public void testMarketASWSpread()
{
// Testing relationship between market asset swap and par asset swap...
CommonVars vars = new CommonVars();
Calendar bondCalendar = new TARGET();
int settlementDays = 3;
int fixingDays = 2;
bool payFixedRate = true;
bool parAssetSwap = true;
bool mktAssetSwap = false;
bool inArrears = false;
// Fixed Underlying bond (Isin: DE0001135275 DBR 4 01/04/37)
// maturity doesn't occur on a business day
Schedule fixedBondSchedule1 = new Schedule(new Date(4,Month.January,2005),
new Date(4,Month.January,2037),
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
Bond fixedBond1 = new FixedRateBond(settlementDays, vars.faceAmount, fixedBondSchedule1,
new List<double>{0.04},
new ActualActual(ActualActual.Convention.ISDA),BusinessDayConvention.Following,
100.0, new Date(4,Month.January,2005));
IPricingEngine bondEngine = new DiscountingBondEngine(vars.termStructure);
IPricingEngine swapEngine = new DiscountingSwapEngine(vars.termStructure);
fixedBond1.setPricingEngine(bondEngine);
double fixedBondMktPrice1 = 89.22 ; // market price observed on 7th June 2007
double fixedBondMktFullPrice1=fixedBondMktPrice1+fixedBond1.accruedAmount();
AssetSwap fixedBondParAssetSwap1 = new AssetSwap(payFixedRate,
fixedBond1, fixedBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedBondParAssetSwap1.setPricingEngine(swapEngine);
double fixedBondParAssetSwapSpread1 = fixedBondParAssetSwap1.fairSpread();
AssetSwap fixedBondMktAssetSwap1 = new AssetSwap(payFixedRate,
fixedBond1, fixedBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
fixedBondMktAssetSwap1.setPricingEngine(swapEngine);
double fixedBondMktAssetSwapSpread1 = fixedBondMktAssetSwap1.fairSpread();
double tolerance = 1.0e-13;
double error1 = Math.Abs(fixedBondMktAssetSwapSpread1- 100*fixedBondParAssetSwapSpread1/fixedBondMktFullPrice1);
if (error1>tolerance) {
Assert.Fail("wrong asset swap spreads for fixed bond:" +
"\n market ASW spread: " + fixedBondMktAssetSwapSpread1 +
"\n par ASW spread: " + fixedBondParAssetSwapSpread1 +
"\n error: " + error1 +
"\n tolerance: " + tolerance);
}
// Fixed Underlying bond (Isin: IT0006527060 IBRD 5 02/05/19)
// maturity occurs on a business day
Schedule fixedBondSchedule2 = new Schedule(new Date(5,Month.February,2005),
new Date(5,Month.February,2019),
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
Bond fixedBond2 = new FixedRateBond(settlementDays, vars.faceAmount, fixedBondSchedule2,
new List<double>{ 0.05},
new Thirty360(Thirty360.Thirty360Convention.BondBasis), BusinessDayConvention.Following,
100.0, new Date(5,Month.February,2005));
fixedBond2.setPricingEngine(bondEngine);
double fixedBondMktPrice2 = 99.98 ; // market price observed on 7th June 2007
double fixedBondMktFullPrice2=fixedBondMktPrice2+fixedBond2.accruedAmount();
AssetSwap fixedBondParAssetSwap2 = new AssetSwap(payFixedRate,
fixedBond2, fixedBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedBondParAssetSwap2.setPricingEngine(swapEngine);
double fixedBondParAssetSwapSpread2 = fixedBondParAssetSwap2.fairSpread();
AssetSwap fixedBondMktAssetSwap2 = new AssetSwap(payFixedRate,
fixedBond2, fixedBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
fixedBondMktAssetSwap2.setPricingEngine(swapEngine);
double fixedBondMktAssetSwapSpread2 = fixedBondMktAssetSwap2.fairSpread();
double error2 = Math.Abs(fixedBondMktAssetSwapSpread2-
100*fixedBondParAssetSwapSpread2/fixedBondMktFullPrice2);
if (error2>tolerance) {
Assert.Fail("wrong asset swap spreads for fixed bond:" +
"\n market ASW spread: " + fixedBondMktAssetSwapSpread2 +
"\n par ASW spread: " + fixedBondParAssetSwapSpread2 +
