Re: [Quantlib-dev] CDS upfront

[Simon I. <s.i...@gm...>]

I think this has already been done in
ql\pricingengines\credit\integralcdsengine where you can choose an
integration periodicity.

Simon

PS You have to look at the files - I don't think they've been added to the
VC++ project file.



On 6/4/08, ja...@fr... <ja...@fr...> wrote:
>
> This is what happens with junior tranches. It makes sense when they are
> very
> risky. Cant we add the upfront as a member to the cds? and then
> price/calibrate:
>
> CL = upfront * DF (settlement) + \sum [c_i df_i psurv_i + accrued_i] = DL
>
> Of course if there r no coupons, and this is your point I guess, we are
> left
> with arbitrarily timed integration points in the default leg. We only have
> the
> CDS tenors and will not interpolate for coupon dates (no coupons). (
> Curiously
> it means the CL is independent of the interpolator we choose) But then the
> tenors can jump 5Y and that will make the DL integration innacurate.
>
> A quick one is to have a zero spread schedule with coupons every 3M or 1M
> for
> the DL computation (and incompatible with paysAtDefaultTime since these are
> fictitious points), but thats just a dirty trick. Since we construct the
> schedule outside the CDS I can not see a lib user setting schedules for a
> zero
> spread....... Besides, it will burden the CL calculation with zero
> products...
>
> what if coupon schedule = void THEN create 3M/1M empty schedule? Not
> elegant,
> hum?
>
> This question rises also the one of how accurate is to calculate the DL
> with the
> coupons schedule, it might contain periods which are too long for accuracy.
>
> pp
>
> Quoting Simon Ibbotson <s.i...@gm...>:
>
> > Just a quick note on this (if anyone is thinking of implementing
> something)
> > - it is also quite common for a contract to be both... i.e. have an
> upfront
> > payment plus a running spread. So, incorporating a simple payment at the
> > front of a CDS could be the simplest way of allowing upfront prices.
> >
> > Simon
> >
> >
> > On 6/3/08, Luca Billi <luc...@gm...> wrote:
> > >
> > > Since sometimes CDS quotes are based on upfront (price) rather then
> > > premium,
> > > it would be nice to have the possibility to use directly that upfront
> > > when bootstrapping credit curves and when pricing CDS contracts.
> > >
> > > I was wondering if anyone has thought about adding this feature or is
> > > willing to share any ideas.
> > >
> > > Thanks,
> > > Luca
> > >
> > >
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