def test_performCDSIndexHazardRateAdjustment():
tradeDate = FinDate(2007, 8, 1)
stepInDate = tradeDate.addDays(1)
valuationDate = stepInDate
liborCurve = buildLiborCurve(tradeDate)
maturity3Y = tradeDate.nextCDSDate(36)
maturity5Y = tradeDate.nextCDSDate(60)
maturity7Y = tradeDate.nextCDSDate(84)
maturity10Y = tradeDate.nextCDSDate(120)
path = dirname(__file__)
filename = "CDX_NA_IG_S7_SPREADS.csv"
full_filename_path = join(path, "data", filename)
f = open(full_filename_path, 'r')
data = f.readlines()
issuerCurves = []
for row in data[1:]:
splitRow = row.split(",")
spd3Y = float(splitRow[1]) / 10000.0
spd5Y = float(splitRow[2]) / 10000.0
spd7Y = float(splitRow[3]) / 10000.0
spd10Y = float(splitRow[4]) / 10000.0
recoveryRate = float(splitRow[5])
cds3Y = FinCDS(stepInDate, maturity3Y, spd3Y)
cds5Y = FinCDS(stepInDate, maturity5Y, spd5Y)
cds7Y = FinCDS(stepInDate, maturity7Y, spd7Y)
cds10Y = FinCDS(stepInDate, maturity10Y, spd10Y)
cdsContracts = [cds3Y, cds5Y, cds7Y, cds10Y]
issuerCurve = FinCDSCurve(valuationDate, cdsContracts, liborCurve,
recoveryRate)
issuerCurves.append(issuerCurve)
##########################################################################
# Now determine the average spread of the index
##########################################################################
cdsIndex = FinCDSIndexPortfolio()
averageSpd3Y = cdsIndex.averageSpread(valuationDate, stepInDate,
maturity3Y, issuerCurves) * 10000.0
averageSpd5Y = cdsIndex.averageSpread(valuationDate, stepInDate,
maturity5Y, issuerCurves) * 10000.0
averageSpd7Y = cdsIndex.averageSpread(valuationDate, stepInDate,
maturity7Y, issuerCurves) * 10000.0
averageSpd10Y = cdsIndex.averageSpread(valuationDate, stepInDate,
maturity10Y, issuerCurves) * 10000.0
testCases.header("LABEL", "VALUE")
testCases.print("AVERAGE SPD 3Y", averageSpd3Y)
testCases.print("AVERAGE SPD 5Y", averageSpd5Y)
testCases.print("AVERAGE SPD 7Y", averageSpd7Y)
testCases.print("AVERAGE SPD 10Y", averageSpd10Y)
testCases.banner(
"===================================================================")
##########################################################################
# Now determine the intrinsic spread of the index to the same maturity dates
# As the single name CDS contracts
##########################################################################
cdsIndex = FinCDSIndexPortfolio()
intrinsicSpd3Y = cdsIndex.intrinsicSpread(
valuationDate, stepInDate, maturity3Y, issuerCurves) * 10000.0
intrinsicSpd5Y = cdsIndex.intrinsicSpread(
valuationDate, stepInDate, maturity5Y, issuerCurves) * 10000.0
intrinsicSpd7Y = cdsIndex.intrinsicSpread(
valuationDate, stepInDate, maturity7Y, issuerCurves) * 10000.0
intrinsicSpd10Y = cdsIndex.intrinsicSpread(
valuationDate, stepInDate, maturity10Y, issuerCurves) * 10000.0
##########################################################################
##########################################################################
testCases.header("LABEL", "VALUE")
testCases.print("INTRINSIC SPD 3Y", intrinsicSpd3Y)
testCases.print("INTRINSIC SPD 5Y", intrinsicSpd5Y)
testCases.print("INTRINSIC SPD 7Y", intrinsicSpd7Y)
testCases.print("INTRINSIC SPD 10Y", intrinsicSpd10Y)
testCases.banner(
"===================================================================")
##########################################################################
##########################################################################
indexCoupons = [0.002, 0.0037, 0.0050, 0.0063]
indexUpfronts = [0.0, 0.0, 0.0, 0.0]
indexMaturityDates = [
FinDate(2009, 12, 20),
FinDate(2011, 12, 20),
FinDate(2013, 12, 20),
FinDate(2016, 12, 20)
]
indexRecoveryRate = 0.40
tolerance = 1e-6
import time
start = time.time()
adjustedIssuerCurves = FinCDSIndexPortfolio.hazardRateAdjustIntrinsic(
valuationDate, issuerCurves, indexCoupons, indexUpfronts,
indexMaturityDates, indexRecoveryRate, tolerance)
end = time.time()
testCases.header("TIME")
testCases.print(end - start)
# numCredits = len(issuerCurves)
# testCases.print("#","MATURITY","CDS_UNADJ","CDS_ADJ")
# for m in range(0,numCredits):
# for cds in cdsContracts:
# unadjustedSpread = cds.parSpread(valuationDate,issuerCurves[m])
# adjustedSpread = cds.parSpread(valuationDate,adjustedIssuerCurves[m])
# testCases.print(m,str(cds._maturityDate),"%10.3f"%(unadjustedSpread*10000),"%10.3f" %(adjustedSpread*10000))
cdsIndex = FinCDSIndexPortfolio()
