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# inspired by python example with the same name
suppressMessages(library(QuantLib))
## global data
calendar <- TARGET()
todaysDate <- DateParser_parseISO("2007-05-15")
invisible(Settings_instance()$setEvaluationDate(d=todaysDate))
settlementDays <- 3
settlementDate <- Calendar_advance(calendar, todaysDate, settlementDays, "Days")
cat('Today : ', Date_ISO(todaysDate), "\n")
cat('Settlement Date: ', Date_ISO(settlementDate), "\n")
risk_free_rate = YieldTermStructureHandle(FlatForward(todaysDate, 0.01, Actual365Fixed()))
# ### CDS parameters
recovery_rate = 0.5
quoted_spreads = c(0.0150, 0.0150, 0.0150, 0.0150)
tenors = PeriodVector()
tenors$append(Period(3, "Months"))
tenors$append(Period(6, "Months"))
tenors$append(Period(1, "Years"))
tenors$append(Period(2, "Years"))
maturities = DateVector()
for (i in seq(1, tenors$size())) {
maturities$append(
Calendar_adjust(calendar,
Calendar_advance(calendar, todaysDate, tenors[i][[1]]),
"Following")
)
}
instruments = DefaultProbabilityHelperVector()
for (i in seq(1, length(quoted_spreads))) {
s = quoted_spreads[i]
tenor = tenors[i][[1]]
it = SpreadCdsHelper(
QuoteHandle(SimpleQuote(s)),
tenor,
0,
calendar,
"Quarterly",
"Following",
DateGeneration_TwentiethIMM_get(),
Actual365Fixed(),
recovery_rate,
risk_free_rate
)
instruments$append(it)
}
hazard_curve = PiecewiseFlatHazardRate(todaysDate, instruments, Actual365Fixed())
print("Calibrated hazard rate values: ")
for (i in seq(1, hazard_curve$dates()$size())) {
print(paste("hazard rate on ",
Date_ISO(hazard_curve$dates()[i][[1]]),
"is ",
HazardRateCurve_hazardRates(hazard_curve)[i]))
}
print(paste("1Y survival probability:",
DefaultProbabilityTermStructure_survivalProbability(hazard_curve, Calendar_advance(calendar, todaysDate, Period(1, "Years"))),
"expected 0.9704 "
))
print(paste("2Y survival probability:",
DefaultProbabilityTermStructure_survivalProbability(hazard_curve, Calendar_advance(calendar, todaysDate, Period(2, "Years"))),
"expected 0.9418 "
))
# ### Reprice instruments
nominal = 1000000.0
probability = DefaultProbabilityTermStructureHandle(hazard_curve)
# We'll create a cds for every maturity:
print("Repricing of quoted CDSs employed for calibration: ")
for (i in seq(1, length(quoted_spreads))) {
maturity = maturities[i][[1]]
s = quoted_spreads[i]
tenor = tenors[i][[1]]
schedule = Schedule(
todaysDate,
maturity,
Period(3, "Months"), # "Quarterly",
calendar,
"Following",
"Unadjusted",
DateGeneration_TwentiethIMM_get(),
F
)
cds = CreditDefaultSwap(Protection_Seller_get(), nominal, s, schedule, "Following", Actual365Fixed())
engine = MidPointCdsEngine(probability, recovery_rate, risk_free_rate)
cds$setPricingEngine(engine)
print(paste("fair spread: ", Period___str__(tenor), cds$fairSpread()))
print(paste(" NPV: ", cds$NPV()))
print(paste(" default leg: ", cds$defaultLegNPV()))
print(paste(" coupon leg: ", cds$couponLegNPV()))
print("")
}
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