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ATTENTION: THIS IS NOT VBA. IT'S GAUSS-CODE. Sry for caps.
Hi Folks,
I have some VBA code, that I wish to "translate" into R code. I understand R, but is useless in VBA. Anybody care to help? Thanks.
Hi Folks,
I have some VBA code, that I wish to "translate" into R code. I understand R, but is useless in VBA. Anybody care to help? Thanks.
Code:
/* CCRgDer.txt Program to perform derivative calculations for the risk parameters
for a Contingent Capital Bond where the conversion price is the trigger price.
Derivatives are computed for different values of initial capital to deposits, x.
It uses the same sequence of random numbers to carry out this exercise. */
ns = 100000; /* Number of simulations */
dt = 1/250; /* Length of each subperiod (e.g., trading day) */
/* Bank Assumptions */
x0 = seqa(1.065,0.005,18); /* Starting ratio of assets to deposits */
np = rows(x0);
/* sga = 0.02; */ /* Brownian motion volatility of bank assets */
rar = -0.2; /* Correlation between asset and interest rate Brownian motions */
/* lm = 1; */ /* Annual frequency of jumps */
/* muy = -0.01; */ /* mean log jump size */
/* sgy = 0.02; */ /* Standard deviation of jump size */
g = 0.5; /* Deposit growth mean reversion */
xs = 1.10; /* Target asset to deposit ratio */
/* Contingent Capital Assumptions */
b0 = 0.04; /* Starting ratio of contingent capital to deposits */
p = 0.9; /* Conversion premium or discount */
xcc = 1.02 + b0*(1-p); /* (Asset-p*bt)/deposit or converted equity/deposit level at which contingent capital converts */
tc = 5; /* Maturity in years of contingent capital */
ff = 1; /* 0; */ /* Dummy that equals 0 if coupon is fixed, equals 1 if the coupon is floating */
c = 0.032675; /* Yield or spread for a starting value of x=1.1 and parameters equal to benchmark */
/* CIR Term Structure Assumptions */
r0 = 0.035; /* Beginning real interest rate */
kr = 0.114; /* Risk-neutral mean reversion */
rb = 0.069; /* Risk-neutral steady state */
sgr = 0.0700; /* Standard deviation of short-rate changes */
mxp = tc/dt; /* Maximum number of periods for bonds */
wr = sqrt(1-rar^2); /* Weight on idionsycratic risk for interest rate shock */
/* k = exp(muy+0.5*sgy^2) - 1; */ /* Expected jump size */
/* Calculate risk-free CIR coupon bond yield */
i = 1;
dsum = 0;
thet = sqrt(kr^2+2*sgr^2);
do until i >mxp;
t=i*dt;
ati = ((2*thet*exp((thet+kr)*t/2))/((thet+kr)*(exp(thet*t)-1)+2*thet))^(2*rb*kr/sgr^2);
bti = 2*(exp(thet*t)-1)/((thet+kr)*(exp(thet*t)-1)+2*thet);
dsum = dsum + ati*exp(-bti*r0)*dt;
i = i + 1;
endo;
atc = ((2*thet*exp((thet+kr)*tc/2))/((thet+kr)*(exp(thet*tc)-1)+2*thet))^(2*rb*kr/sgr^2);
btc = 2*(exp(thet*tc)-1)/((thet+kr)*(exp(thet*tc)-1)+2*thet);
ccir = (1 - atc*exp(-btc*r0))/dsum; /* 0.05; */
output file = c:\doc\rbc\CCTgRkDrFlb04x02p9.out reset;
outwidth 240;
nps = 5; /* Number of different parameter sets */