intrinsicSpd3Y = cdsIndex.intrinsicSpread(valuationDate, stepInDate,
indexMaturityDates[0],
adjustedIssuerCurves) * 10000.0
intrinsicSpd5Y = cdsIndex.intrinsicSpread(valuationDate, stepInDate,
indexMaturityDates[1],
adjustedIssuerCurves) * 10000.0
intrinsicSpd7Y = cdsIndex.intrinsicSpread(valuationDate, stepInDate,
indexMaturityDates[2],
adjustedIssuerCurves) * 10000.0
intrinsicSpd10Y = cdsIndex.intrinsicSpread(valuationDate, stepInDate,
indexMaturityDates[3],
adjustedIssuerCurves) * 10000.0
# If the adjustment works then this should equal the index spreads
testCases.header("LABEL", "VALUE")
testCases.print("ADJUSTED INTRINSIC SPD 3Y", intrinsicSpd3Y)
testCases.print("ADJUSTED INTRINSIC SPD 5Y", intrinsicSpd5Y)
testCases.print("ADJUSTED INTRINSIC SPD 7Y", intrinsicSpd7Y)
testCases.print("ADJUSTED INTRINSIC SPD 10Y", intrinsicSpd10Y)
def test_fullPriceCDSIndexOption():
tradeDate = FinDate(1, 8, 2007)
stepInDate = tradeDate.addDays(1)
valuationDate = stepInDate
liborCurve = buildIborCurve(tradeDate)
maturity3Y = tradeDate.nextCDSDate(36)
maturity5Y = tradeDate.nextCDSDate(60)
maturity7Y = tradeDate.nextCDSDate(84)
maturity10Y = tradeDate.nextCDSDate(120)
path = os.path.join(os.path.dirname(__file__),
'.//data//CDX_NA_IG_S7_SPREADS.csv')
f = open(path, 'r')
data = f.readlines()
f.close()
issuerCurves = []
for row in data[1:]:
splitRow = row.split(",")
creditName = splitRow[0]
spd3Y = float(splitRow[1]) / 10000.0
spd5Y = float(splitRow[2]) / 10000.0
spd7Y = float(splitRow[3]) / 10000.0
spd10Y = float(splitRow[4]) / 10000.0
recoveryRate = float(splitRow[5])
cds3Y = FinCDS(stepInDate, maturity3Y, spd3Y)
cds5Y = FinCDS(stepInDate, maturity5Y, spd5Y)
cds7Y = FinCDS(stepInDate, maturity7Y, spd7Y)
cds10Y = FinCDS(stepInDate, maturity10Y, spd10Y)
cdsContracts = [cds3Y, cds5Y, cds7Y, cds10Y]
issuerCurve = FinCDSCurve(valuationDate, cdsContracts, liborCurve,
recoveryRate)
issuerCurves.append(issuerCurve)
##########################################################################
##########################################################################
indexUpfronts = [0.0, 0.0, 0.0, 0.0]
indexMaturityDates = [
FinDate(20, 12, 2009),
FinDate(20, 12, 2011),
FinDate(20, 12, 2013),
FinDate(20, 12, 2016)
]
indexRecovery = 0.40
testCases.banner(
"======================= CDS INDEX OPTION ==========================")
indexCoupon = 0.004
volatility = 0.50
expiryDate = FinDate(1, 2, 2008)
maturityDate = FinDate(20, 12, 2011)
notional = 10000.0
tolerance = 1e-6
testCases.header("TIME", "STRIKE", "INDEX", "PAY", "RECEIVER", "G(K)", "X",
"EXPH", "ABPAY", "ABREC")
for index in np.linspace(20, 60, 10):
#######################################################################
cdsContracts = []
for dt in indexMaturityDates:
cds = FinCDS(valuationDate, dt, index / 10000.0)
cdsContracts.append(cds)
indexCurve = FinCDSCurve(valuationDate, cdsContracts, liborCurve,
indexRecovery)
if 1 == 1:
indexSpreads = [index / 10000.0] * 4
indexPortfolio = FinCDSIndexPortfolio()
adjustedIssuerCurves = indexPortfolio.hazardRateAdjustIntrinsic(
valuationDate, issuerCurves, indexSpreads, indexUpfronts,
indexMaturityDates, indexRecovery, tolerance)
else:
indexSpread = index / 10000.0
issuerCurve = buildFlatIssuerCurve(tradeDate, liborCurve,
indexSpread, indexRecovery)
adjustedIssuerCurves = []
for iCredit in range(0, 125):
adjustedIssuerCurves.append(issuerCurve)
#######################################################################
for strike in np.linspace(20, 60, 20):
start = time.time()
option = FinCDSIndexOption(expiryDate, maturityDate, indexCoupon,
strike / 10000.0, notional)
v_pay_1, v_rec_1, strikeValue, mu, expH = option.valueAnderson(
valuationDate, adjustedIssuerCurves, indexRecovery, volatility)
end = time.time()
elapsed = end - start
end = time.time()
v_pay_2, v_rec_2 = option.valueAdjustedBlack(
valuationDate, indexCurve, indexRecovery, liborCurve,
volatility)
elapsed = end - start
testCases.print(elapsed, strike, index, v_pay_1, v_rec_1,
strikeValue, mu, expH, v_pay_2, v_rec_2)