Re: Credit Spread in Trees

Posted by Luigi Ballabio-2 on
URL: http://quantlib.414.s1.nabble.com/Credit-Spread-in-Trees-tp2481p2482.html

At 10:42 AM 4/15/03 +0200, [hidden email] wrote:
>I'm thinking about the way to introduce a spread (like credit spread) in
>the evaluation of interest rate derivatives
>
>but for a floater I would need 2 different term structures, one for
>discounting (spreaded) and one to compute forward rates (without spread).

Andrea,
         if you check out the latest version from CVS, you can use Nicolas'
IndexedCoupon for the task, namely:
1) instantiate a Libor object by passing it the curve without spread;
2) instantiate the coupons (in this case, UpFrontIndexedCoupon) by passing
    them the libor you created;
3) discount the coupon values returned by CashFlow::amount by using the
    spreaded term structure.

Also, you're welcome to perform:
4) wrap the above in a Bond class and contribute it to the library :)

Bye,
         Luigi