Re: [Quantlib-users] CDS quoted spread v Running/par spread calculator

[Jack G <jac...@gm...>]

Ben,

Please do consider helping us fix the documentation issues you describe by
contributing to the python docs here, once you have got it working:
https://quantlib-python-docs.readthedocs.io/en/latest/

Many thanks!
Jack


On Tue, 4 Apr 2023, 11:57 Ben Watson, <ben...@ma...>
wrote:

> Thank you Luigi,
>
>
>
> Thank you for this – looks promising, but not a lot doco on UpfrontCdsHelper
> to work with.  But I have put together a function to test this out. The
> code also print the all the types of the inputs to the UpfrontCdsHelper to
> make sure I am passing the correct types.
>
>
>
> I got ‘kind of’ close to get it working, but….
>
>
>
> If I leave the model (being the MidpointEngine) out of the
> UpfrontCdsHelper caller function, it throws no error, except that I get the
> following error when calling impliedQuote
>
>
>
>   return _QuantLib.DefaultProbabilityHelper_impliedQuote(self)
>
> RuntimeError: Boost assertion failed: px != 0
>
>
>
> If I include the MidpointEngine I get the following error
>
>
>
> TypeError: Wrong number or type of arguments for overloaded function
> 'new_UpfrontCdsHelper'.
>
>   Possible C/C++ prototypes are:….
>
> …
>
> …
>
> UpfrontCdsHelper::UpfrontCdsHelper(Rate,Rate,Period const
> &,Integer,Calendar const
> &,Frequency,BusinessDayConvention,DateGeneration::Rule,DayCounter const
> &,Real,Handle< YieldTermStructure > const &,Natural,bool,bool,Date const
> &,DayCounter const &,bool,CreditDefaultSwap::PricingModel)
>
> ….
>
> ….
>
>
>
> The type of the is …. model <QuantLib.QuantLib.MidPointCdsEngine; proxy
> of <Swig Object of type 'ext::shared_ptr< MidPointCdsEngine > *' at
> 0x000001150752E4E0> > <class 'QuantLib.QuantLib.MidPointCdsEngine'>
>
>
>
> Not sure if there is something that I am doing wrong or there is a bug…
>
>
>
> Code below….
>
>
>
> import QuantLib as ql
>
>
>
> def convert_spreads(    upfront,    running_spread,    recovery_rate,
> notional,    maturity_date,    today=None,    coupon_frequency=4,
> day_count=ql.Thirty360(),    calendar=ql.TARGET(),):
>
>
>
>     flat_ts = ql.FlatForward(today, 0.0, day_count, ql.Compounded, ql.
> Annual)
>
>     yield_curve_handle = ql.YieldTermStructureHandle(flat_ts)
>
>
>
>     upfront_quote =  ql.QuoteHandle(ql.SimpleQuote(upfront))
>
>     running_spread_quote =running_spread#
> ql.QuoteHandle(ql.SimpleQuote(running_spread))
>
>
>
>     hazard_rate_structure = upfront_quote
>
>     default_probability_curve = ql.FlatHazardRate(0, calendar,
> hazard_rate_structure, day_count)
>
>     MidpointEngine = ql.MidPointCdsEngine( ql.
> DefaultProbabilityTermStructureHandle(default_probability_curve),
> recovery_rate,yield_curve_handle, )
>
>
>
>     settlementDays=2
>
>     tenor=ql.Period(5,ql.Years)
>
>     frequency= ql.Quarterly
>
>     paymentConvention=ql.Following
>
>     rule=ql.DateGeneration.TwentiethIMM
>
>     dayCounter=ql.Actual365Fixed()
>
>     upfrontSettlementDays=3
>
>     settlesAccrual =True
>
>     paysAtDefaultTime=True
>
>     startDate=today
>
>     lastPeriodDayCounter=ql.Actual365Fixed()
>
>     rebatesAccrual=True
>
>     model=MidpointEngine
>
>
>
>     print(
> '============================================================================================================================='
> )
>
>     print('upfront_quote',upfront_quote,type(upfront_quote))
>                            # const Handle< Quote > &   upfront,
>
>     print('upfront',upfront,type(upfront))
>                            # Rate  runningSpread
>