"\n error: " + error2 +
"\n tolerance: " + tolerance);
}
// FRN Underlying bond (Isin: IT0003543847 ISPIM 0 09/29/13)
// maturity doesn't occur on a business day
Schedule floatingBondSchedule1 = new Schedule( new Date(29,Month.September,2003),
new Date(29,Month.September,2013),
new Period(Frequency.Semiannual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
Bond floatingBond1 = new FloatingRateBond(settlementDays, vars.faceAmount,
floatingBondSchedule1,
vars.iborIndex, new Actual360(),
BusinessDayConvention.Following, fixingDays,
new List<double>{1}, new List<double>{0.0056},
new List<double>(), new List<double>(),
inArrears,
100.0, new Date(29,Month.September,2003));
floatingBond1.setPricingEngine(bondEngine);
Utils.setCouponPricer(floatingBond1.cashflows(), vars.pricer);
vars.iborIndex.addFixing(new Date(27,Month.March,2007), 0.0402);
// market price observed on 7th June 2007
double floatingBondMktPrice1 = 101.64 ;
double floatingBondMktFullPrice1 = floatingBondMktPrice1+floatingBond1.accruedAmount();
AssetSwap floatingBondParAssetSwap1 = new AssetSwap(payFixedRate,
floatingBond1, floatingBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingBondParAssetSwap1.setPricingEngine(swapEngine);
double floatingBondParAssetSwapSpread1 = floatingBondParAssetSwap1.fairSpread();
AssetSwap floatingBondMktAssetSwap1= new AssetSwap(payFixedRate,
floatingBond1, floatingBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
floatingBondMktAssetSwap1.setPricingEngine(swapEngine);
double floatingBondMktAssetSwapSpread1 = floatingBondMktAssetSwap1.fairSpread();
double error3 = Math.Abs(floatingBondMktAssetSwapSpread1-
100*floatingBondParAssetSwapSpread1/floatingBondMktFullPrice1);
if (error3>tolerance) {
Assert.Fail("wrong asset swap spreads for floating bond:" +
"\n market ASW spread: " + floatingBondMktAssetSwapSpread1 +
"\n par ASW spread: " + floatingBondParAssetSwapSpread1 +
"\n error: " + error3 +
"\n tolerance: " + tolerance);
}
// FRN Underlying bond (Isin: XS0090566539 COE 0 09/24/18)
// maturity occurs on a business day
Schedule floatingBondSchedule2 = new Schedule( new Date(24,Month.September,2004),
new Date(24,Month.September,2018),
new Period(Frequency.Semiannual), bondCalendar,
BusinessDayConvention.ModifiedFollowing, BusinessDayConvention.ModifiedFollowing,
DateGeneration.Rule.Backward, false);
Bond floatingBond2 = new FloatingRateBond(settlementDays, vars.faceAmount,
floatingBondSchedule2,
vars.iborIndex, new Actual360(),
BusinessDayConvention.ModifiedFollowing, fixingDays,
new List<double>{1}, new List<double>{0.0025},
new List<double>(), new List<double>(),
inArrears,
100.0, new Date(24,Month.September,2004));
floatingBond2.setPricingEngine(bondEngine);
Utils.setCouponPricer(floatingBond2.cashflows(), vars.pricer);
vars.iborIndex.addFixing(new Date(22,Month.March,2007), 0.04013);
// market price observed on 7th June 2007
double floatingBondMktPrice2 = 101.248 ;
double floatingBondMktFullPrice2 = floatingBondMktPrice2+floatingBond2.accruedAmount();
AssetSwap floatingBondParAssetSwap2= new AssetSwap(payFixedRate,
floatingBond2, floatingBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingBondParAssetSwap2.setPricingEngine(swapEngine);
double floatingBondParAssetSwapSpread2 = floatingBondParAssetSwap2.fairSpread();
AssetSwap floatingBondMktAssetSwap2 = new AssetSwap(payFixedRate,
floatingBond2, floatingBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
floatingBondMktAssetSwap2.setPricingEngine(swapEngine);
double floatingBondMktAssetSwapSpread2 = floatingBondMktAssetSwap2.fairSpread();
double error4 = Math.Abs(floatingBondMktAssetSwapSpread2-
