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<div class="title">CDS.cpp</div> </div>
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<p>This example bootstraps a default-probability curve over a number of CDS and reprices them.</p>
<div class="fragment"><pre class="fragment"><span class="comment">/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */</span>
<span class="comment">/*</span>
<span class="comment"> Copyright (C) 2008 Jose Aparicio</span>
<span class="comment"></span>
<span class="comment"> This file is part of QuantLib, a free-software/open-source library</span>
<span class="comment"> for financial quantitative analysts and developers - http://quantlib.org/</span>
<span class="comment"></span>
<span class="comment"> QuantLib is free software: you can redistribute it and/or modify it</span>
<span class="comment"> under the terms of the QuantLib license. You should have received a</span>
<span class="comment"> copy of the license along with this program; if not, please email</span>
<span class="comment"> <quantlib-dev@lists.sf.net>. The license is also available online at</span>
<span class="comment"> <http://quantlib.org/license.shtml>.</span>
<span class="comment"></span>
<span class="comment"> This program is distributed in the hope that it will be useful, but WITHOUT</span>
<span class="comment"> ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS</span>
<span class="comment"> FOR A PARTICULAR PURPOSE. See the license for more details.</span>
<span class="comment">*/</span>
<span class="preprocessor">#include <ql/quantlib.hpp></span>
<span class="preprocessor">#include <boost/timer.hpp></span>
<span class="preprocessor">#include <iostream></span>
<span class="preprocessor">#include <iomanip></span>
<span class="keyword">using namespace </span>std;
<span class="keyword">using namespace </span>QuantLib;
<span class="preprocessor">#if defined(QL_ENABLE_SESSIONS)</span>
<span class="preprocessor"></span><span class="keyword">namespace </span>QuantLib {
<a name="a0"></a><a class="code" href="group__types.html#gab9c87440c314438e51a899a03d2442d0" title="integer number">Integer</a> sessionId() { <span class="keywordflow">return</span> 0; }
}
<span class="preprocessor">#endif</span>
<span class="preprocessor"></span>
<span class="keywordtype">int</span> main(<span class="keywordtype">int</span>, <span class="keywordtype">char</span>* []) {
<span class="keywordflow">try</span> {
boost::timer timer;
std::cout << std::endl;
<span class="comment">/*********************</span>
<span class="comment"> *** MARKET DATA ***</span>
<span class="comment"> *********************/</span>
<a name="_a1"></a><a class="code" href="class_quant_lib_1_1_calendar.html" title="calendar class">Calendar</a> calendar = <a name="_a2"></a><a class="code" href="class_quant_lib_1_1_t_a_r_g_e_t.html" title="TARGET calendar">TARGET</a>();
<a name="_a3"></a><a class="code" href="class_quant_lib_1_1_date.html" title="Concrete date class.">Date</a> todaysDate(15, May, 2007);
<span class="comment">// must be a business day</span>
todaysDate = calendar.<a name="a4"></a><a class="code" href="class_quant_lib_1_1_calendar.html#aee7c18511c7ee1bcda6124f43a37aa28">adjust</a>(todaysDate);
Settings::instance().evaluationDate() = todaysDate;
<span class="comment">// dummy curve</span>
boost::shared_ptr<Quote> flatRate(<span class="keyword">new</span> <a name="_a5"></a><a class="code" href="class_quant_lib_1_1_simple_quote.html" title="market element returning a stored value">SimpleQuote</a>(0.01));
