BlackCdsOptionEngine Class Reference

#include <qle/pricingengines/blackcdsoptionengine.hpp>

Inheritance diagram for BlackCdsOptionEngine:

Public Member Functions
	BlackCdsOptionEngine (const QuantLib::Handle< QuantLib::DefaultProbabilityTermStructure > &probability, QuantLib::Real recovery, const QuantLib::Handle< QuantLib::YieldTermStructure > &discount, const QuantLib::Handle< QuantExt::CreditVolCurve > &volatility)
Inspectors
const QuantLib::Handle< QuantLib::DefaultProbabilityTermStructure > &	probability () const
QuantLib::Real	recovery () const
const QuantLib::Handle< QuantLib::YieldTermStructure >	discount () const
const QuantLib::Handle< QuantExt::CreditVolCurve >	volatility () const

Instrument interface
void	calculate () const override

Detailed Description

Black single name CDS option engine

Prices single name CDS option instruments quoted in terms of strike spread. It is assumed that the volatility structure's strike dimension, if there is one, is in terms of spread also. This is the standard situation for single name CDS options.

The valuation follows the approach outlined in Modeling Single-name and Multi-name Credit Derivatives, Dominic O'Kane, 2008, Section 9.3.7. This is also the approach in A CDS Option Miscellany, Richard J. Martin, 2019, Section 2.1 and 2.2. If we need the approach in Section 2.4 of that paper, we would need to make adjustments to the forward spread and RPV01 in our calculation which may in turn need access to the ISDA supplied interest rate curve. We leave that as a possible future enhancement.