vs = zeros(np,nps); /* Average value of risk-neutral coupon bond payoff (Each iteration do vs = vs + val/ns) */
" ";
" x0 = ";;x0;
" ";
" ";
" Risk-free CIR yield ";;ccir;
i = 1;
do until i > ns; /* Do loop for each simulation */
if fmod(i,1000) == 0;
" Simulation = ";;i;
endif;
ep = rndn(mxp,3); /* Three normally-distributed random numbers for each potential period. */
unif = rndu(mxp,1); /* .<(lm*dt); */ /* A Poisson count for each period having probability lm*dt */
ic = 1; /* Do loop for a given coupon and simulation */
do until ic > nps;
if ic < 1.5;
lm = 1;
psn = unif.<(lm*dt);
sga = 0.02;
muy = -0.01;
sgy = 0.02;
k = exp(muy+0.5*sgy^2) - 1;
elseif ic < 2.5;
lm = 1.25;
psn = unif.<(lm*dt);
sga = 0.02;
muy = -0.01;
sgy = 0.02;
k = exp(muy+0.5*sgy^2) - 1;
elseif ic < 3.5;
lm = 1;
psn = unif.<(lm*dt);
sga = 0.025;
muy = -0.01;
sgy = 0.02;
k = exp(muy+0.5*sgy^2) - 1;
elseif ic < 4.5;
lm = 1;
psn = unif.<(lm*dt);
sga = 0.020;
muy = -0.0125;
sgy = 0.02;
k = exp(muy+0.5*sgy^2) - 1;
else;
lm = 1;
psn = unif.<(lm*dt);
sga = 0.020;
muy = -0.01;
sgy = 0.025;
k = exp(muy+0.5*sgy^2) - 1;
endif;
ix = 1; /* Do loop for a given x value, parameter set, and simulation */
do until ix > np;
x = x0[ix,1]; /* Initialize asset to deposit ratio */
t = 0;
j=1; /* j is index for time, t */
val = 0;
r = r0; /* Initialize interest rate */
bt = b0; /* Initialize contingent capital par to deposit ratio */
dsf = 1; /* Initialize discount factor */
do until t > (tc-dt+0.000001); /* Do loop for each period over length of bond maturity */
/* Compute deposit credit spread */
d1 = (ln(x)+muy)/sgy;
d2 = d1+sgy;
h = lm*(cdfn(-d1)-x*exp(muy+0.5*sgy^2)*cdfn(-d2));
if h < 0;
h = 0;
endif;
/* " t = ";;t;;" x = ";;x;;" h = ";;h; */
/* Update x for next period */
x = x*exp((r-lm*k - (r+h+(c+ff*r)*bt)/x - g*(x-xs) - 0.5*sga^2)*dt + sga*sqrt(dt)*ep[j,1] + psn[j,1]*(muy + sgy*ep[j,3]));
dsf = dsf*exp(-r*dt);
if x > (xcc + p*bt); /* Continuation state */
val = val + dsf*(c+ff*r)*b0*dt; /* Discounted end of period coupon added to value. */
/* if t > maxt;
maxt = t;
" maxt = ";;maxt;
endif; */
if t > (tc - dt - 0.000001);
val = val + dsf*b0; /* Payment of final principal */
/* " Maturity Reached"; */
endif;
r = rb*kr*dt + r*(1-kr*dt) + sgr*sqrt(r*dt)*(rar*ep[j,1]+wr*ep[j,2]); /* Update Interest Rate for next period */
bt = bt*exp(-g*(x-xs)*dt); /* Update cc par to deposit ratio */
t = t + dt;
j = j + 1;
elseif x > 1; /* Conversion without Failure */
val = val + dsf*(x-1)*p*b0/(xcc+p*bt-1); /* Check if p < 1 case makes sense in terms of number of shares issued. */
t = tc + 1;
else; /* Failure: Value not incremented */
t = tc + 1;
endif;
endo; /* Endo for time period */
vs[ix,ic] = vs[ix,ic] + val/ns;
ix = ix + 1;
endo; /* Endo for x value */
ic = ic + 1;
endo; /* Endo for parameter set */
/* " Simulation = ";;i; */
i = i + 1;
endo; /* Endo for each simulation */
" ";
" vs = ";
vs;
" ";
" ";
pdif = vs/b0;
pdif = ln(pdif);
" pdif = ";;
pdif;
output off;
