From 2f0b3880a13c684b951986ce723ba8ec65932f54 Mon Sep 17 00:00:00 2001
From: Guillaume Horel <guillaume.horel@serenitascapital.com>
Date: Thu, 28 Aug 2014 15:10:49 -0400
Subject: cap the skew

---
 R/tranche_functions.R | 4 ++--
 1 file changed, 2 insertions(+), 2 deletions(-)

(limited to 'R')

diff --git a/R/tranche_functions.R b/R/tranche_functions.R
index 9f1d70b..97c0c72 100644
--- a/R/tranche_functions.R
+++ b/R/tranche_functions.R
@@ -737,9 +737,9 @@ adjust.skew <- function(index1, index2, method="ATM"){
         el2 <- EL(index2)
     }
     skew <- function(x){
-        #we cap the correlation at 0.99
+        #we cap the correlation at 0.99 and 0.01
         f <- splinefun(K1, index1$rho[-c(1, length(index1$rho))], "natural")
-        return(pmin(f(x), 0.99))
+        return(pmax(pmin(f(x), 0.99), 0.01))
     }
     if(method=="ATM"){
         K1eq <- el1/el2 * K2
-- 
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