ch 6 credit adjusted pricing

7/25/2019 Ch 6 Credit Adjusted Pricing

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Worksheet Title

6.21 Market data for Credit Adjusted pricing

6.22 Modelling the Forward IR envelope

6.2 !orksheet to su""arise "odelling swap e#posure and t

6.2& %sti"ation of $%'s for IR( and CC(6.2) *raph of IR( $%'

6.26 *raph of CC( $%'

6.2+ !orksheet to calculate the credit adjust"ent on the prici

6.2, *raph of accu"ulative default pro-a-ilities

6.2 Credit adjust"ent for a range of "aturities and for difere


2/17

plot $otential Future %#posure

g of an IR(

t rating counterparties


3/17

6.21: Market data for Credit Adjusted pricing

/oda0 4-e!-"#

$ %o.

or&ard da0s Forward "o. Forward (pot (

dates Act63 4F5s rates volatilit0

7see Forward 8ol curve 79 in Ch 13 for source9

6:Fe-:3, 1 3

6:Ma0:3, 3.2)3 3.21 .1&)33;

6 6:Aug:3, 3.2)6 3.,&),2 .32+2; 16.22;

6:


4/17


5/17

6.2$: Worksheet to su%%arise %odelling s&ap eposure and to plot 9otential

2*r

down "id up down

3 3.33; 3.33; 3.33; 3.33;

1 :3.+6; :3.1&; 3.66; :1.&;2 3.33; 3.33; 3.33; :3.66;

3.33;

&

)

6

+

,

13

11

12


6/17

ture posure

$*r 4*r ,*r

"id up down "id up down "id

3.33; 3.33; 3.33; 3.33; 3.33; 3.33; 3.33;

3.36; 1.,); :1.; 3.26; .13; :2.+3; 3.&);3.&1; 1.; :1.&2; 3.,1; .2; :2.2+; 1.1,;

3.33; 3.33; :3.+; 3.62; 2.+&; :1.6; 1.1;

3.33; 3.33; 3.33; :3.1; 3.+,;

3.33; 3.33;

8 eposure en)elopes


7/17

6*r *r

up down "id up down "id

3.33; 3.33; 3.33; 3.33; 3.33; 3.33;

&.); :.&); 3.62; ).),; :&.21; 3.+);).3; :.23; 1.)2; +.,&; :&.1,; 1.+,;

).&&; :2.+3; 1.+3; ,.3); :.,1; 2.13;

.&; :1.6; 1.&,; 6.,1; :.1); 2.31;

3.33; :1.36; 3.,; &.1); :2.1; 1.)+;

3.33; 3.33; 3.33; :1.2; 3.,&;

3.33; 3.33;


8/17

#*r *r

up down "id up down "id up

3.33; 3.33; 3.33; 3.33; 3.33; 3.33; 3.33;

6.+2; :&.,; 3.,); +.+,; :).+); 3.&; ,.+;.61; :).1; 1.,; 11.22; :6.22; 2.1+; 12.+,;

13.&2; :&.,; 2.&3; 12.)+; :6.1,; 2.6,; 1&.62;

.,3; :&.&); 2.&; 12.)2; :).++; 2.,1; 1).3;

+.,; :.6,; 2.13; 11.1); :).12; 2.),; 1&.3;

&.)1; :2.+; 1.&,; ,.)2; :&.2&; 2.3+; 12.3;

3.33; :1.)3; 3.++; &.,&; :.3,; 1.&6; .);

3.33; 3.33; 3.33; :1.6&; 3.,2; ).;3.33; 3.33; 3.33;


9/17

1"*r 11*r

down "id up down "id up down

3.33; 3.33; 3.33; 3.33; 3.33; 3.33; 3.33;

:6.)3; 1.31; .+2; :+.21; 1.3+; 13.)6; :+.3;:+.2; 2.2; 1&.1,; :,.21; 2.&&; 1).&; :.16;

