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cds.py
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cds.py
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'''
QuantLib with python example
Copyright (C) 2014 John Orford
This program is free software: you can redistribute it and/or modify
it under the terms of the GNU Affero General Public License as
published by the Free Software Foundation, either version 3 of the
License, or (at your option) any later version.
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
GNU Affero General Public License for more details.
You should have received a copy of the GNU Affero General Public License
along with this program. If not, see <http://www.gnu.org/licenses/>.
'''
#######################################################################
## 1) Global data
## 2) Date setup
## 3) Construct yield term structure
## 4) Setup initial bond
## 5) Calibrate and find spread
## 6) Collate results
from QuantLib import *
from volkills.models import CDS
def modelCds_Value(c):
#######################################################################
## 1) Global data
calendar = WeekendsOnly()
# 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_date_ql_ql
recovery_rate = 0.4
#if nominal is -ve then seller else buyer
buy_or_sell = Protection.Buyer
day_counter = Actual365Fixed()
payment_frequency = Quarterly
payment_convention = Following
#default 'CDS' choice not implemented
date_generation = DateGeneration.TwentiethIMM
#######################################################################
## 2) Date setup
valuation_date_ql = Date(c.valuation_date.day,c.valuation_date.month,c.valuation_date.year)
maturity_date_ql = Date(c.maturity_date.day,c.maturity_date.month,c.maturity_date.year)
#must be a business day
valuation_date_ql = calendar.adjust(valuation_date_ql);
maturity_date_ql = calendar.adjust(maturity_date_ql);
Settings.instance().evaluationDate = valuation_date_ql
#######################################################################
## 3) Construct term structures
## Discounting setup
zcQuotes = [ (c.term_structure_1m, Period(1,Months)),
(c.term_structure_3m, Period(3,Months)),
(c.term_structure_6m, Period(6,Months)),
(c.term_structure_1y, Period(1,Years)),
(c.term_structure_2y, Period(2,Years)),
(c.term_structure_3y, Period(3,Years)),
(c.term_structure_5y, Period(5,Years)),
(c.term_structure_7y, Period(7,Years)),
(c.term_structure_10y, Period(10,Years)),
(c.term_structure_20y, Period(20,Years)),
(c.term_structure_30y, Period(30,Years))
]
zcHelpers = [ DepositRateHelper( QuoteHandle(SimpleQuote(r)),
tenor,
0,
calendar,
payment_convention,
True,
day_counter)
for (r,tenor) in zcQuotes ]
discountingTermStructure = PiecewiseFlatForward(valuation_date_ql,
zcHelpers,
day_counter)
interest_rate = YieldTermStructureHandle(discountingTermStructure)
##Set up hazard rate term structure in order to calibrate latr
##Assume flat structure
hr = QuoteHandle(SimpleQuote(c.default_probability))
fhr = FlatHazardRate( valuation_date_ql,
hr,
day_counter
)
probability = DefaultProbabilityTermStructureHandle(fhr)
#######################################################################
## 4) Setup initial CDS
engine = MidPointCdsEngine(probability, recovery_rate, interest_rate)
cdsSchedule = Schedule( valuation_date_ql,
maturity_date_ql,
Period(payment_frequency),
calendar,
Unadjusted,
Unadjusted,
date_generation,
False)
cds = CreditDefaultSwap(buy_or_sell,
c.nominal,
c.contract_spread,
cdsSchedule,
payment_convention,
day_counter
)
cds.setPricingEngine(engine)
#######################################################################
## 6) Collate results
c.result_npv = cds.NPV()
c.result_coupon_leg_bps = cds.couponLegBPS()
c.result_fair_spread = cds.fairSpread()