100*floatingBondParAssetSwapSpread2/floatingBondMktFullPrice2);
if (error4>tolerance) {
Assert.Fail("wrong asset swap spreads for floating bond:" +
"\n market ASW spread: " + floatingBondMktAssetSwapSpread2 +
"\n par ASW spread: " + floatingBondParAssetSwapSpread2 +
"\n error: " + error4 +
"\n tolerance: " + tolerance);
}
// CMS Underlying bond (Isin: XS0228052402 CRDIT 0 8/22/20)
// maturity doesn't occur on a business day
Schedule cmsBondSchedule1 = new Schedule( new Date(22,Month.August,2005),
new Date(22,Month.August,2020),
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
Bond cmsBond1 = new CmsRateBond(settlementDays, vars.faceAmount, cmsBondSchedule1,
vars.swapIndex, new Thirty360(),
BusinessDayConvention.Following, fixingDays,
new List<double>{1.0}, new List<double>{0.0},
new List<double>{0.055}, new List<double>{0.025},
inArrears,
100.0, new Date(22,Month.August,2005));
cmsBond1.setPricingEngine(bondEngine);
Utils.setCouponPricer(cmsBond1.cashflows(), vars.cmspricer);
vars.swapIndex.addFixing(new Date(18,Month.August,2006), 0.04158);
double cmsBondMktPrice1 = 88.45 ; // market price observed on 7th June 2007
double cmsBondMktFullPrice1 = cmsBondMktPrice1+cmsBond1.accruedAmount();
AssetSwap cmsBondParAssetSwap1 = new AssetSwap(payFixedRate,
cmsBond1, cmsBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
cmsBondParAssetSwap1.setPricingEngine(swapEngine);
double cmsBondParAssetSwapSpread1 = cmsBondParAssetSwap1.fairSpread();
AssetSwap cmsBondMktAssetSwap1 = new AssetSwap(payFixedRate,
cmsBond1, cmsBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
cmsBondMktAssetSwap1.setPricingEngine(swapEngine);
double cmsBondMktAssetSwapSpread1 = cmsBondMktAssetSwap1.fairSpread();
double error5 = Math.Abs(cmsBondMktAssetSwapSpread1-
100*cmsBondParAssetSwapSpread1/cmsBondMktFullPrice1);
if (error5>tolerance) {
Assert.Fail("wrong asset swap spreads for cms bond:" +
"\n market ASW spread: " + cmsBondMktAssetSwapSpread1 +
"\n par ASW spread: " + cmsBondParAssetSwapSpread1 +
"\n error: " + error5 +
"\n tolerance: " + tolerance);
}
// CMS Underlying bond (Isin: XS0218766664 ISPIM 0 5/6/15)
// maturity occurs on a business day
Schedule cmsBondSchedule2 = new Schedule(new Date(06,Month.May,2005),
new Date(06,Month.May,2015),
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
Bond cmsBond2 = new CmsRateBond(settlementDays, vars.faceAmount, cmsBondSchedule2,
vars.swapIndex, new Thirty360(),
BusinessDayConvention.Following, fixingDays,
new List<double>{0.84}, new List<double>{0.0},
new List<double>(), new List<double>(),
inArrears,
100.0, new Date(06,Month.May,2005));
cmsBond2.setPricingEngine(bondEngine);
Utils.setCouponPricer(cmsBond2.cashflows(), vars.cmspricer);
vars.swapIndex.addFixing(new Date(04,Month.May,2006), 0.04217);
double cmsBondMktPrice2 = 94.08 ; // market price observed on 7th June 2007
double cmsBondMktFullPrice2 = cmsBondMktPrice2+cmsBond2.accruedAmount();
AssetSwap cmsBondParAssetSwap2 = new AssetSwap(payFixedRate,
cmsBond2, cmsBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
cmsBondParAssetSwap2.setPricingEngine(swapEngine);
double cmsBondParAssetSwapSpread2 = cmsBondParAssetSwap2.fairSpread();
AssetSwap cmsBondMktAssetSwap2 = new AssetSwap(payFixedRate,
cmsBond2, cmsBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
cmsBondMktAssetSwap2.setPricingEngine(swapEngine);
double cmsBondMktAssetSwapSpread2 = cmsBondMktAssetSwap2.fairSpread();
double error6 = Math.Abs(cmsBondMktAssetSwapSpread2-
100*cmsBondParAssetSwapSpread2/cmsBondMktFullPrice2);
if (error6>tolerance) {
Assert.Fail("wrong asset swap spreads for cms bond:" +