>     print('running_spread_quote',running_spread_quote,type(
> running_spread_quote))                   # Rate  runningSpread,
>
>     print('tenor',tenor,type(tenor))
>                            # const Period &    tenor,
>
>     print('settlementDays',settlementDays,type(settlementDays))
>                           # Integer   settlementDays,
>
>     print('calendar',calendar,type(calendar))
>                           # const Calendar &  calendar,
>
>     print('frequency',frequency,type(frequency))
>                            # Frequency     frequency,
>
>     print('paymentConvention',paymentConvention,type(paymentConvention))
>                            # BusinessDayConvention     paymentConvention,
>
>     print('rule',rule,type(rule))
>                           # DateGeneration::Rule  rule,
>
>     print('dayCounter',dayCounter,type(dayCounter))
>                           # const DayCounter &    dayCounter,
>
>     print('recovery_rate',recovery_rate,type(recovery_rate))
>                            # Real  recoveryRate,
>
>     print('yield_curve_handle',yield_curve_handle,type(yield_curve_handle))
>                         # const Handle< YieldTermStructure > &
>  discountCurve,
>
>     print('upfrontSettlementDays',upfrontSettlementDays,type(
> upfrontSettlementDays))                # Natural   upfrontSettlementDays
> = 3,
>
>     print('settlesAccrual',settlesAccrual,type(settlesAccrual))
>                           # bool  settlesAccrual = true,
>
>     print('paysAtDefaultTime',paysAtDefaultTime,type(paysAtDefaultTime))
>                            # bool  paysAtDefaultTime = true,
>
>     print('startDate',startDate,type(startDate))
>                            # const Date &  startDate = Date(),
>
>     print('lastPeriodDayCounter',lastPeriodDayCounter,type(
> lastPeriodDayCounter))                   # const DayCounter &
>  lastPeriodDayCounter = DayCounter(),
>
>     print('rebatesAccrual',rebatesAccrual,type(rebatesAccrual))
>                           # bool  rebatesAccrual = true,
>
>     print('model',model,type(model))
>                            # CreditDefaultSwap::PricingModel   model =
> CreditDefaultSwap::Midpoint
>
>     print(
> '============================================================================================================================='
> )
>
>
>
>     helper = ql.UpfrontCdsHelper(
>
>         upfront,                                        # Rate
>  runningSpread / const Handle< Quote > &     upfront,
>
>         running_spread_quote,                           # Rate
>  runningSpread,
>
>         tenor,                                          # const Period &
>    tenor,
>
>         settlementDays,                                 # Integer
> settlementDays,
>
>         calendar,                                       # const Calendar
> &  calendar,
>
>         frequency,                                      # Frequency
> frequency,
>
>         paymentConvention,                              #
> BusinessDayConvention     paymentConvention,
>
>         rule,                                           #
> DateGeneration::Rule  rule,
>
>         dayCounter,                                     # const
> DayCounter &    dayCounter,
>
>         recovery_rate,                                  # Real
>  recoveryRate,
>
>         yield_curve_handle,                             # const Handle<
> YieldTermStructure > &  discountCurve,
>
>         upfrontSettlementDays,                          # Natural
> upfrontSettlementDays = 3,
>
>         settlesAccrual,                                 # bool
>  settlesAccrual = true,
