1 files changed, 36 insertions, 6 deletions
diff --git a/R/cds_functions_generic.R b/R/cds_functions_generic.R
index 671d1c0f..32f6559b 100644
--- a/R/cds_functions_generic.R
+++ b/R/cds_functions_generic.R
@@ -733,7 +733,7 @@ survivalProbability1 <- function(startdate, date, survival.curve) {
             }
         }
     }
-    ## if date is greater than last survival.curve date, keep the hazard rate flate
+    ## if date is greater than last survival.curve date, keep the hazard rate flat
     logprob <- - yearFrac(startdate, date) * survival.curve$hazardrates[i]
     return( exp(as.numeric(logprob)) )
 }
@@ -749,17 +749,21 @@ survivalProbability.exact <- function(credit.curve, date) {
         if ( date > curve@dates[i] ) {
             logprob <- logprob - curve@hazardrates[i] * dT[i]
         }else{
-            if( i > 1 ){
-                logprob <- logprob - curve@hazardrates[i] * (Tmat - T[i])
-            }else{
-                logprob <- logprob - curve@hazardrates[1] * Tmat
-            }
+            logprob <- logprob - curve@hazardrates[i] * (Tmat - T[i])
             break
         }
     }
     return( exp(as.numeric(logprob)) )
 }
 
+FEP <- function(index, exerciseDate) {
+    ## computes the front end protection for a credit index at a given date
+    DP <- 1-unlist(lapply(index$portfolio, survivalProbability.exact, date=exerciseDate))
+    R <- unlist(lapply(index$portfolio, function(x)x@recovery))
+    fep <- crossprod(index$issuerweights, (1-R)*DP)
+    return( fep )
+}
+
 SP <- function(sc, startdate=Sys.Date()){
     ## computes the survival probability associated with the survival curve
     T <- c(0, yearFrac(startdate, sc@dates))
@@ -829,3 +833,29 @@ creditcurve.maturity <- function(creditcurve){
         stop("not of class creditcurve")
     }
 }
+
+forward.cl <- function(index, exerciseDate){
+    aux <- function(creditCurve){
+        cs <- cds.cs$cs[cds.cs$cs$unadj.dates<=index$maturity,]
+        couponleg(cs, creditCurve@curve, startdate=exerciseDate)
+    }
+    return( crossprod(index$issuerweights, unlist(lapply(index$portfolio, aux))) )
+}
+
+forward.prot <- function(index, exerciseDate){
+    cs <- cds.cs$cs[cds.cs$cs$unadj.dates<=index$maturity,]
+    prot <- numeric(length(index$portfolio))
+    for(i in seq_along(index$portfolio)){
+        creditCurve <- index$portfolio[[i]]
+        prot[i] <- defaultleg(cs, creditCurve@curve, creditCurve@recovery, startdate=exerciseDate)
+    }
+    return( crossprod(prot, index$issuerweights) )
+}
+
+defaultAdjustedForwardIndexPrice <- function(index, exerciseDate){
+    tes <- addBusDay(exerciseDate)
+    df <- DiscountCurve(L3m$params, L3m$tsQuotes, yearFrac(tradedate, tes))$discounts
+    price <- 1 - FEP(index, exerciseDate) + forward.cl(index, exerciseDate)*0.05 -
+        forward.prot(index, exerciseDate)
+    return( as.numeric(df*price) )
+}