"\n market ASW spread: " + cmsBondMktAssetSwapSpread2 +
"\n par ASW spread: " + cmsBondParAssetSwapSpread2 +
"\n error: " + error6 +
"\n tolerance: " + tolerance);
}
// Zero Coupon bond (Isin: DE0004771662 IBRD 0 12/20/15)
// maturity doesn't occur on a business day
Bond zeroCpnBond1 = new ZeroCouponBond(settlementDays, bondCalendar, vars.faceAmount,
new Date(20,Month.December,2015), BusinessDayConvention.Following,
100.0, new Date(19,Month.December,1985));
zeroCpnBond1.setPricingEngine(bondEngine);
// market price observed on 12th June 2007
double zeroCpnBondMktPrice1 = 70.436 ;
double zeroCpnBondMktFullPrice1 = zeroCpnBondMktPrice1+zeroCpnBond1.accruedAmount();
AssetSwap zeroCpnBondParAssetSwap1 = new AssetSwap(payFixedRate,zeroCpnBond1,
zeroCpnBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnBondParAssetSwap1.setPricingEngine(swapEngine);
double zeroCpnBondParAssetSwapSpread1 = zeroCpnBondParAssetSwap1.fairSpread();
AssetSwap zeroCpnBondMktAssetSwap1 = new AssetSwap(payFixedRate,zeroCpnBond1,
zeroCpnBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
zeroCpnBondMktAssetSwap1.setPricingEngine(swapEngine);
double zeroCpnBondMktAssetSwapSpread1 = zeroCpnBondMktAssetSwap1.fairSpread();
double error7 = Math.Abs(zeroCpnBondMktAssetSwapSpread1-
100*zeroCpnBondParAssetSwapSpread1/zeroCpnBondMktFullPrice1);
if (error7>tolerance) {
Assert.Fail("wrong asset swap spreads for zero cpn bond:" +
"\n market ASW spread: " + zeroCpnBondMktAssetSwapSpread1 +
"\n par ASW spread: " + zeroCpnBondParAssetSwapSpread1 +
"\n error: " + error7 +
"\n tolerance: " + tolerance);
}
// Zero Coupon bond (Isin: IT0001200390 ISPIM 0 02/17/28)
// maturity occurs on a business day
Bond zeroCpnBond2 = new ZeroCouponBond(settlementDays, bondCalendar, vars.faceAmount,
new Date(17,Month.February,2028),
BusinessDayConvention.Following,
100.0, new Date(17,Month.February,1998));
zeroCpnBond2.setPricingEngine(bondEngine);
// Real zeroCpnBondPrice2 = zeroCpnBond2->cleanPrice();
// market price observed on 12th June 2007
double zeroCpnBondMktPrice2 = 35.160 ;
double zeroCpnBondMktFullPrice2 = zeroCpnBondMktPrice2+zeroCpnBond2.accruedAmount();
AssetSwap zeroCpnBondParAssetSwap2 = new AssetSwap(payFixedRate,zeroCpnBond2,
zeroCpnBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnBondParAssetSwap2.setPricingEngine(swapEngine);
double zeroCpnBondParAssetSwapSpread2 = zeroCpnBondParAssetSwap2.fairSpread();
AssetSwap zeroCpnBondMktAssetSwap2 = new AssetSwap(payFixedRate,zeroCpnBond2,
zeroCpnBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
zeroCpnBondMktAssetSwap2.setPricingEngine(swapEngine);
double zeroCpnBondMktAssetSwapSpread2 = zeroCpnBondMktAssetSwap2.fairSpread();
double error8 = Math.Abs(zeroCpnBondMktAssetSwapSpread2-
100*zeroCpnBondParAssetSwapSpread2/zeroCpnBondMktFullPrice2);
if (error8>tolerance) {
Assert.Fail("wrong asset swap spreads for zero cpn bond:" +
"\n market ASW spread: " + zeroCpnBondMktAssetSwapSpread2 +
"\n par ASW spread: " + zeroCpnBondParAssetSwapSpread2 +
"\n error: " + error8 +
"\n tolerance: " + tolerance);
}
}
public void testImpliedValue()
{
// Testing implied bond value against asset-swap fair price with null spread
CommonVars vars = new CommonVars();
Calendar bondCalendar = new TARGET();
int settlementDays = 3;
int fixingDays = 2;
bool payFixedRate = true;
bool parAssetSwap = true;
bool inArrears = false;
// Fixed Underlying bond (Isin: DE0001135275 DBR 4 01/04/37)
// maturity doesn't occur on a business day
Schedule fixedBondSchedule1 = new Schedule( new Date(4,Month.January,2005),
new Date(4,Month.January,2037),
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
