Bootstrap Default Probability Curve from Market CDS
Instruments
This example shows how to use defprobstrip
to bootstrap a defprobcurve
object based on market CDS
instruments.
Create ratecurve
Object for Zero-Rate Curve
Create a ratecurve
object using ratecurve
.
Settle = datetime(2017,9,15);
ZeroTimes = [calmonths(6) calyears([1 2 3 4 5 7 10 20 30])];
ZeroRates = [0.0052 0.0055 0.0061 0.0073 0.0094 0.0119 0.0168 0.0222 0.0293 0.0307]';
ZeroDates = Settle + ZeroTimes;
ZeroCurve = ratecurve("zero",Settle,ZeroDates,ZeroRates);
Market CDS Spreads and Vector of Market CDS
Instruments
Define the market CDS spreads and use fininstrument
to create a vector of market CDS
instrument objects.
SpreadTimes = [1 2 3 4 5 7 10 20 30]'; Spread = [140 175 210 265 310 360 410 460 490]'; MarketDates = datemnth(Settle,12*SpreadTimes); NumMarketInst = length(MarketDates); ContractSpreadBP = zeros(NumMarketInst,1); MarketCDSInstruments(NumMarketInst,1) = fininstrument("cds", ... 'ContractSpread', ContractSpreadBP(end), 'Maturity', MarketDates(end)); for k = 1:NumMarketInst MarketCDSInstruments(k,1) = fininstrument("cds", ... 'ContractSpread', ContractSpreadBP(k), 'Maturity', MarketDates(k)); end
Use defprobstrip
to create a defprobcurve
object.
DefaultProbCurve = defprobstrip(ZeroCurve,MarketCDSInstruments, Spread)
DefaultProbCurve = defprobcurve with properties: Settle: 15-Sep-2017 Basis: 2 Dates: [9x1 datetime] DefaultProbabilities: [9x1 double]