>
>         paysAtDefaultTime,                              # bool
>  paysAtDefaultTime = true,
>
>         startDate,                                      # const Date &
>  startDate = Date(),
>
>         lastPeriodDayCounter,                           # const
> DayCounter &    lastPeriodDayCounter = DayCounter(),
>
>         rebatesAccrual,                                 # bool
>  rebatesAccrual = true,
>
>     #    model,                                          #
> CreditDefaultSwap::PricingModel  model = CreditDefaultSwap::Midpoint
>
>         )
>
>
>
>     fair_running_spread = helper.impliedQuote()
>
>
>
>     return  fair_running_spread
>
>
>
> if __name__ == "__main__":
>
>     upfront = 0.01
>
>     running_spread = 0.012
>
>     recovery_rate = 0.4
>
>     notional = 1e7
>
>     maturity_date = ql.Date(20,12,2028)
>
>
>
>     today = ql.Date(3,4,2023)
>
>     ql.Settings.instance().setEvaluationDate(today)
>
>     fair_upfront, fair_running_spread = convert_spreads(upfront,
> running_spread, recovery_rate, notional, maturity_date, today    )
>
>
>
>     print(f"Fair Running Spread: {fair_running_spread:.4f}")
>
>
>
>
>
>
>
>
>
>
>
> *From:* Luigi Ballabio <lui...@gm...>
> *Sent:* Monday, April 3, 2023 6:04 PM
> *To:* Ben Watson <ben...@ma...>
> *Cc:* QuantLib Users <qua...@li...>
> *Subject:* Re: CDS quoted spread v Running/par spread calculator
>
>
>
> Hello Ben,
>
>     you can use the UpfrontCdsHelper class instead. It allows you to
> specify both the spread and the quoted upfront.
>
>
>
> Best,
>
>     Luigi
>
>
>
>
>
> On Mon, Apr 3, 2023, 06:44 Ben Watson <ben...@ma...>
> wrote:
>
> Just trying to get a bit of guidance on this.
>
>
>
> The documentation talks about running spread – which would be the case when coupon=spread. This is not quoted in the market as they quote 100 or 500 coupon.
>
> ql.*SpreadCdsHelper*(  runningSpread, tenor, settlementDays, calendar, frequency,  paymentConvention, rule, dayCounter, recoveryRate, yts)
>
>
>
> Example in Git hub (
> https://github.com/lballabio/QuantLib-SWIG/blob/master/Python/examples/cds.py)
> talks about quoted spread which would in the market come to mean a fixed
> coupon. The CDS helper however does not have a coupon.
>
>
>
> quoted_spreads = [0.0150, 0.0150, 0.0150, 0.0150]
>
> tenors = [ql.Period(3, ql.Months), ql.Period(6, ql.Months), ql.Period(1,
> ql.Years), ql.Period(2, ql.Years)]
>
> maturities = [calendar.adjust(todaysDate + x, ql.Following) for x in
> tenors]
>
>
>
> instruments = [     ql.SpreadCdsHelper(
> ql.QuoteHandle(ql.SimpleQuote(s)),        tenor,        0,
> calendar,        ql.Quarterly,        ql.Following,
> l.DateGeneration.TwentiethIMM,        ql.Actual365Fixed(),
> recovery_rate,        risk_free_rate,    )
>
>
>
> So not so clear, but it looks like it is running spread
>
>
>
> In light of this is there any function that converts the market quote
> (with 100 or 500 coupon) to the running spread that I can use to bootstrap
> a CDS curve?
>
>
>
> Regards
>
>
>
> Ben
>
>
>
>
>
>
>
>
>
>
>
> *From:* Ben Watson <ben...@ma...>
> *Sent:* Thursday, March 30, 2023 10:54 AM
> *To:* 'QuantLib Users' <qua...@li...>; 'Luigi
> Ballabio' <lui...@gm...>
> *Subject:* CDS quoted spread v Running/par spread calculator
>
>
>
> Hi,
>
>
>
> Noticed that the CDS curve builder uses the running spread to boot strap
> the curve. However the quotes I am working with is basis 100 or 500 coupon
> with an up front. Does Quantlib have a spread converter to change the
> quoted spreads to the running spreads?
>
>
>
> Ben
>
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