<a name="_a6"></a><a class="code" href="class_quant_lib_1_1_handle.html">Handle<YieldTermStructure></a> tsCurve(
boost::shared_ptr<FlatForward>(
<span class="keyword">new</span> <a name="_a7"></a><a class="code" href="class_quant_lib_1_1_flat_forward.html" title="Flat interest-rate curve.">FlatForward</a>(todaysDate, <a name="_a8"></a><a class="code" href="class_quant_lib_1_1_handle.html">Handle<Quote></a>(flatRate),
<a name="_a9"></a><a class="code" href="class_quant_lib_1_1_actual365_fixed.html" title="Actual/365 (Fixed) day count convention.">Actual365Fixed</a>())));
<span class="comment">/*</span>
<span class="comment"> In Lehmans Brothers "guide to exotic credit derivatives"</span>
<span class="comment"> p. 32 there's a simple case, zero flat curve with a flat CDS</span>
<span class="comment"> curve with constant market spreads of 150 bp and RR = 50%</span>
<span class="comment"> corresponds to a flat 3% hazard rate. The implied 1-year</span>
<span class="comment"> survival probability is 97.04% and the 2-years is 94.18%</span>
<span class="comment"> */</span>
<span class="comment">// market</span>
<a name="a10"></a><a class="code" href="group__types.html#ga4bdf4bfe76b9ffa6fa64c47d8bfa0c78" title="real number">Real</a> recovery_rate = 0.5;
<a class="code" href="group__types.html#ga4bdf4bfe76b9ffa6fa64c47d8bfa0c78" title="real number">Real</a> quoted_spreads[] = { 0.0150, 0.0150, 0.0150, 0.0150 };
vector<Period> tenors;
tenors.push_back(3*Months);
tenors.push_back(6*Months);
tenors.push_back(1*Years);
tenors.push_back(2*Years);
vector<Date> maturities;
<span class="keywordflow">for</span> (<a class="code" href="group__types.html#gaf38bdb4c54463b1f456655efa95b5c77" title="size of a container">Size</a> i=0; i<4; i++) {
maturities.push_back(calendar.<a class="code" href="class_quant_lib_1_1_calendar.html#aee7c18511c7ee1bcda6124f43a37aa28">adjust</a>(todaysDate + tenors[i],
<a name="a11"></a><a class="code" href="group__datetime.html#ggaff46c5ae9385d20709bedade86edd368ab6a37af780aa2b97f8bbdc4d149dae18">Following</a>));
}
std::vector<boost::shared_ptr<DefaultProbabilityHelper> > instruments;
<span class="keywordflow">for</span> (<a class="code" href="group__types.html#gaf38bdb4c54463b1f456655efa95b5c77" title="size of a container">Size</a> i=0; i<4; i++) {
instruments.push_back(boost::shared_ptr<DefaultProbabilityHelper>(
<span class="keyword">new</span> <a name="_a12"></a><a class="code" href="class_quant_lib_1_1_spread_cds_helper.html" title="Spread-quoted CDS hazard rate bootstrap helper.">SpreadCdsHelper</a>(
<a class="code" href="class_quant_lib_1_1_handle.html">Handle<Quote></a>(boost::shared_ptr<Quote>(
<span class="keyword">new</span> <a class="code" href="class_quant_lib_1_1_simple_quote.html" title="market element returning a stored value">SimpleQuote</a>(quoted_spreads[i]))),
tenors[i],
0,
calendar,
<a name="a13"></a><a class="code" href="group__datetime.html#gga6d41db8ba0ea90d22df35889df452adaab4fce358383d1822f7596659e00b07f7" title="every third month">Quarterly</a>,
<a class="code" href="group__datetime.html#ggaff46c5ae9385d20709bedade86edd368ab6a37af780aa2b97f8bbdc4d149dae18">Following</a>,
DateGeneration::TwentiethIMM,
<a class="code" href="class_quant_lib_1_1_actual365_fixed.html" title="Actual/365 (Fixed) day count convention.">Actual365Fixed</a>(),
recovery_rate,
tsCurve)));
}
<span class="comment">// Bootstrap hazard rates</span>
