.cpp.

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◆ upfrontBPS()

Real upfrontBPS ( ) const

Definition at line 301 of file creditdefaultswap.cpp.

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◆ couponLegNPV()

Real couponLegNPV ( ) const

Examples: CDS.cpp.

Definition at line 280 of file creditdefaultswap.cpp.

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◆ defaultLegNPV()

Real defaultLegNPV ( ) const

Examples: CDS.cpp.

Definition at line 287 of file creditdefaultswap.cpp.

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◆ upfrontNPV()

Real upfrontNPV ( ) const

Definition at line 294 of file creditdefaultswap.cpp.

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◆ accrualRebateNPV()

Real accrualRebateNPV ( ) const

Definition at line 308 of file creditdefaultswap.cpp.

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◆ impliedHazardRate()

Rate impliedHazardRate	(	Real	targetNPV,
		const Handle< YieldTermStructure > &	discountCurve,
		const DayCounter &	dayCounter,
		Real	recoveryRate = `0.4`,
		Real	accuracy = `1.0e-8`,
		PricingModel	model = `Midpoint`
	)		const

Implied hazard rate calculation.

Note

This method performs the calculation with the instrument characteristics. It will coincide with the ISDA calculation if your object has the standard characteristics. Notably:

The calendar should have no bank holidays, just weekends.
The yield curve should be LIBOR piecewise constant in fwd rates, with a discount factor of 1 on the calculation date, which coincides with the trade date.
Convention should be Following for yield curve and contract cashflows.
The CDS should pay accrued and mature on standard IMM dates, settle on trade date +1 and upfront settle on trade date +3.

Definition at line 340 of file creditdefaultswap.cpp.

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◆ conventionalSpread()

Rate conventionalSpread	(	Real	conventionalRecovery,
		const Handle< YieldTermStructure > &	discountCurve,
		const DayCounter &	dayCounter,
		PricingModel	model = `Midpoint`
	)		const

Conventional/standard upfront-to-spread conversion.

Under a standard ISDA model and a set of standardised instrument characteristics, it is the running only quoted spread that will make a CDS contract have an NPV of 0 when quoted for that running only spread. Refer to: "ISDA Standard CDS converter specification." May 2009.

The conventional recovery rate to apply in the calculation is as specified by ISDA, not necessarily equal to the market-quoted one. It is typically 0.4 for SeniorSec and 0.2 for subordinate.

Note

The conversion employs a flat hazard rate. As a result, you will not recover the market quotes.

This method performs the calculation with the instrument characteristics. It will coincide with the ISDA calculation if your object has the standard characteristics. Notably:

The calendar should have no bank holidays, just weekends.
The yield curve should be LIBOR piecewise constant in fwd rates, with a discount factor of 1 on the calculation date, which coincides with the trade date.
Convention should be Following for yield curve and contract cashflows.
The CDS should pay accrued and mature on standard IMM dates, settle on trade date +1 and upfront settle on trade date +3.

Definition at line 383 of file creditdefaultswap.cpp.

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◆ setupExpired()

void setupExpired ( ) const

overrideprotectedvirtual

This method must leave the instrument in a consistent state when the expiration condition is met.

Reimplemented from Instrument.

Definition at line 215 of file creditdefaultswap.cpp.

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◆ init()

void init	(	const Schedule &	schedule,
		BusinessDayConvention	paymentConvention,
		const DayCounter &	dayCounter,
		const DayCounter &	lastPeriodDayCounter,
		bool	rebatesAccrual,
		const Date &	upfrontDate = `Date()`
	)

private

Shared initialisation.

Definition at line 87 of file creditdefaultswap.cpp.

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Member Data Documentation

◆ side_

Protection::Side side_

protected

Definition at line 283 of file creditdefaultswap.hpp.

◆ notional_

Real notional_

protected

Definition at line 284 of file creditdefaultswap.hpp.

◆ upfront_

ext::optional<Rate> upfront_

protected

Definition at line 285 of file creditdefaultswap.hpp.

◆ runningSpread_

Rate runningSpread_

protected

Definition at line 286 of file creditdefaultswap.hpp.

