wwd1015
2017-05-25 22:14:31 UTC
Hi,I'm really new to quantlib so please pardon me for any stupid questions. I
have built Quantlib using the SWIG bindings for Python and tried to use it
to replicate the ISDA Fair Value CDS pricing engine (i.e. using real yield
curve and spread curve and assuming piecewise constant harzard rate). I
modified Luigi's sample code on GitHub and created the sample code below. It
seems that the hazard curve generated from the code is very different from
the Bloomberg result (see screenshot below). Any ideas why this
happens?Thanks in advance...Alanfrom QuantLib import *calendar = TARGET()#
Set evaluation datetodaysDate = Date(23, 5, 2017);todaysDate =
calendar.adjust(todaysDate) # business day
adjustmentSettings.instance().evaluationDate = todaysDate# CDS
parametersrecovery_rate = 0.4quoted_spreads = [0.001192, 0.002158, 0.003165,
0.004384, 0.005732, 0.007000, 0.009490, 0.011103]tenors =
[Period(6, Months), Period(1, Years), Period(2, Years), Period(3,
Years), Period(4, Years), Period(5, Years), Period(7, Years),
Period(10, Years)]maturities = [calendar.adjust(todaysDate + x, Following)
for x in tenors]spotRates = [0.010294, 0.010989, 0.011920,
0.014193, 0.017265, 0.015215, 0.016575, 0.017645, 0.018625,
0.019415, 0.020185, 0.020830, 0.021310, 0.021855, 0.022705,
0.023460, 0.024160, 0.024335, 0.024440]spotPeriod = [Period(1,
Months), Period(2, Months), Period(3, Months), Period(6,
Months), Period(1, Years), Period(2, Years),
Period(3, Years), Period(4, Years), Period(5, Years), Period(6,
Years), Period(7, Years), Period(8, Years),
Period(9, Years), Period(10, Years), Period(12, Years),
Period(15, Years), Period(20, Years), Period(25, Years),
Period(30, Years)]spotDates = [todaysDate + x for x in
spotPeriod]risk_free_rate = YieldTermStructureHandle(
ZeroCurve(spotDates, spotRates, Actual360()))# CDS instrumentsinstruments =
[ SpreadCdsHelper(QuoteHandle(SimpleQuote(s)), tenor,
0, calendar, Quarterly,
Following, DateGeneration.TwentiethIMM,
Actual360(), recovery_rate,
risk_free_rate) for s, tenor in zip(quoted_spreads, tenors)]hazard_curve
= PiecewiseFlatHazardRate(todaysDate, instruments,
Actual360())print("Calibrated hazard rate values: ")for x in
hazard_curve.nodes(): print("hazard rate on %s is %.7f" % x)# reprice
instrumentsnominal = 1000000.0probability =
DefaultProbabilityTermStructureHandle(hazard_curve)# create a cds for every
maturityall_cds = []for maturity, s in zip(maturities, quoted_spreads):
schedule = Schedule(todaysDate, maturity, Period(Quarterly),
calendar, Following, Following,
DateGeneration.TwentiethIMM, False) cds =
CreditDefaultSwap(Protection.Seller, nominal, s,
schedule, Following, Actual360()) engine = MidPointCdsEngine(probability,
recovery_rate, risk_free_rate) cds.setPricingEngine(engine)
all_cds.append(cds)print("Repricing of quoted CDSs employed for calibration:
")for i in range(len(tenors)): print("%s fair spread: %.7g" % (tenors[i],
all_cds[i].fairSpread())) print(" NPV: %g" % all_cds[i].NPV())
print(" default leg: %.7g" % all_cds[i].defaultLegNPV()) print("
coupon leg: %.7g" % all_cds[i].couponLegNPV())
<Loading Image...
