Price payer and receiver credit default swap options
[Payer,Receiver] = cdsoptprice(ZeroData,ProbData,Settle,OptionMaturity,CDSMaturity,Strike,SpreadVol)
[Payer,Receiver] = cdsoptprice(ZeroData,ProbData,Settle,OptionMaturity,CDSMaturity,Strike,SpreadVol,Name,Value)
[Payer,Receiver] = cdsoptprice(ZeroData,ProbData,Settle,OptionMaturity,CDSMaturity,Strike,SpreadVol)
computes
the price of payer and receiver credit default swap options.
[Payer,Receiver] = cdsoptprice(ZeroData,ProbData,Settle,OptionMaturity,CDSMaturity,Strike,SpreadVol,
computes
the price of payer and receiver credit default swap options with additional
options specified by one or more Name,Value
)Name,Value
pair
arguments.





Settlement date is a serial date number or date character vector. 








Specify optional
commaseparated pairs of Name,Value
arguments. Name
is
the argument name and Value
is the corresponding value.
Name
must appear inside single quotes (' '
). You can
specify several name and value pair arguments in any order as
Name1,Value1,...,NameN,ValueN
.
Any optional input of size N
by1 is also
acceptable as an array of size 1
byN
,
or as a single value applicable to all contracts. Single values are
internally expanded to an array of size N
by1.

Default: unadjusted forward spread normally used for singlename CDS options 

For more information, see basis. Default: 

Business day conventions, specified by a character vector or
Default: 

Default: 

Default: 

Default: 

Default: 

Basis of the zero curve. Choices are identical to Default: 

Compounding frequency of the zero curve. Allowed values are:
Note When
Default: 




The payer and receiver credit default swap options are computed using the Black's model as described in O'Kane [1]:
$${V}_{Pay(Knockout)}=RPV01(t,{t}_{E},T)(F\Phi ({d}_{1})K\Phi ({d}_{2}))$$
$${V}_{Rec(Knockout)}=RPV01(t,{t}_{E},T)(K\Phi ({d}_{2})F\Phi ({d}_{1}))$$
$${d}_{1}=\frac{\mathrm{ln}\left(\frac{F}{K}\right)+\frac{1}{2}{\sigma}^{2}({t}_{E}t)}{\sigma \sqrt{{t}_{E}t}}$$
$${d}_{2}={d}_{1}\sigma \sqrt{{t}_{E}t}$$
$${V}_{Pay(NonKnockout)}={V}_{Pay(Knockout)}+FEP$$
$${V}_{Pay(NonKnockout)}={V}_{Rec(Knockout)}$$
where
RPV01 is the risky present value of a basis
point (see cdsrpv01
).
Φ is the normal cumulative distribution function.
σ is the spread volatility.
t is the valuation date.
t_{E} is the option expiry date.
T is the CDS maturity date.
F is the forward spread (from option expiry to CDS maturity).
K is the strike spread.
FEP is the frontend protection (from option initiation to option expiry).
[1] O'Kane, D. Modelling Singlename and Multiname Credit Derivatives. Wiley, 2008, pp. 156–169.