c.result_default_leg_npv = cds.defaultLegNPV()
c.result_coupon_leg_npv = cds.couponLegNPV()
c.result_running_spread = cds.runningSpread()
c.save()
return c
def modelCds_Calibrate(c):
#######################################################################
## 1) Global data
calendar = WeekendsOnly()
# 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_date_ql_ql
recovery_rate = 0.4
#if nominal is -ve then seller else buyer
buy_or_sell = Protection.Buyer
day_counter = Actual365Fixed()
payment_frequency = Quarterly
payment_convention = Following
#default 'CDS' choice not implemented
date_generation = DateGeneration.TwentiethIMM
#######################################################################
## 2) Date setup
valuation_date_ql = Date(c.valuation_date.day,c.valuation_date.month,c.valuation_date.year)
maturity_date_ql = Date(c.maturity_date.day,c.maturity_date.month,c.maturity_date.year)
#must be a business day
valuation_date_ql = calendar.adjust(valuation_date_ql);
maturity_date_ql = calendar.adjust(maturity_date_ql);
Settings.instance().evaluationDate = valuation_date_ql
#######################################################################
## 3) Construct term structures
## Discounting setup
zcQuotes = [ (c.term_structure_1m, Period(1,Months)),
(c.term_structure_3m, Period(3,Months)),
(c.term_structure_6m, Period(6,Months)),
(c.term_structure_1y, Period(1,Years)),
(c.term_structure_2y, Period(2,Years)),
(c.term_structure_3y, Period(3,Years)),
(c.term_structure_5y, Period(5,Years)),
(c.term_structure_7y, Period(7,Years)),
(c.term_structure_10y, Period(10,Years)),
(c.term_structure_20y, Period(20,Years)),
(c.term_structure_30y, Period(30,Years))
]
zcHelpers = [ DepositRateHelper( QuoteHandle(SimpleQuote(r)),
tenor,
0,
calendar,
payment_convention,
True,
day_counter)
for (r,tenor) in zcQuotes ]
discountingTermStructure = PiecewiseFlatForward(valuation_date_ql,
zcHelpers,
day_counter)
interest_rate = YieldTermStructureHandle(discountingTermStructure)
##Set up hazard rate term structure in order to calibrate latr
##Assume flat structure
hr = QuoteHandle(SimpleQuote(0.01))
fhr = FlatHazardRate( valuation_date_ql,
hr,
day_counter
)
probability = DefaultProbabilityTermStructureHandle(fhr)
#######################################################################
## 4) Setup initial CDS
engine = MidPointCdsEngine(probability, recovery_rate, interest_rate)
cdsSchedule = Schedule( valuation_date_ql,
maturity_date_ql,
Period(payment_frequency),
calendar,
Unadjusted,
Unadjusted,
date_generation,
False)
cds = CreditDefaultSwap(buy_or_sell,
c.nominal,
c.contract_spread,
cdsSchedule,
payment_convention,
day_counter
)
cds.setPricingEngine(engine)
#######################################################################
## 5) Calibrate and find hazard rate
#then feed back into model and remodel
hr_calibrated = cds.impliedHazardRate(c.market_value, interest_rate, day_counter, recovery_rate)
hr_qh_calibrated = QuoteHandle(SimpleQuote(hr_calibrated))
fhr_calibrated = FlatHazardRate(valuation_date_ql, hr_qh_calibrated, day_counter)
probability_calibrated = DefaultProbabilityTermStructureHandle(fhr_calibrated)
engine_calibrated = MidPointCdsEngine(probability_calibrated, recovery_rate, interest_rate)
cds.setPricingEngine(engine_calibrated)
#######################################################################
## 6) Collate results
c.result_npv = cds.NPV()
c.result_coupon_leg_bps = cds.couponLegBPS()
c.result_fair_spread = cds.fairSpread()
c.result_default_leg_npv = cds.defaultLegNPV()
c.result_coupon_leg_npv = cds.couponLegNPV()
c.result_running_spread = cds.runningSpread()
c.result_implied_hazard_rate = cds.impliedHazardRate(c.market_value, interest_rate, day_counter, recovery_rate)
c.save()
return c