Calculates Implied Recovery Rate

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Description

implied_RR that calculates the recovery rate implied by the CDS spread and probability of default (pd) by using the ISDA model. This takes a data frame of inputs and returns a vector of the same length.

Usage

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implied_RR(x, date.var = "date", tenor.var = "tenor",
  maturity.var = "maturity", spread.var = "spread", pd.var = "pd")

Arguments

x

data frame, contains all the relevant columns.

date.var

character, column in x containing date variable.

tenor.var

character, column in x containing tenors.

maturity.var

character, column in x containing maturity date.

spread.var

character, column in x containing spread in basis points.

pd.var

name of the column containing the probability of default rates.

Value

implied recovery rate in percentage based on the general approximation for a probability of default in the Bloomberg manual. The actual calculation uses a complicated bootstrapping process, so the results may be marginally different.