cds index option

financepy.products.credit.cds_index_option

Class

CDSIndexOption

CDSIndexOption(
    expiry_dt: Date,
    maturity_dt: Date,
    index_cpn: float,
    strike_cpn: float,
    notional: float = 1000000,
    long_protect: bool = True,
    freq_type: FrequencyTypes = <FrequencyTypes.QUARTERLY: 4>,
    accrual_dc_type: DayCountTypes = <DayCountTypes.ACT_360: 8>,
    cal_type: CalendarTypes = <CalendarTypes.WEEKEND: 2>,
    bd_type: BusDayAdjustTypes = <BusDayAdjustTypes.FOLLOWING: 2>,
    dg_type: DateGenRuleTypes = <DateGenRuleTypes.BACKWARD: 2>,
) -> None

Class to manage the pricing and risk management of an option to enter into a CDS index. Different pricing algorithms are presented.

Methods

value_adjusted_black


value_adjusted_black(
    self,
    value_dt: Date,
    index_curve: DiscountCurve,
    index_recovery: float,
    libor_curve: DiscountCurve,
    sigma: float,
)

This approach uses two adjustments to black's option pricing model to value an option on a CDS index.

value_anderson


value_anderson(
    self,
    value_dt: Date,
    issuer_curves: list[financepy.market.curves.discount_curve.DiscountCurve],
    index_recovery: float,
    sigma: float,
)

This function values a CDS index option following approach by Anderson (2006). This ensures that a no-arbitrage relationship between the constituent CDS contract and the CDS index is enforced. It models the forward spread as a log-normally distributed quantity and uses the credit triangle to compute the forward RPV01.

Generated automatically from the FinancePy source code. Do not edit this file manually.