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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2008 Roland Lichters
Copyright (C) 2021 Lew Wei Hao
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
<https://www.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.
*/
#include <ql/pricingengines/bond/riskybondengine.hpp>
#include <ql/cashflows/cashflows.hpp>
#include <ql/cashflows/coupon.hpp>
#include <utility>
namespace QuantLib {
RiskyBondEngine::RiskyBondEngine(Handle<DefaultProbabilityTermStructure> defaultTS,
Real recoveryRate,
Handle<YieldTermStructure> yieldTS)
: defaultTS_(std::move(defaultTS)),
recoveryRate_(recoveryRate),
yieldTS_(std::move(yieldTS)) {
registerWith(defaultTS_);
registerWith(yieldTS_);
}
void RiskyBondEngine::calculate() const {
Date npvDate = yieldTS()->referenceDate();
Date settlementDate = arguments_.settlementDate;
Date startDate = CashFlows::startDate(arguments_.cashflows);
Date d1 = std::max(npvDate, startDate);
Real NPV = 0.0;
Real settlementValue = 0.0;
for (auto& cf : arguments_.cashflows) {
Date d2 = cf->date();
if (d2 > npvDate) {
Real weightedCouponAmount = cf->amount() * defaultTS()->survivalProbability(d2);
NPV += weightedCouponAmount * yieldTS()->discount(d2);
if (d2 > settlementDate)
settlementValue += weightedCouponAmount * yieldTS()->discount(d2);
auto coupon = ext::dynamic_pointer_cast<Coupon>(cf);
if (coupon != nullptr) {
Date defaultDate = d1 + (d2 - d1) / 2;
Real weightedRecovery = coupon->nominal() * recoveryRate() *
(defaultTS()->survivalProbability(d1) -
defaultTS()->survivalProbability(d2));
NPV += weightedRecovery * yieldTS()->discount(defaultDate);
if (d2 > settlementDate)
settlementValue += weightedRecovery * yieldTS()->discount(defaultDate);
d1 = d2;
}
}
}
results_.value = NPV;
results_.settlementValue = settlementValue / yieldTS()->discount(settlementDate);
results_.valuationDate = npvDate;
}
}
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