Merge branch 'feature/QPR-12830' into 'master'

QPR-12830, QPR-13094 Support IsdaCdsEngine + Conv Spreads + Assumed RR

Closes QPR-12830

See merge request qs/oreplus!2911

Author: Sebastien Bouvard

Docs/UserGuide/curve_configurations/default_curves_from_cds.tex

@@ -15,7 +15,7 @@ \subsubsection{Default Curves from CDS}
 The default curve's currency.
 
 \item \lstinline!Type!:
-For a default curve built from CDS, the \lstinline!Type! should be set to \lstinline!SpreadCDS! if the \lstinline!Quotes! reference CDS spread quotes or \lstinline!Price! if the \lstinline!Quotes! reference upfront price quotes.
+For a default curve built from CDS, the \lstinline!Type! should be set to \lstinline!SpreadCDS! if the \lstinline!Quotes! reference CDS spread quotes or \lstinline!Price! if the \lstinline!Quotes! reference upfront price quotes or \lstinline!ConvSpreadCDS! if the \lstinline!Quotes! reference Conventional CDS spread quotes.  Note that if ConvSpreadCDS or Price is used, the model will be IsdaCdsEngine. Else, MidPointCdsEngine.
 
 \item \lstinline!DiscountCurve!:
 A reference to a valid discount curve specification that will be used to discount cashflows during the bootstrap process. It should be of the form \lstinline!Yield/Currency/curve_name! where \lstinline!curve_name! is the name of a yield curve defined in the yield curve configurations.
@@ -43,7 +43,7 @@ \subsubsection{Default Curves from CDS}
   using the adjacent terms of the provided quotes.
 
 \item \lstinline!Quotes!:
-The \lstinline!Quotes! element should be populated with a list of valid \lstinline!Quote! elements. If the \lstinline!Type! is \lstinline!SpreadCDS!, the quotes should be CDS spread quote strings as documented in Section \ref{md:cds_spread_quote} and if \lstinline!Type! is \lstinline!Price!, the quotes should be CDS upfront price quote strings as documented in Section \ref{md:cds_price_quote}. The attribute \lstinline!optional! in the \lstinline!Quote! element should be set to \lstinline!true! if the associated quote is optional and set to \lstinline!false! if the associated quote is mandatory. If a quote is mandatory and not found in the market, the default curve building will fail. The attribute \lstinline!optional! may be omitted from the quote element. In this case, it defaults to \lstinline!false! and the quote is mandatory. Note also that instead of a list of explicit quotes, a single quote may be provided with the wildcard character \lstinline!*!. In this case, the market is searched for quotes matching the pattern. For example, \lstinline!CDS/CREDIT_SPREAD/JPM/SNRFOR/USD/XR14/*! would return all quotes in the market that start with \lstinline!CDS/CREDIT_SPREAD/JPM/SNRFOR/USD/XR14!.
+The \lstinline!Quotes! element should be populated with a list of valid \lstinline!Quote! elements. If the \lstinline!Type! is \lstinline!SpreadCDS!, the quotes should be CDS spread quote strings as documented in Section \ref{md:cds_spread_quote} and if \lstinline!Type! is \lstinline!Price!, the quotes should be CDS upfront price quote strings as documented in Section \ref{md:cds_price_quote} and If the \lstinline!Type! is \lstinline!ConvSpreadCDS!, the quotes should be Conv CDS spread quote strings as documented in Section \ref{md:cds_spread_quote}. The attribute \lstinline!optional! in the \lstinline!Quote! element should be set to \lstinline!true! if the associated quote is optional and set to \lstinline!false! if the associated quote is mandatory. If a quote is mandatory and not found in the market, the default curve building will fail. The attribute \lstinline!optional! may be omitted from the quote element. In this case, it defaults to \lstinline!false! and the quote is mandatory. Note also that instead of a list of explicit quotes, a single quote may be provided with the wildcard character \lstinline!*!. In this case, the market is searched for quotes matching the pattern. For example, \lstinline!CDS/CREDIT_SPREAD/JPM/SNRFOR/USD/XR14/*! would return all quotes in the market that start with \lstinline!CDS/CREDIT_SPREAD/JPM/SNRFOR/USD/XR14!.
 
 \item \lstinline!Conventions!:
 The name of a valid set of CDS conventions, as documented in Section \ref{sss:cds_conventions}, to use in the bootstrap.

