CreditCurve: CreditCurve class

In imanuelcostigan/fmbasics: Financial Market Building Blocks

Description

A class that defines the bare bones of a credit curve pricing structure.

Usage

CreditCurve(survival_probabilities, reference_date, interpolation, specs)

Arguments

survival_probabilities	a SurvivalProbabilities object. These are converted to continuously compounded zero coupon interest rates with an act/365 day basis for internal storage purposes
reference_date	a Date object
interpolation	an Interpolation object
specs	CDS curve specifications that inherits from CDSSpec()

Details

A term structure of credit spread is a curve showing several credit spreads across different contract lengths (2 month, 2 year, 20 year, etc...) for a similar debt contract. The curve shows the relation between the (level of) crdit spread and the time to maturity, known as the "term", of the debt for a given borrower in a given currency. When the effect of coupons on spreads are stripped away, one has a zero-coupon credit curve.

The following interpolation schemes are supported by ZeroCurve: ConstantInterpolation, LinearInterpolation, LogDFInterpolation and CubicInterpolation. Points outside the calibration region use constant extrapolation on the zero hazard rate.

Value

a CreditCurve object curve_specs <- CDSMarkitSpec(rating = "AAA", region = "Japan", sector = "Utilities") zero_curve <- build_zero_curve() ref_date <- zero_curve$reference_date specs <- CDSMarkitSpec(rating = "AAA", region = "Japan", sector = "Utilities") cds_curve <- CDSCurve(reference_date = ref_date, tenors = c(1, 3, 5, 7), spreads = c(0.0050, 0.0070, 0.0090, 0.0110), lgd = .6, premium_frequency = 4, specs = curve_specs) sp <- as_SurvivalProbabilities(x = cds_curve, zero_curve = zero_curve) CreditCurve(survival_probabilities = sp, reference_date =ref_date, interpolation = CubicInterpolation(), specs = curve_specs)

See Also

Interpolation

imanuelcostigan/fmbasics documentation built on Dec. 6, 2019, 9:48 a.m.