boost::shared_ptr<PiecewiseDefaultCurve<HazardRate, BackwardFlat> >
hazardRateStructure(
<span class="keyword">new</span> <a name="_a14"></a><a class="code" href="class_quant_lib_1_1_piecewise_default_curve.html" title="Piecewise default-probability term structure.">PiecewiseDefaultCurve<HazardRate, BackwardFlat></a>(
todaysDate,
instruments,
<a class="code" href="class_quant_lib_1_1_actual365_fixed.html" title="Actual/365 (Fixed) day count convention.">Actual365Fixed</a>()));
vector<pair<Date, Real> > hr_curve_data = hazardRateStructure->nodes();
cout << <span class="stringliteral">"Calibrated hazard rate values: "</span> << endl ;
<span class="keywordflow">for</span> (<a class="code" href="group__types.html#gaf38bdb4c54463b1f456655efa95b5c77" title="size of a container">Size</a> i=0; i<hr_curve_data.size(); i++) {
cout << <span class="stringliteral">"hazard rate on "</span> << hr_curve_data[i].first << <span class="stringliteral">" is "</span>
<< hr_curve_data[i].second << endl;
}
cout << endl;
cout << <span class="stringliteral">"Some survival probability values: "</span> << endl ;
cout << <span class="stringliteral">"1Y survival probability: "</span>
<< <a name="a15"></a><a class="code" href="group__manips.html#gae524bfb28ff5254a99ba5a4e778aee29" title="output reals as percentages">io::percent</a>(hazardRateStructure->survivalProbability(
todaysDate + 1*Years))
<< endl
<< <span class="stringliteral">" expected: "</span>
<< <a class="code" href="group__manips.html#gae524bfb28ff5254a99ba5a4e778aee29" title="output reals as percentages">io::percent</a>(0.9704)
<< endl;
cout << <span class="stringliteral">"2Y survival probability: "</span>
<< <a class="code" href="group__manips.html#gae524bfb28ff5254a99ba5a4e778aee29" title="output reals as percentages">io::percent</a>(hazardRateStructure->survivalProbability(
todaysDate + 2*Years))
<< endl
<< <span class="stringliteral">" expected: "</span>
<< <a class="code" href="group__manips.html#gae524bfb28ff5254a99ba5a4e778aee29" title="output reals as percentages">io::percent</a>(0.9418)
<< endl;
cout << endl << endl;
<span class="comment">// reprice instruments</span>
<a class="code" href="group__types.html#ga4bdf4bfe76b9ffa6fa64c47d8bfa0c78" title="real number">Real</a> nominal = 1000000.0;
<a name="_a16"></a><a class="code" href="class_quant_lib_1_1_handle.html">Handle<DefaultProbabilityTermStructure></a> probability(hazardRateStructure);
boost::shared_ptr<PricingEngine> engine(
<span class="keyword">new</span> MidPointCdsEngine(probability, recovery_rate, tsCurve));
<a name="_a17"></a><a class="code" href="class_quant_lib_1_1_schedule.html" title="Payment schedule.">Schedule</a> cdsSchedule =
<a name="_a18"></a><a class="code" href="class_quant_lib_1_1_make_schedule.html" title="helper class">MakeSchedule</a>().<a name="a19"></a>from(todaysDate).<a name="a20"></a>to(maturities[0])
.<a name="a21"></a>withFrequency(<a class="code" href="group__datetime.html#gga6d41db8ba0ea90d22df35889df452adaab4fce358383d1822f7596659e00b07f7" title="every third month">Quarterly</a>)
.<a name="a22"></a>withCalendar(calendar)
.<a name="a23"></a>withTerminationDateConvention(<a name="a24"></a><a class="code" href="group__datetime.html#ggaff46c5ae9385d20709bedade86edd368a5fb8b90b7fdf1a3a228fbbc083e64547">Unadjusted</a>)
.<a name="a25"></a>withRule(DateGeneration::TwentiethIMM);
<a name="_a26"></a><a class="code" href="class_quant_lib_1_1_credit_default_swap.html" title="Credit default swap.">CreditDefaultSwap</a> cds_3m(Protection::Seller,