:+.; 2.1; 16.&,; :,.)+; .3; 1,.11; :.+1;

:+.12; .11; 1+.; :,.&+; .6; 1.&; :.+,;

:6.); 2.+; 1+.13; :,.3+; .2+; 1.)6; :.);

:).,2; 2.)&; 1).6,; :+.&2; 2.1; 1,.62; :.31;

:&.+); 2.32; 1.); :6.&); 2.&6; 16.,); :,.16;

:.,; 1.&6; 13.12; :).1,; 1.6; 1&.2; :6.;:1.,2; 3.+&; ).6; :.6; 1.2; 13.&,; :).);

3.33; 3.33; 3.33; :1.6; 3.6); ).+); :.);

3.33; 3.33; 3.33; :2.3,;

3.33;


10/17

12*r

"id up

3.33; 3.33;

1.12; 11.2;2.)&; 16.)6;

.2&; 1.),;

.)); 21.2&;

.); 21.++;

.21; 21.2&;

2.,2; 1.&;

2.,; 1+.,,;1.+; 1&.+);

1.1,; 13.+6;

3.); ).1;

3.33; 3.33;


11/17

6.24: sti%ation of 9;s for '( and CC

tracted fro% (eport1$61d:


12/17

stru%ents 0ank of ngland> 1#

+ , 13 11 12

16.33; 1.23; 22.&3; 2).&3; 2,.63; 1.63;

11.&3; 1.63; 1).,3; 1,.23; 23.&3; 22.63;

.&3; 11.23; 1.33; 1&.,3; 16.,3; 1,.,3;

+.&3; ,.,3; 13.23; 11.63; 1.23; 1&.63;

6.33; +.23; ,.&3; .,3; 11.33; 12.23;

).23; 6.23; +.23; ,.23; .23; 13.&3;

&.&3; ).23; 6.23; +.33; ,.33; .33;

).23; 6.23; +.&3; ,.&3; .63; 13.63;

6.33; +.33; ,.33; .33; 13.33; 11.33;


13/17

6.2) IR( $%'

$age 1

3 2 & 6 , 13 12 1&3.33;

).33;

13.33;

1).33;

23.33;

2).33;

3.33;

).33;

$eak %#posure of B( IR(7as ; of


14/17

6.26 CC( $%'

$age 1&

3 2 & 6 , 13 12 1&3.33;

13.33;

23.33;

3.33;

&3.33;

)3.33;

63.33;

+3.33;

$eak %#posure of B( D CC(7as ; of


15/17

6.2: Worksheet to calculate the credit adjust

/i"e 3 1

current discount curve 1 3.+1+

1.32

1. Cu%ulati)e default %atri

Rating

Aaa 3;

Aa 3;

A 3;

Eaa 3.2;

Ea 1.+;

E +.;

Inv grade 3.3;

(pec grade &.;

tracted fro% Mo

Rating

Aaa 133.3;

Aa 133.3;

A 133.3;

Eaa .,;

Ea ,.;

E 2.1;

Inv grade 133.3;

(pec grade ).+;

Rating

Aaa 3.3;

Aa 3.3;

A 3.3;

Eaa 3.2;

E 1 +;

Cu%ulati)e pro!a!ilit* of sur)i)al %atri tD

ur)i)al until t-1D> then default EtD


16/17

6.2, Accu"ulative default pro-s

3 1 2 & ) 6 + , 13 11 12

3.3;

13.3;

23.3;

3.3;

&3.3;

)3.3;

3efault 9ro!a!ilities

Aaa

Aa

A

Eaa

Ea

E

Inv grade

(pec

grade

Maturit*


17/17

6.2 *raph of CA pricing

$age 1+

2 $ 4 , 6 # 1" 11 12

"."

1"."

2"."

$"."

4"."

,"."

6"."

"."

#"."

"."

,8 Fui)alent eposure !pD

Aaa

Aa

A

0aa

0a

0

'n) Grade

pec Grade

ch 6 credit adjusted pricing

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