Docs/UserGuide/marketdata.tex

@@ -32,12 +32,12 @@ \section{Market Data}\label{sec:market_data}
     \hline
  Instrument Type & \emph{ZERO, DISCOUNT, MM, MM\_FUTURE, FRA, IMM\_FRA,
   IR\_SWAP,  BASIS\_SWAP, CC\_BASIS\_SWAP, CDS, CDS\_INDEX, FX\_SPOT, FX\_FWD,
-  SWAPTION, CAPFLOOR, FX\_OPTION, HAZARD\_RATE, RECOVERY\_RATE,
+  SWAPTION, CAPFLOOR, FX\_OPTION, HAZARD\_RATE, RECOVERY\_RATE, ASSUMED\_RECOVERY\_RATE,
   ZC\_INFLATIONSWAP, YY\_INFLATIONSWAP, ZC\_INFLATIONCAPFLOOR,
   SEASONALITY, EQUITY\_SPOT, EQUITY\_FWD, EQUITY\_DIVIDEND, 
   EQUITY\_OPTION, BOND, INDEX\_CDS\_OPTION, CPR, COMMODITY, COMMODITY\_FWD, COMMODITY\_OPTION} \\
 \hline
-  Quote Type & \emph{BASIS\_SPREAD, CREDIT\_SPREAD, YIELD\_SPREAD, HAZARD\_RATE,
+  Quote Type & \emph{BASIS\_SPREAD, CREDIT\_SPREAD, CONV\_CREDIT\_SPREAD, YIELD\_SPREAD, HAZARD\_RATE,
   RATE, RATIO, PRICE, RATE\_LNVOL, RATE\_NVOL, RATE\_SLNVOL,
   BASE\_CORRELATION, SHIFT} \\
 \hline
@@ -678,6 +678,14 @@ \subsection{CDS Spread}
 \item \lstinline!CDS/CREDIT_SPREAD/RBS/SUBLT2/EUR/MR14/10Y/500!
 \item \lstinline!CDS/CREDIT_SPREAD/RBS/SUBLT2/EUR/1Y!
 \item \lstinline!CDS/CREDIT_SPREAD/RBS/SUBLT2/EUR/1Y/500!
+\item \lstinline!CDS/CONV_CREDIT_SPREAD/JPM/SNRFOR/USD/5Y!
+\item \lstinline!CDS/CONV_CREDIT_SPREAD/JPM/SNRFOR/USD/5Y/100!
+\item \lstinline!CDS/CONV_CREDIT_SPREAD/JPM/SNRFOR/USD/XR14/5Y!
+\item \lstinline!CDS/CONV_CREDIT_SPREAD/JPM/SNRFOR/USD/XR14/5Y/100!
+\item \lstinline!CDS/CONV_CREDIT_SPREAD/RBS/SUBLT2/EUR/MR14/10Y!
+\item \lstinline!CDS/CONV_CREDIT_SPREAD/RBS/SUBLT2/EUR/MR14/10Y/500!
+\item \lstinline!CDS/CONV_CREDIT_SPREAD/RBS/SUBLT2/EUR/1Y!
+\item \lstinline!CDS/CONV_CREDIT_SPREAD/RBS/SUBLT2/EUR/1Y/500!
 \end{itemize}
 
 \subsection{CDS Upfront Price}
@@ -721,7 +729,7 @@ \subsection{CDS Recovery Rate}
   \begin{tabular}{|p{3cm}|p{3.5cm}|p{7cm}|}
     \hline
     {\bf Property} & {\bf Allowable values} & {\bf Description} \\ \hline
-    Instrument Type & \lstinline!RECOVERY_RATE! & \\ \hline
+    Instrument Type & \lstinline!RECOVERY_RATE! or \lstinline!ASSUMED_RECOVERY_RATE! & \\ \hline
     Quote Type & \lstinline!RATE! & \\ \hline
     Entity & String & The CDS reference entity name \\ \hline
     Tier & String & The CDS tier \\ \hline
@@ -772,17 +780,20 @@ \subsection{Security Recovery Rate}\label{md:sec_rec_rates}
   \begin{tabular}{|p{3cm}|p{3.5cm}|p{7cm}|}
     \hline
     {\bf Property} & {\bf Allowable values} & {\bf Description} \\ \hline
-    Instrument Type & \emph{RECOVERY\_RATE} & \\ \hline
+    Instrument Type & \emph{RECOVERY\_RATE} or \emph{ASSUMED\_RECOVERY\_RATE} & \\ \hline
     Quote Type & \emph{RATE} & \\ \hline
     ID & String &  Security ID \\ \hline
   \end{tabular}
   \caption{Security Recovery Rate}
   \label{tab:secrecrate_quote}
 \end{table}
 