◆ settlesAccrual_

bool settlesAccrual_

protected

Definition at line 287 of file creditdefaultswap.hpp.

◆ paysAtDefaultTime_

bool paysAtDefaultTime_

protected

Definition at line 287 of file creditdefaultswap.hpp.

◆ claim_

ext::shared_ptr<Claim> claim_

protected

Definition at line 288 of file creditdefaultswap.hpp.

◆ leg_

Leg leg_

protected

Definition at line 289 of file creditdefaultswap.hpp.

◆ upfrontPayment_

ext::shared_ptr<SimpleCashFlow> upfrontPayment_

protected

Definition at line 290 of file creditdefaultswap.hpp.

◆ accrualRebate_

ext::shared_ptr<SimpleCashFlow> accrualRebate_

protected

Definition at line 291 of file creditdefaultswap.hpp.

◆ protectionStart_

Date protectionStart_

protected

Definition at line 292 of file creditdefaultswap.hpp.

◆ tradeDate_

Date tradeDate_

protected

Definition at line 293 of file creditdefaultswap.hpp.

◆ cashSettlementDays_

Natural cashSettlementDays_

protected

Definition at line 294 of file creditdefaultswap.hpp.

◆ maturity_

Date maturity_

protected

Definition at line 295 of file creditdefaultswap.hpp.

◆ fairUpfront_

Rate fairUpfront_

mutableprotected

Definition at line 297 of file creditdefaultswap.hpp.

◆ fairSpread_

Rate fairSpread_

mutableprotected

Definition at line 298 of file creditdefaultswap.hpp.

◆ couponLegBPS_

Real couponLegBPS_

mutableprotected

Definition at line 299 of file creditdefaultswap.hpp.

◆ couponLegNPV_

Real couponLegNPV_

protected

Definition at line 299 of file creditdefaultswap.hpp.

◆ upfrontBPS_

Real upfrontBPS_

mutableprotected

Definition at line 300 of file creditdefaultswap.hpp.

◆ upfrontNPV_

Real upfrontNPV_

protected

Definition at line 300 of file creditdefaultswap.hpp.

◆ defaultLegNPV_

Real defaultLegNPV_

mutableprotected

Definition at line 301 of file creditdefaultswap.hpp.

◆ accrualRebateNPV_

Real accrualRebateNPV_

mutableprotected

Definition at line 302 of file creditdefaultswap.hpp.

Classes

Public Types

Public Member Functions

Instrument interface

Additional Inherited Members

Detailed Description

Member Enumeration Documentation

◆ PricingModel

Constructor & Destructor Documentation

◆ CreditDefaultSwap() [1/2]

◆ CreditDefaultSwap() [2/2]

Member Function Documentation

◆ isExpired()

◆ setupArguments()

◆ fetchResults()

◆ side()

◆ notional()

◆ runningSpread()

◆ upfront()

◆ settlesAccrual()

◆ paysAtDefaultTime()

◆ coupons()

◆ protectionStartDate()

◆ protectionEndDate()

◆ rebatesAccrual()

◆ upfrontPayment()

◆ accrualRebate()

◆ tradeDate()

◆ cashSettlementDays()

◆ fairUpfront()

◆ fairSpread()

◆ couponLegBPS()

◆ upfrontBPS()

◆ couponLegNPV()

◆ defaultLegNPV()

◆ upfrontNPV()

◆ accrualRebateNPV()

◆ impliedHazardRate()

◆ conventionalSpread()

◆ setupExpired()

◆ init()

Member Data Documentation

◆ side_

◆ notional_

◆ upfront_

◆ runningSpread_

◆ settlesAccrual_

◆ paysAtDefaultTime_

◆ claim_

◆ leg_

◆ upfrontPayment_

◆ accrualRebate_

◆ protectionStart_

◆ tradeDate_

◆ cashSettlementDays_

◆ maturity_

◆ fairUpfront_

◆ fairSpread_

◆ couponLegBPS_

◆ couponLegNPV_

◆ upfrontBPS_

◆ upfrontNPV_

◆ defaultLegNPV_

◆ accrualRebateNPV_