Bond fixedBond1 = new FixedRateBond(settlementDays, vars.faceAmount,
fixedBondSchedule1,
new List<double>(){0.04},
new ActualActual(ActualActual.Convention.ISDA),
BusinessDayConvention.Following,
100.0, new Date(4,Month.January,2005));
IPricingEngine bondEngine = new DiscountingBondEngine(vars.termStructure);
IPricingEngine swapEngine = new DiscountingSwapEngine(vars.termStructure);
fixedBond1.setPricingEngine(bondEngine);
double fixedBondPrice1 = fixedBond1.cleanPrice();
AssetSwap fixedBondAssetSwap1 = new AssetSwap(payFixedRate, fixedBond1, fixedBondPrice1, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), parAssetSwap);
fixedBondAssetSwap1.setPricingEngine(swapEngine);
double fixedBondAssetSwapPrice1 = fixedBondAssetSwap1.fairCleanPrice();
double tolerance = 1.0e-13;
double error1 = Math.Abs(fixedBondAssetSwapPrice1-fixedBondPrice1);
if (error1>tolerance) {
Assert.Fail("wrong zero spread asset swap price for fixed bond:" +
"\n bond's clean price: " + fixedBondPrice1 +
"\n asset swap fair price: " + fixedBondAssetSwapPrice1 +
"\n error: " + error1 +
"\n tolerance: " + tolerance);
}
// Fixed Underlying bond (Isin: IT0006527060 IBRD 5 02/05/19)
// maturity occurs on a business day
Schedule fixedBondSchedule2 = new Schedule( new Date(5,Month.February,2005),
new Date(5,Month.February,2019),
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
Bond fixedBond2 = new FixedRateBond(settlementDays, vars.faceAmount,
fixedBondSchedule2,
new List<double>(){0.05},
new Thirty360(Thirty360.Thirty360Convention.BondBasis),
BusinessDayConvention.Following,
100.0, new Date(5,Month.February,2005));
fixedBond2.setPricingEngine(bondEngine);
double fixedBondPrice2 = fixedBond2.cleanPrice();
AssetSwap fixedBondAssetSwap2 = new AssetSwap(payFixedRate, fixedBond2, fixedBondPrice2, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), parAssetSwap);
fixedBondAssetSwap2.setPricingEngine(swapEngine);
double fixedBondAssetSwapPrice2 = fixedBondAssetSwap2.fairCleanPrice();
double error2 = Math.Abs(fixedBondAssetSwapPrice2-fixedBondPrice2);
if (error2>tolerance) {
Assert.Fail("wrong zero spread asset swap price for fixed bond:" +
"\n bond's clean price: " + fixedBondPrice2 +
"\n asset swap fair price: " + fixedBondAssetSwapPrice2 +
"\n error: " + error2 +
"\n tolerance: " + tolerance);
}
// FRN Underlying bond (Isin: IT0003543847 ISPIM 0 09/29/13)
// maturity doesn't occur on a business day
Schedule floatingBondSchedule1 = new Schedule( new Date(29,Month.September,2003),
new Date(29,Month.September,2013),
new Period(Frequency.Semiannual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
Bond floatingBond1 = new FloatingRateBond(settlementDays, vars.faceAmount,
floatingBondSchedule1,
vars.iborIndex, new Actual360(),
BusinessDayConvention.Following, fixingDays,
new List<double>(){1},
new List<double>(){0.0056},
new List<double>(),
new List<double>(),
inArrears,
100.0, new Date(29,Month.September,2003));
floatingBond1.setPricingEngine(bondEngine);
Utils.setCouponPricer(floatingBond1.cashflows(), vars.pricer);
vars.iborIndex.addFixing(new Date(27,Month.March,2007), 0.0402);
double floatingBondPrice1 = floatingBond1.cleanPrice();
AssetSwap floatingBondAssetSwap1 = new AssetSwap(payFixedRate, floatingBond1, floatingBondPrice1, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), parAssetSwap);
floatingBondAssetSwap1.setPricingEngine(swapEngine);
double floatingBondAssetSwapPrice1 = floatingBondAssetSwap1.fairCleanPrice();
double error3 = Math.Abs(floatingBondAssetSwapPrice1-floatingBondPrice1);
if (error3>tolerance) {
Assert.Fail("wrong zero spread asset swap price for floater:" +