+Currently, only par (real) recovery rates (quote type \lstinline!RECOVERY_RATE!) are supported.
+
 Example:
 \begin{itemize}
 \item {RECOVERY\_RATE/RATE/SECURITY\_1}
+\item {ASSUMED\_RECOVERY\_RATE/RATE/SECURITY\_1}
 \end{itemize}
 
 % %- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

ORE-SWIG/QuantLib-SWIG

@@ -180,7 +180,7 @@ parRateCurveHelpers(const string& name, const vector<Period>& parTenor, const ve
         BOOST_ASSERT(*exDiscount);
         rateHelper = QuantLib::ext::make_shared<QuantExt::SpreadCdsHelper>(
             parRateQuote, tenor, cdsConv->settlementDays(), cdsConv->calendar(), cdsConv->frequency(),
-            cdsConv->paymentConvention(), cdsConv->rule(), cdsConv->dayCounter(), recoveryRate, exDiscount,
+            cdsConv->paymentConvention(), cdsConv->rule(), cdsConv->dayCounter(), recoveryRate, exDiscount, CreditDefaultSwap::PricingModel::Midpoint,
             true, QuantExt::CreditDefaultSwap::ProtectionPaymentTime::atDefault, today + cdsConv->settlementDays());
         instruments.push_back(rateHelper);
     }

OREAnalytics/test/testmarket.cpp

@@ -139,6 +139,8 @@ void DefaultCurveConfig::Config::fromXML(XMLNode* node) {
         type_ = Type::HazardRate;
     } else if (type == "Price") {
         type_ = Type::Price;
+    } else if (type == "ConvSpreadCDS") {
+        type_ = Type::ConvSpreadCDS;
     } else if (type == "Benchmark") {
         type_ = Type::Benchmark;
     } else if (type == "MultiSection") {
@@ -201,10 +203,10 @@ void DefaultCurveConfig::Config::fromXML(XMLNode* node) {
         // Read the optional start date
         string d = XMLUtils::getChildValue(node, "StartDate", false);
         if (d != "") {
-            if (type_ == Type::SpreadCDS || type_ == Type::Price) {
+            if (type_ == Type::SpreadCDS || type_ == Type::Price || type_ == Type::ConvSpreadCDS) {
                 startDate_ = parseDate(d);
             } else {
-                WLOG("'StartDate' is only used when type is 'SpreadCDS' or 'Price'");
+                WLOG("'StartDate' is only used when type is 'SpreadCDS' or 'Price' or 'ConvSpreadCDS'");
             }
         }
         string s = XMLUtils::getChildValue(node, "RunningSpread", false);
@@ -230,9 +232,11 @@ void DefaultCurveConfig::Config::fromXML(XMLNode* node) {
 XMLNode* DefaultCurveConfig::Config::toXML(XMLDocument& doc) const {
     XMLNode* node = doc.allocNode("Configuration");
     XMLUtils::addAttribute(doc, node, "priority", std::to_string(priority_));
-    if (type_ == Type::SpreadCDS || type_ == Type::HazardRate || type_ == Type::Price) {
+    if (type_ == Type::SpreadCDS || type_ == Type::HazardRate || type_ == Type::Price || type_ == Type::ConvSpreadCDS) {
         if (type_ == Type::SpreadCDS) {
             XMLUtils::addChild(doc, node, "Type", "SpreadCDS");
+        } else if (type_ == Type::ConvSpreadCDS){
+            XMLUtils::addChild(doc, node, "Type", "ConvSpreadCDS");
         } else if (type_ == Type::HazardRate) {
             XMLUtils::addChild(doc, node, "Type", "HazardRate");
         } else {

OREData/ored/configuration/defaultcurveconfig.cpp

@@ -51,7 +51,7 @@ class DefaultCurveConfig : public CurveConfig {
     class Config : public XMLSerializable {
     public:
         //! Supported default curve types
-        enum class Type { SpreadCDS, HazardRate, Benchmark, Price, MultiSection, TransitionMatrix, Null };
+        enum class Type { SpreadCDS, ConvSpreadCDS, HazardRate, Benchmark, Price, MultiSection, TransitionMatrix, Null };
         Config(const Type& type, const string& discountCurveID, const string& recoveryRateQuote,
                const DayCounter& dayCounter, const string& conventionID,
                const std::vector<std::pair<std::string, bool>>& cdsQuotes = {}, bool extrapolation = true,