nominal,
quoted_spreads[0],
cdsSchedule,
<a class="code" href="group__datetime.html#ggaff46c5ae9385d20709bedade86edd368ab6a37af780aa2b97f8bbdc4d149dae18">Following</a>,
<a class="code" href="class_quant_lib_1_1_actual365_fixed.html" title="Actual/365 (Fixed) day count convention.">Actual365Fixed</a>());
cdsSchedule =
<a class="code" href="class_quant_lib_1_1_make_schedule.html" title="helper class">MakeSchedule</a>().from(todaysDate).to(maturities[1])
.withFrequency(<a class="code" href="group__datetime.html#gga6d41db8ba0ea90d22df35889df452adaab4fce358383d1822f7596659e00b07f7" title="every third month">Quarterly</a>)
.withCalendar(calendar)
.withTerminationDateConvention(<a class="code" href="group__datetime.html#ggaff46c5ae9385d20709bedade86edd368a5fb8b90b7fdf1a3a228fbbc083e64547">Unadjusted</a>)
.withRule(DateGeneration::TwentiethIMM);
<a class="code" href="class_quant_lib_1_1_credit_default_swap.html" title="Credit default swap.">CreditDefaultSwap</a> cds_6m(Protection::Seller,
nominal,
quoted_spreads[1],
cdsSchedule,
<a class="code" href="group__datetime.html#ggaff46c5ae9385d20709bedade86edd368ab6a37af780aa2b97f8bbdc4d149dae18">Following</a>,
<a class="code" href="class_quant_lib_1_1_actual365_fixed.html" title="Actual/365 (Fixed) day count convention.">Actual365Fixed</a>());
cdsSchedule =
<a class="code" href="class_quant_lib_1_1_make_schedule.html" title="helper class">MakeSchedule</a>().from(todaysDate).to(maturities[2])
.withFrequency(<a class="code" href="group__datetime.html#gga6d41db8ba0ea90d22df35889df452adaab4fce358383d1822f7596659e00b07f7" title="every third month">Quarterly</a>)
.withCalendar(calendar)
.withTerminationDateConvention(<a class="code" href="group__datetime.html#ggaff46c5ae9385d20709bedade86edd368a5fb8b90b7fdf1a3a228fbbc083e64547">Unadjusted</a>)
.withRule(DateGeneration::TwentiethIMM);
<a class="code" href="class_quant_lib_1_1_credit_default_swap.html" title="Credit default swap.">CreditDefaultSwap</a> cds_1y(Protection::Seller,
nominal,
quoted_spreads[2],
cdsSchedule,
<a class="code" href="group__datetime.html#ggaff46c5ae9385d20709bedade86edd368ab6a37af780aa2b97f8bbdc4d149dae18">Following</a>,
<a class="code" href="class_quant_lib_1_1_actual365_fixed.html" title="Actual/365 (Fixed) day count convention.">Actual365Fixed</a>());
cdsSchedule =
<a class="code" href="class_quant_lib_1_1_make_schedule.html" title="helper class">MakeSchedule</a>().from(todaysDate).to(maturities[3])
.withFrequency(<a class="code" href="group__datetime.html#gga6d41db8ba0ea90d22df35889df452adaab4fce358383d1822f7596659e00b07f7" title="every third month">Quarterly</a>)
.withCalendar(calendar)
.withTerminationDateConvention(<a class="code" href="group__datetime.html#ggaff46c5ae9385d20709bedade86edd368a5fb8b90b7fdf1a3a228fbbc083e64547">Unadjusted</a>)
.withRule(DateGeneration::TwentiethIMM);
<a class="code" href="class_quant_lib_1_1_credit_default_swap.html" title="Credit default swap.">CreditDefaultSwap</a> cds_2y(Protection::Seller,
nominal,
quoted_spreads[3],
cdsSchedule,
<a class="code" href="group__datetime.html#ggaff46c5ae9385d20709bedade86edd368ab6a37af780aa2b97f8bbdc4d149dae18">Following</a>,
<a class="code" href="class_quant_lib_1_1_actual365_fixed.html" title="Actual/365 (Fixed) day count convention.">Actual365Fixed</a>());
cds_3m.setPricingEngine(engine);
cds_6m.setPricingEngine(engine);
cds_1y.setPricingEngine(engine);
cds_2y.setPricingEngine(engine);
cout << <span class="stringliteral">"Repricing of quoted CDSs employed for calibration: "</span> << endl;
