CounterpartyAdjSwapEngine Class Reference

#include <cvaswapengine.hpp>

Inheritance diagram for CounterpartyAdjSwapEngine:

Collaboration diagram for CounterpartyAdjSwapEngine:

Constructors
Handle< PricingEngine >	baseSwapEngine_
Handle< PricingEngine >	swaptionletEngine_
Handle< YieldTermStructure >	discountCurve_
Handle< DefaultProbabilityTermStructure >	defaultTS_
Real	ctptyRecoveryRate_
Handle< DefaultProbabilityTermStructure >	invstDTS_
Real	invstRecoveryRate_
	CounterpartyAdjSwapEngine (const Handle< YieldTermStructure > &discountCurve, const Handle< PricingEngine > &swaptionEngine, const Handle< DefaultProbabilityTermStructure > &ctptyDTS, Real ctptyRecoveryRate, const Handle< DefaultProbabilityTermStructure > &invstDTS=Handle< DefaultProbabilityTermStructure >(), Real invstRecoveryRate=0.999)
	CounterpartyAdjSwapEngine (const Handle< YieldTermStructure > &discountCurve, Volatility blackVol, const Handle< DefaultProbabilityTermStructure > &ctptyDTS, Real ctptyRecoveryRate, const Handle< DefaultProbabilityTermStructure > &invstDTS=Handle< DefaultProbabilityTermStructure >(), Real invstRecoveryRate=0.999)
	CounterpartyAdjSwapEngine (const Handle< YieldTermStructure > &discountCurve, const Handle< Quote > &blackVol, const Handle< DefaultProbabilityTermStructure > &ctptyDTS, Real ctptyRecoveryRate, const Handle< DefaultProbabilityTermStructure > &invstDTS=Handle< DefaultProbabilityTermStructure >(), Real invstRecoveryRate=0.999)
void	calculate () const override

Detailed Description

Bilateral (CVA and DVA) default adjusted vanilla swap pricing engine. Collateral is not considered. No wrong way risk is considered (rates and counterparty default are uncorrelated). Based on: Sorensen, E.H. and Bollier, T.F., Pricing swap default risk. Financial Analysts Journal, 1994, 50, 23–33 Also see sect. II-5 in: Risk Neutral Pricing of Counterparty Risk D. Brigo, M. Masetti, 2004 or in sections 3 and 4 of "A Formula for Interest Rate Swaps Valuation under Counterparty Risk in presence of Netting Agreements" D. Brigo and M. Masetti; May 4, 2005

to do: Compute fair rate through iteration instead of the current approximation . to do: write Issuer based constructors (event type) to do: Check consistency between option engine discount and the one given

Definition at line 49 of file cvaswapengine.hpp.

Constructor & Destructor Documentation

CounterpartyAdjSwapEngine() [1/3]

CounterpartyAdjSwapEngine	(	const Handle< YieldTermStructure > &	discountCurve,
		const Handle< PricingEngine > &	swaptionEngine,
		const Handle< DefaultProbabilityTermStructure > &	ctptyDTS,
		Real	ctptyRecoveryRate,
		const Handle< DefaultProbabilityTermStructure > &	invstDTS = Handle<DefaultProbabilityTermStructure>(),
		Real	invstRecoveryRate = 0.999
	)

Creates the engine from an arbitrary swaption engine. If the investor default model is not given a default free one is assumed.

Parameters

discountCurve	Used in pricing.
swaptionEngine	Determines the volatility and thus the exposure model.
ctptyDTS	Counterparty default curve.
ctptyRecoveryRate	Counterparty recovey rate.
invstDTS	Investor (swap holder) default curve.
invstRecoveryRate	Investor recovery rate.

Definition at line 33 of file cvaswapengine.cpp.

CounterpartyAdjSwapEngine() [2/3]

CounterpartyAdjSwapEngine	(	const Handle< YieldTermStructure > &	discountCurve,
		Volatility	blackVol,
		const Handle< DefaultProbabilityTermStructure > &	ctptyDTS,
		Real	ctptyRecoveryRate,
		const Handle< DefaultProbabilityTermStructure > &	invstDTS = Handle<DefaultProbabilityTermStructure>(),
		Real	invstRecoveryRate = 0.999
	)

Creates an engine with a black volatility model for the exposure. If the investor default model is not given a default free one is assumed.

Parameters

discountCurve	Used in pricing.
blackVol	Black volatility used in the exposure model.
ctptyDTS	Counterparty default curve.
ctptyRecoveryRate	Counterparty recovey rate.
invstDTS	Investor (swap holder) default curve.
invstRecoveryRate	Investor recovery rate.

Definition at line 57 of file cvaswapengine.cpp.

CounterpartyAdjSwapEngine() [3/3]

CounterpartyAdjSwapEngine	(	const Handle< YieldTermStructure > &	discountCurve,
		const Handle< Quote > &	blackVol,
		const Handle< DefaultProbabilityTermStructure > &	ctptyDTS,
		Real	ctptyRecoveryRate,
		const Handle< DefaultProbabilityTermStructure > &	invstDTS = Handle<DefaultProbabilityTermStructure>(),
		Real	invstRecoveryRate = 0.999
	)

Creates an engine with a black volatility model for the exposure. The volatility is given as a quote. If the investor default model is not given a default free one is assumed.

Parameters

discountCurve	Used in pricing.
blackVol	Black volatility used in the exposure model.
ctptyDTS	Counterparty default curve.
ctptyRecoveryRate	Counterparty recovey rate.
invstDTS	Investor (swap holder) default curve.
invstRecoveryRate	Investor recovery rate.

Definition at line 82 of file cvaswapengine.cpp.

Member Function Documentation

calculate()

void calculate ( ) const

override

Definition at line 108 of file cvaswapengine.cpp.

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Member Data Documentation

baseSwapEngine_

Handle<PricingEngine> baseSwapEngine_

private

Definition at line 114 of file cvaswapengine.hpp.

swaptionletEngine_

Handle<PricingEngine> swaptionletEngine_

private

Definition at line 115 of file cvaswapengine.hpp.

discountCurve_

Handle<YieldTermStructure> discountCurve_

private

Definition at line 116 of file cvaswapengine.hpp.

defaultTS_

Handle<DefaultProbabilityTermStructure> defaultTS_

private

Definition at line 117 of file cvaswapengine.hpp.

ctptyRecoveryRate_

Real ctptyRecoveryRate_

private

Definition at line 118 of file cvaswapengine.hpp.

invstDTS_

Handle<DefaultProbabilityTermStructure> invstDTS_

private

Definition at line 119 of file cvaswapengine.hpp.

invstRecoveryRate_

Real invstRecoveryRate_

private

Definition at line 120 of file cvaswapengine.hpp.