OREData/ored/configuration/defaultcurveconfig.hpp

@@ -23,7 +23,6 @@
 
 #include <qle/termstructures/generatordefaulttermstructure.hpp>
 #include <qle/termstructures/interpolatedhazardratecurve.hpp>
-#include <qle/termstructures/interpolatedsurvivalprobabilitycurve.hpp>
 #include <qle/termstructures/iterativebootstrap.hpp>
 #include <qle/termstructures/multisectiondefaultcurve.hpp>
 #include <qle/termstructures/probabilitytraits.hpp>
@@ -34,6 +33,7 @@
 #include <ql/math/interpolations/backwardflatinterpolation.hpp>
 #include <ql/math/interpolations/loginterpolation.hpp>
 #include <ql/termstructures/credit/defaultprobabilityhelpers.hpp>
+#include <ql/termstructures/credit/interpolatedsurvivalprobabilitycurve.hpp>
 #include <ql/termstructures/credit/flathazardrate.hpp>
 #include <ql/time/daycounters/actual365fixed.hpp>
 
@@ -103,14 +103,12 @@ set<QuoteData> getRegexQuotes(const Wildcard& wc, const string& configId, Defaul
         auto mdqt = md->quoteType();
 
         // If we have a CDS spread or hazard rate quote, check it and populate tenor and value if it matches
-        if (type == DCCT::SpreadCDS && mdit == MDIT::CDS &&
+        if (((type == DCCT::SpreadCDS && mdit == MDIT::CDS)||(type == DCCT::ConvSpreadCDS && mdit == MDIT::CDS)) &&
             (mdqt == MDQT::CREDIT_SPREAD || mdqt == MDQT::CONV_CREDIT_SPREAD)) {
 
             auto q = QuantLib::ext::dynamic_pointer_cast<CdsQuote>(md);
             QL_REQUIRE(q, "Internal error: could not downcast MarketDatum '" << md->name() << "' to CdsQuote");
             if (wc.matches(q->name())) {
-                QL_REQUIRE(mdqt != MDQT::CONV_CREDIT_SPREAD, 
-                   "Conventional credit spread are currently not supported for default curves");
                 addQuote(result, configId, q->name(), q->term(), q->quote()->value(), q->seniority(), q->ccy(),
                          q->docClause(), q->runningSpread());
             }
@@ -205,7 +203,7 @@ set<QuoteData> getConfiguredQuotes(const std::string& curveID, const DefaultCurv
 
     using DCCT = DefaultCurveConfig::Config::Type;
     auto type = config.type();
-    QL_REQUIRE(type == DCCT::SpreadCDS || type == DCCT::Price || type == DCCT::HazardRate,
+    QL_REQUIRE(type == DCCT::SpreadCDS || type == DCCT::Price || type == DCCT::HazardRate || type == DCCT::ConvSpreadCDS,
                "getConfiguredQuotes expects a curve type of SpreadCDS, Price or HazardRate.");
     QL_REQUIRE(!config.cdsQuotes().empty(), "No quotes configured for curve " << curveID);
 
@@ -264,6 +262,7 @@ DefaultCurve::DefaultCurve(Date asof, DefaultCurveSpec spec, const Loader& loade
             // Build the default curve of the requested type
             switch (config.second.type()) {
             case DefaultCurveConfig::Config::Type::SpreadCDS:
+            case DefaultCurveConfig::Config::Type::ConvSpreadCDS:
             case DefaultCurveConfig::Config::Type::Price:
                 buildCdsCurve(configs->curveID(), config.second, asof, spec, loader, yieldCurves);
                 break;
@@ -308,7 +307,8 @@ void DefaultCurve::buildCdsCurve(const std::string& curveID, const DefaultCurveC
     LOG("Start building default curve of type SpreadCDS for curve " << curveID);
 
     QL_REQUIRE(config.type() == DefaultCurveConfig::Config::Type::SpreadCDS ||
-                   config.type() == DefaultCurveConfig::Config::Type::Price,
+               config.type() == DefaultCurveConfig::Config::Type::Price ||
+               config.type() == DefaultCurveConfig::Config::Type::ConvSpreadCDS,
                "DefaultCurve::buildCdsCurve expected a default curve configuration with type SpreadCDS/Price");
     QL_REQUIRE(recoveryRate_ != Null<Real>(), "DefaultCurve: recovery rate needed to build SpreadCDS curve");
 