cout << <span class="stringliteral">"3M fair spread: "</span> << <a name="a27"></a><a class="code" href="group__manips.html#gac63ea3dad10259db3764c7d15a61cde5" title="output rates and spreads as percentages">io::rate</a>(cds_3m.fairSpread()) << endl
<< <span class="stringliteral">" NPV: "</span> << cds_3m.NPV() << endl
<< <span class="stringliteral">" default leg: "</span> << cds_3m.defaultLegNPV() << endl
<< <span class="stringliteral">" coupon leg: "</span> << cds_3m.couponLegNPV() << endl
<< endl;
cout << <span class="stringliteral">"6M fair spread: "</span> << <a class="code" href="group__manips.html#gac63ea3dad10259db3764c7d15a61cde5" title="output rates and spreads as percentages">io::rate</a>(cds_6m.fairSpread()) << endl
<< <span class="stringliteral">" NPV: "</span> << cds_6m.NPV() << endl
<< <span class="stringliteral">" default leg: "</span> << cds_6m.defaultLegNPV() << endl
<< <span class="stringliteral">" coupon leg: "</span> << cds_6m.couponLegNPV() << endl
<< endl;
cout << <span class="stringliteral">"1Y fair spread: "</span> << <a class="code" href="group__manips.html#gac63ea3dad10259db3764c7d15a61cde5" title="output rates and spreads as percentages">io::rate</a>(cds_1y.fairSpread()) << endl
<< <span class="stringliteral">" NPV: "</span> << cds_1y.NPV() << endl
<< <span class="stringliteral">" default leg: "</span> << cds_1y.defaultLegNPV() << endl
<< <span class="stringliteral">" coupon leg: "</span> << cds_1y.couponLegNPV() << endl
<< endl;
cout << <span class="stringliteral">"2Y fair spread: "</span> << <a class="code" href="group__manips.html#gac63ea3dad10259db3764c7d15a61cde5" title="output rates and spreads as percentages">io::rate</a>(cds_2y.fairSpread()) << endl
<< <span class="stringliteral">" NPV: "</span> << cds_2y.NPV() << endl
<< <span class="stringliteral">" default leg: "</span> << cds_2y.defaultLegNPV() << endl
<< <span class="stringliteral">" coupon leg: "</span> << cds_2y.couponLegNPV() << endl
<< endl;
cout << endl << endl;
<a class="code" href="group__types.html#ga4bdf4bfe76b9ffa6fa64c47d8bfa0c78" title="real number">Real</a> seconds = timer.elapsed();
<a class="code" href="group__types.html#gab9c87440c314438e51a899a03d2442d0" title="integer number">Integer</a> hours = <a class="code" href="group__types.html#gab9c87440c314438e51a899a03d2442d0" title="integer number">Integer</a>(seconds/3600);
seconds -= hours * 3600;
<a class="code" href="group__types.html#gab9c87440c314438e51a899a03d2442d0" title="integer number">Integer</a> minutes = <a class="code" href="group__types.html#gab9c87440c314438e51a899a03d2442d0" title="integer number">Integer</a>(seconds/60);
seconds -= minutes * 60;
cout << <span class="stringliteral">"Run completed in "</span>;
<span class="keywordflow">if</span> (hours > 0)
cout << hours << <span class="stringliteral">" h "</span>;
<span class="keywordflow">if</span> (hours > 0 || minutes > 0)
cout << minutes << <span class="stringliteral">" m "</span>;
cout << fixed << setprecision(0)
<< seconds << <span class="stringliteral">" s"</span> << endl;
<span class="keywordflow">return</span> 0;
} <span class="keywordflow">catch</span> (exception& e) {
cerr << e.what() << endl;
<span class="keywordflow">return</span> 1;
} <span class="keywordflow">catch</span> (...) {
cerr << <span class="stringliteral">"unknown error"</span> << endl;
<span class="keywordflow">return</span> 1;
}
}
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