QuantLib: NthToDefault Class Reference

A free/open-source library for quantitative finance Reference manual - version 1.6

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Classes | Public Member Functions | List of all members
NthToDefault Class Reference

N-th to default swap. More...

`#include <ql/experimental/credit/nthtodefault.hpp>`

Inheritance diagram for NthToDefault:
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## Classes
class | engine
| NTD base engine. More...

## Public Member Functions
| NthToDefault (const boost::shared_ptr< Basket > &basket, Size n, Protection::Side side, const Schedule &premiumSchedule, Rate upfrontRate, Rate premiumRate, const DayCounter &dayCounter, Real nominal, bool settlePremiumAccrual)
| This product is 'digital'; the basket might be tranched but this is.
bool | isExpired () const
| returns whether the instrument might have value greater than zero.
Rate | premium () const
Real | nominal () const
DayCounter | dayCounter () const
Protection::Side | side () const
Size | rank () const
Size | basketSize () const
const Date & | maturity () const
const boost::shared_ptr< Basket > & | basket () const
Rate | fairPremium () const
Real | premiumLegNPV () const
Real | protectionLegNPV () const
Real | errorEstimate () const
void | setupArguments (PricingEngine::arguments *) const
void | fetchResults (const PricingEngine::results *) const
Public Member Functions inherited from Instrument
Real | NPV () const
| returns the net present value of the instrument.
Real | errorEstimate () const
| returns the error estimate on the NPV when available.
const Date & | valuationDate () const
| returns the date the net present value refers to.
template<typename T >
T | result (const std::string &tag) const
| returns any additional result returned by the pricing engine.
const std::map< std::string, boost::any > & | additionalResults () const
| returns all additional result returned by the pricing engine.
void | setPricingEngine (const boost::shared_ptr< PricingEngine > &)
| set the pricing engine to be used. More...
Public Member Functions inherited from LazyObject
void | update ()
void | recalculate ()
void | freeze ()
void | unfreeze ()
Public Member Functions inherited from Observable
| Observable (const Observable &)
Observable & | operator= (const Observable &)
void | notifyObservers ()
Public Member Functions inherited from Observer
| Observer (const Observer &)
Observer & | operator= (const Observer &)
std::pair< std::set< boost::shared_ptr< Observable > >::iterator, bool > | registerWith (const boost::shared_ptr< Observable > &)
void | registerWithObservables (const boost::shared_ptr< Observer > &)
Size | unregisterWith (const boost::shared_ptr< Observable > &)
void | unregisterWithAll ()

## Additional Inherited Members
Protected Member Functions inherited from Instrument
void | calculate () const
virtual void | performCalculations () const
Protected Member Functions inherited from LazyObject
Protected Attributes inherited from Instrument
boost::shared_ptr< PricingEngine > | engine_
Real | NPV_
Real | errorEstimate_
Date | valuationDate_
std::map< std::string, boost::any > | additionalResults_
Protected Attributes inherited from LazyObject
bool | calculated_
bool | frozen_

## Detailed Description

N-th to default swap.

A NTD instrument exchanges protection against the nth default in a basket of underlying credits for premium payments based on the protected notional amount.

The pricing is analogous to the pricing of a CDS instrument which represents protection against default of a single underlying credit. The only difference is the calculation of the probability of default. In the CDS case, it is the probabilty of single name default; in the NTD case the probability of at least N defaults in the portfolio of underlying credits.

This probability is computed using the algorithm in John Hull and Alan White, "Valuation of a CDO and nth to default CDS without Monte Carlo simulation", Journal of Derivatives 12, 2, 2004.

The algorithm allows for varying probability of default across the basket. Otherwise, for identical probabilities of default, the probability of n defaults is given by the binomial distribution.

Default correlation is modeled using a one-factor Gaussian copula approach.

The class is tested against data in Hull-White (see reference above.)

## Member Function Documentation

void setupArguments | ( | PricingEngine::arguments * |  | ) | const
| virtual

When a derived argument structure is defined for an instrument, this method should be overridden to fill it. This is mandatory in case a pricing engine is used.

Reimplemented from Instrument.

void fetchResults | ( | const PricingEngine::results * | r | ) | const
| virtual

When a derived result structure is defined for an instrument, this method should be overridden to read from it. This is mandatory in case a pricing engine is used.

Reimplemented from Instrument.