@@ -378,6 +378,7 @@ void DefaultCurve::buildCdsCurve(const std::string& curveID, const DefaultCurveC
                                                                  : QuantExt::CreditDefaultSwap::atPeriodEnd;
 
     if (config.type() == DefaultCurveConfig::Config::Type::SpreadCDS) {
+        refData.type = "SpreadCDS";
         for (auto quote : quotes) {
             try {
                 if ((cdsConv->rule() == DateGeneration::CDS || cdsConv->rule() == DateGeneration::CDS2015 ||
@@ -393,7 +394,7 @@ void DefaultCurve::buildCdsCurve(const std::string& curveID, const DefaultCurveC
                 };
                 helpers.push_back(QuantLib::ext::make_shared<SpreadCdsHelper>(
                     quote.value, quote.term, cdsConv->settlementDays(), cdsConv->calendar(), cdsConv->frequency(),
-                    cdsConv->paymentConvention(), cdsConv->rule(), cdsConv->dayCounter(), recoveryRate_, discountCurve,
+                    cdsConv->paymentConvention(), cdsConv->rule(), cdsConv->dayCounter(), recoveryRate_, discountCurve, CreditDefaultSwap::PricingModel::Midpoint,
                     cdsConv->settlesAccrual(), ppt, config.startDate(), cdsConv->lastPeriodDayCounter()));
                 runningSpread = config.runningSpread();
                 helperQuoteTerms[helpers.back()->latestDate()] = quote.term;
@@ -408,7 +409,41 @@ void DefaultCurve::buildCdsCurve(const std::string& curveID, const DefaultCurveC
                 }
             }
         }
-    } else {
+    }else if(config.type() == DefaultCurveConfig::Config::Type::ConvSpreadCDS){
+        refData.type = "ConvSpreadCDS";
+        // Currently same than SpreadCDS
+        for (auto quote : quotes) {
+            try {
+                if ((cdsConv->rule() == DateGeneration::CDS || cdsConv->rule() == DateGeneration::CDS2015 ||
+                     cdsConv->rule() == DateGeneration::OldCDS) &&
+                    cdsMaturity(asof, quote.term, cdsConv->rule()) <= asof + 1 * Days) {
+                    auto maturity = cdsMaturity(asof, quote.term, cdsConv->rule());
+                    WLOG("DefaultCurve:: SKIP cds with term "
+                         << quote.term << " because cds maturity (" << io::iso_date(maturity)
+                         << ") is <= T + 1 (T =" << io::iso_date(asof)
+                         << "), but by standard conventioons the first CDS payment is the next IMM payment"
+                            "date strictly after T + 1.");
+                    continue;
+                };
+                helpers.push_back(QuantLib::ext::make_shared<SpreadCdsHelper>(
+                    quote.value, quote.term, cdsConv->settlementDays(), cdsConv->calendar(), cdsConv->frequency(),
+                    cdsConv->paymentConvention(), cdsConv->rule(), cdsConv->dayCounter(), recoveryRate_, discountCurve, CreditDefaultSwap::PricingModel::ISDA,
+                    cdsConv->settlesAccrual(), ppt, config.startDate(), cdsConv->lastPeriodDayCounter()));
+                runningSpread = config.runningSpread();
+                helperQuoteTerms[helpers.back()->latestDate()] = quote.term;
+            } catch (exception& e) {
+                if (quote.term == Period(0, Months)) {
+                    WLOG("DefaultCurve:: Cannot add quote of term 0M to CDS curve " << curveID << " for asof date "
+                                                                                    << asof);
+                } else {
+                    QL_FAIL("DefaultCurve:: Failed to add quote of term " << quote.term << " to CDS curve " << curveID
+                                                                          << " for asof date " << asof
+                                                                          << ", with error: " << e.what());
+                }
+            }
+        }
+    }else {
+        refData.type = "Upfront";
         for (auto quote : quotes) {
             // If there is no running spread encoded in the quote, the config must have one.
             runningSpread = quote.runningSpread;
@@ -421,7 +456,7 @@ void DefaultCurve::buildCdsCurve(const std::string& curveID, const DefaultCurveC
             auto tmp = QuantLib::ext::make_shared<UpfrontCdsHelper>(
                 quote.value, runningSpread, quote.term, cdsConv->settlementDays(), cdsConv->calendar(),
                 cdsConv->frequency(), cdsConv->paymentConvention(), cdsConv->rule(), cdsConv->dayCounter(),
-                recoveryRate_, discountCurve, cdsConv->upfrontSettlementDays(), cdsConv->settlesAccrual(), ppt,
+                recoveryRate_, discountCurve, CreditDefaultSwap::PricingModel::ISDA, cdsConv->upfrontSettlementDays(), cdsConv->settlesAccrual(), ppt,
                 config.startDate(), cdsConv->lastPeriodDayCounter());
             if (tmp->latestDate() > asof) {
                 helpers.push_back(tmp);