Class IsdaCurve

java.lang.Object
com.quantfinlib.credit.IsdaCurve
public final class IsdaCurve extends Object
A curve of the kind the ISDA CDS Standard Model works on: continuously compounded zero rates r_i at node times t_i (years, ACT/365F from the curve's base date), interpolated linearly in r(t) * t. That makes the instantaneous forward piecewise constant between nodes, which is what lets the model integrate its legs in closed form segment by segment (ISDA CDS Standard Model, "ISDA CDS Standard Model proposed numerical fix", Markit 2009, and the JPMorgan CDS library JpmcdsZeroPrice). Before the first node the zero rate is held at r_1 and after the last at r_n, so the forward there is r_1 and r_n.

The same object serves as a discount curve (value(double) is the discount factor P(t)) and as a survival curve (the "rate" is the average hazard, value(t) is Q(t)). ofHazardRates(double[], double[]) builds the second from piecewise-constant hazards on (t_{i-1}, t_i]. Research lane, deterministic.

  • Method Summary

    Modifier and Type
    Method
    Description
    static IsdaCurve
    flat(double rate)
    A flat curve: constant zero rate (or constant hazard).
    static IsdaCurve
    ofHazardRates(double[] times, double[] hazards)
    Survival curve from piecewise-constant hazards: hazards[i] applies on (t_{i-1}, t_i] with t_{-1} = 0, and the last hazard continues beyond the last node.
    static IsdaCurve
    ofZeroRates(double[] times, double[] zeroRates)
    Curve from zero rates.
    double
    rateTimesTime(double t)
    r(t) * t, the integrated forward from 0 to t.
    double
    time(int i)
    Node time i.
    double[]
    timesCopy()
    Copy of the node times.
    int
    timesLength()
    Number of nodes (a hazard curve carries one extra node 1000 years out).
    double
    value(double t)
    exp(-r(t) t): the discount factor, or the survival probability.
    double
    zeroRate(double t)
    Continuously compounded zero rate at t > 0.

    Methods inherited from class Object

    clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

  • Method Details

    • ofZeroRates

      public static IsdaCurve ofZeroRates(double[] times, double[] zeroRates)
      Curve from zero rates.
      Parameters:
      times - strictly ascending node times in years, all > 0 and finite
      zeroRates - continuously compounded zero rates at the nodes, finite
      Returns:
      the curve

    • ofHazardRates

      public static IsdaCurve ofHazardRates(double[] times, double[] hazards)
      Survival curve from piecewise-constant hazards: hazards[i] applies on (t_{i-1}, t_i] with t_{-1} = 0, and the last hazard continues beyond the last node.
      Parameters:
      times - strictly ascending node times in years, all > 0 and finite
      hazards - hazards per year, ≥ 0 and finite
      Returns:
      the curve, whose value(double) is Q(t)

    • flat

      public static IsdaCurve flat(double rate)
      A flat curve: constant zero rate (or constant hazard).

    • rateTimesTime

      public double rateTimesTime(double t)
      r(t) * t, the integrated forward from 0 to t.
      Parameters:
      t - time in years, ≥ 0 and finite
      Returns:
      the integral

    • zeroRate

      public double zeroRate(double t)
      Continuously compounded zero rate at t > 0.

    • value

      public double value(double t)
      exp(-r(t) t): the discount factor, or the survival probability.

    • timesLength

      public int timesLength()
      Number of nodes (a hazard curve carries one extra node 1000 years out).

    • time

      public double time(int i)
      Node time i.

    • timesCopy

      public double[] timesCopy()
      Copy of the node times.