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
.
Note:
Any optional input of size 

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:
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.