Confronting the upfront

[japari]

Hi all,
I have modified the cds to include upfront and running quotes. It affects the
 cds, their engines and the calibration helpers. Although there are quite a
few changes the interfaces do not change much and existing client code will
still work (at the price of misnaming the helpers a bit... )

I have split the bootstrap helpers in two different ones, each one corresponds
 to a different quotation mode and they target a different spread in the
bootstrapping.

Upfront quotes have a standardised/conventional mapping to a 'conventional
spread', this is done by means of a conventional recovery rate (different to
the market one) and a standard model (JPM is the public/ISDA standard for
this convention mapping). This is why I included the new member, methods,
 spreads and cashflow. I have put the upfront flow in a different "leg".
There are three spreads now, the upfront, the running and the conventional.

Computing the implicit conventional is done with the library models and not
 with the JPM standard which is becoming public for .... maybe this reason?
 Anyway, so a difference might appear. Models performing interpolations on HRs
 directly rather than on the intensities or the probabilities will give
different results.

Theres an impact on the cds options so these change too but internally only.
I have forced the options to be referring to running only quoted swaps. I
havent think much on this but looks like one could model through  Blacks the
forward upfront in the same way the forward running is. But what I am not
sure is that a Black forward running model is compatible with (implies also
a) a Black forward upfront and what the relation among the volatilies are
now.
I have no idea how the options are going to be quoted now. There is the
possibility of performing a transformation in another constructor to a
running only equivalent underlying cds and continue as it is.
Anyone has experience on this, or from another context, FI?

There are a few decissions on legs and helpers with which you might disagree,
 please do comment on these.
For instance the way the BPS is interpreted now. Or I have added schedule to
the helpers as a member, this might increase compilation time.

Luigi, do you think this code can be included for the next release? I have
taken the pain of writting it in two flavours, the old and new interfaces so
anyone can test it.

Regards
Pepe


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[japari]

Hello again,
my drive is quite a mess with so many versions of the lib and two of the files I
have send you are the wrong ones. Please substitute them by these (for the new
interface case).

Apologies
Pepe

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[kevinwang]

Hi, Pepe and Luigi, will this new upfront feature for CDS be in prodution soon?

Thanks
Kevin

Jose Aparicio-Navarro wrote

Hello again,
my drive is quite a mess with so many versions of the lib and two of the files I
have send you are the wrong ones. Please substitute them by these (for the new
interface case).

Apologies
Pepe

 
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[japari]

Hi Kevin,
Probably yes (Luigi?).  The problem is that several data structures in the
credit framework need refactoring. I am currently working on it but its
taking me more trouble than I expected and I found less time for it than I
 thought.
I am not far from proposing something but it still needs to go to the
collaborative stage and get feedback from the other people involved. It
impacts all the credit side.
So even if you patch the code with the files I have submitted you might find
quite a different interface in the end.
Knowing that, if you want to test what it was submitted and provide feedback
that would be quite useful at this stage.
Regards
Pepe

Quoting kevinwang <[hidden email]>:

>
> Hi, Pepe and Luigi, will this new upfront feature for CDS be in prodution
> soon?
>
> Thanks
> Kevin
>
>
> Jose Aparicio-Navarro wrote:
> >
> > Hello again,
> > my drive is quite a mess with so many versions of the lib and two of the
> > files I
> > have send you are the wrong ones. Please substitute them by these (for the
> > new
> > interface case).
> >
> > Apologies
> > Pepe
> >
> >
> >
> ------------------------------------------------------------------------------
> > Open Source Business Conference (OSBC), March 24-25, 2009, San Francisco,
> > CA
> > -OSBC tackles the biggest issue in open source: Open Sourcing the
> > Enterprise
> > -Strategies to boost innovation and cut costs with open source
> > participation
> > -Receive a $600 discount off the registration fee with the source code:
> > SFAD
> > http://p.sf.net/sfu/XcvMzF8H
> > _______________________________________________
> > QuantLib-dev mailing list
> > [hidden email]
> > https://lists.sourceforge.net/lists/listinfo/quantlib-dev
> >
> >
>
> --
> View this message in context:
> http://www.nabble.com/Confronting-the-upfront-tp22324891p23145719.html
> Sent from the quantlib-dev mailing list archive at Nabble.com.
>
>
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[Luigi Ballabio]

On Tue, 2009-04-21 at 12:17 +0200, Jose Aparicio-Navarro wrote:
> Probably yes (Luigi?).  

Yes. I was waiting for you to implement the changes you discussed with
Roland. Not that I want to hurry you, of course...

Luigi


--

Greenspun's Tenth Rule of Programming:
Any sufficiently complicated C or Fortran program contains an
ad-hoc, informally-specified bug-ridden slow implementation of
half of Common Lisp.



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[Ferdinando Ametrano-4]

On Mon, Apr 20, 2009 at 11:56 PM, kevinwang <[hidden email]> wrote:
> will this new upfront feature for CDS be in prodution soon?

I wonder how to bootstrap including an upfront if depending on the
TermStructure reference date the upfront might not enter the NPV?

;-)

ok, ok, I'm joking... sorry... I just couldn't resist... :-D

ciao -- Nando

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[japari]

Quoting Luigi Ballabio <[hidden email]>:
> Yes. I was waiting for you to implement the changes you discussed with
> Roland. Not that I want to hurry you, of course...
>
Is there a QuantLib Union?
:-)

Now seriously, no less than a week to start discussing what I propose.

Regards
Pepe


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[japari]

Quoting Ferdinando Ametrano <[hidden email]>:

> I wonder how to bootstrap including an upfront if depending on the
> TermStructure reference date the upfront might not enter the NPV?
>
> ;-)
>
> ok, ok, I'm joking... sorry... I just couldn't resist... :-D
>
> ciao -- Nando
>

Its not sci fiction, its in there:
and it boostraps from it

    void MidPointCdsEngine::calculate() const {
[.....]
        // Upfront Flow NPV. Either we are on-the-run (no flow)
        // or we are forward start
        Real upfPVO1 = 0.0;
        if(!arguments_.upfrontPayment.hasOccurred(settlementDate, true))//true?
            upfPVO1 =
                probability_->survivalProbability(settlementDate) *
                discountCurve_->discount(settlementDate);
        results_.upfrontNPV = upfPVO1 * arguments_.upfrontPayment.amount();
[.....]

"hasOcurred" hits back...
Settlement lags are relevant here indeed (ordering combinations of
T_settle=upfrtPay  Today and T_protection_start), I did not enter the discussion
but followed with interest because of this but yes the meaning of today is
relevant.

Regards
Pepe


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