>
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View this message in context: http://quantlib.10058.n7.nabble.com/Fail-to-replicate-ISDA-Fair-Value-CDS-Model-tp18310.html
Sent from the quantlib-users mailing list archive at Nabble.com.
have built Quantlib using the SWIG bindings for Python and tried to use it
to replicate the ISDA Fair Value CDS pricing engine (i.e. using real yield
curve and spread curve and assuming piecewise constant harzard rate). I
modified Luigi's sample code on GitHub and created the sample code below. It
seems that the hazard curve generated from the code is very different from
the Bloomberg result (see screenshot below). Any ideas why this
happens?Thanks in advance...Alanfrom QuantLib import *calendar = TARGET()#
Set evaluation datetodaysDate = Date(23, 5, 2017);todaysDate =
calendar.adjust(todaysDate) # business day
adjustmentSettings.instance().evaluationDate = todaysDate# CDS
parametersrecovery_rate = 0.4quoted_spreads = [0.001192, 0.002158, 0.003165,
0.004384, 0.005732, 0.007000, 0.009490, 0.011103]tenors =
[Period(6, Months), Period(1, Years), Period(2, Years), Period(3,
Years), Period(4, Years), Period(5, Years), Period(7, Years),
Period(10, Years)]maturities = [calendar.adjust(todaysDate + x, Following)
for x in tenors]spotRates = [0.010294, 0.010989, 0.011920,
0.014193, 0.017265, 0.015215, 0.016575, 0.017645, 0.018625,
0.019415, 0.020185, 0.020830, 0.021310, 0.021855, 0.022705,
0.023460, 0.024160, 0.024335, 0.024440]spotPeriod = [Period(1,
Months), Period(2, Months), Period(3, Months), Period(6,
Months), Period(1, Years), Period(2, Years),
Period(3, Years), Period(4, Years), Period(5, Years), Period(6,
Years), Period(7, Years), Period(8, Years),
Period(9, Years), Period(10, Years), Period(12, Years),
Period(15, Years), Period(20, Years), Period(25, Years),
Period(30, Years)]spotDates = [todaysDate + x for x in
spotPeriod]risk_free_rate = YieldTermStructureHandle(
ZeroCurve(spotDates, spotRates, Actual360()))# CDS instrumentsinstruments =
[ SpreadCdsHelper(QuoteHandle(SimpleQuote(s)), tenor,
0, calendar, Quarterly,
Following, DateGeneration.TwentiethIMM,
Actual360(), recovery_rate,
risk_free_rate) for s, tenor in zip(quoted_spreads, tenors)]hazard_curve
= PiecewiseFlatHazardRate(todaysDate, instruments,
Actual360())print("Calibrated hazard rate values: ")for x in
hazard_curve.nodes(): print("hazard rate on %s is %.7f" % x)# reprice
instrumentsnominal = 1000000.0probability =
DefaultProbabilityTermStructureHandle(hazard_curve)# create a cds for every
maturityall_cds = []for maturity, s in zip(maturities, quoted_spreads):
schedule = Schedule(todaysDate, maturity, Period(Quarterly),
calendar, Following, Following,
DateGeneration.TwentiethIMM, False) cds =
CreditDefaultSwap(Protection.Seller, nominal, s,
schedule, Following, Actual360()) engine = MidPointCdsEngine(probability,
recovery_rate, risk_free_rate) cds.setPricingEngine(engine)
all_cds.append(cds)print("Repricing of quoted CDSs employed for calibration:
")for i in range(len(tenors)): print("%s fair spread: %.7g" % (tenors[i],
all_cds[i].fairSpread())) print(" NPV: %g" % all_cds[i].NPV())
print(" default leg: %.7g" % all_cds[i].defaultLegNPV()) print("
coupon leg: %.7g" % all_cds[i].couponLegNPV())
<Loading Image...
>--
View this message in context: http://quantlib.10058.n7.nabble.com/Fail-to-replicate-ISDA-Fair-Value-CDS-Model-tp18310.html
Sent from the quantlib-users mailing list archive at Nabble.com.