"\n bond's clean price: " + floatingBondPrice1 +
"\n asset swap fair price: " + floatingBondAssetSwapPrice1 +
"\n error: " + error3 +
"\n tolerance: " + tolerance);
}
// FRN Underlying bond (Isin: XS0090566539 COE 0 09/24/18)
// maturity occurs on a business day
Schedule floatingBondSchedule2 = new Schedule( new Date(24,Month.September,2004),
new Date(24,Month.September,2018),
new Period(Frequency.Semiannual), bondCalendar,
BusinessDayConvention.ModifiedFollowing, BusinessDayConvention.ModifiedFollowing,
DateGeneration.Rule.Backward, false);
Bond floatingBond2 = new FloatingRateBond( settlementDays, vars.faceAmount,
floatingBondSchedule2,
vars.iborIndex, new Actual360(),
BusinessDayConvention.ModifiedFollowing, fixingDays,
new List<double>(){1},
new List<double>(){0.0025},
new List<double>(),
new List<double>(),
inArrears,
100.0, new Date(24,Month.September,2004));
floatingBond2.setPricingEngine(bondEngine);
Utils.setCouponPricer(floatingBond2.cashflows(), vars.pricer);
vars.iborIndex.addFixing( new Date(22,Month.March,2007), 0.04013);
double currentCoupon=0.04013+0.0025;
double floatingCurrentCoupon= floatingBond2.nextCouponRate();
double error4= Math.Abs(floatingCurrentCoupon-currentCoupon);
if (error4>tolerance) {
Assert.Fail("wrong current coupon is returned for floater bond:" +
"\n bond's calculated current coupon: " +
currentCoupon +
"\n current coupon asked to the bond: " +
floatingCurrentCoupon +
"\n error: " + error4 +
"\n tolerance: " + tolerance);
}
double floatingBondPrice2 = floatingBond2.cleanPrice();
AssetSwap floatingBondAssetSwap2 = new AssetSwap(payFixedRate,floatingBond2, floatingBondPrice2, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), parAssetSwap);
floatingBondAssetSwap2.setPricingEngine(swapEngine);
double floatingBondAssetSwapPrice2 = floatingBondAssetSwap2.fairCleanPrice();
double error5 = Math.Abs(floatingBondAssetSwapPrice2-floatingBondPrice2);
if (error5>tolerance) {
Assert.Fail("wrong zero spread asset swap price for floater:" +
"\n bond's clean price: " + floatingBondPrice2 +
"\n asset swap fair price: " + floatingBondAssetSwapPrice2 +
"\n error: " + error5 +
"\n tolerance: " + tolerance);
}
// CMS Underlying bond (Isin: XS0228052402 CRDIT 0 8/22/20)
// maturity doesn't occur on a business day
Schedule cmsBondSchedule1 = new Schedule( new Date(22,Month.August,2005),
new Date(22,Month.August,2020),
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
Bond cmsBond1 = new CmsRateBond(settlementDays, vars.faceAmount,
cmsBondSchedule1,
vars.swapIndex, new Thirty360(),
BusinessDayConvention.Following, fixingDays,
new List<double>(){1.0},
new List<double>(){0.0},
new List<double>(){0.055},
new List<double>(){0.025},
inArrears,
100.0, new Date(22,Month.August,2005));
cmsBond1.setPricingEngine(bondEngine);
Utils.setCouponPricer(cmsBond1.cashflows(), vars.cmspricer);
vars.swapIndex.addFixing( new Date(18,Month.August,2006), 0.04158);
double cmsBondPrice1 = cmsBond1.cleanPrice();
AssetSwap cmsBondAssetSwap1 = new AssetSwap(payFixedRate, cmsBond1, cmsBondPrice1, vars.iborIndex, vars.spread,
null,vars.iborIndex.dayCounter(), parAssetSwap);
cmsBondAssetSwap1.setPricingEngine(swapEngine);
double cmsBondAssetSwapPrice1 = cmsBondAssetSwap1.fairCleanPrice();
double error6 = Math.Abs(cmsBondAssetSwapPrice1-cmsBondPrice1);
if (error6>tolerance) {
Assert.Fail("wrong zero spread asset swap price for cms bond:" +
"\n bond's clean price: " + cmsBondPrice1 +
"\n asset swap fair price: " + cmsBondAssetSwapPrice1 +
"\n error: " + error6 +
"\n tolerance: " + tolerance);
}
// CMS Underlying bond (Isin: XS0218766664 ISPIM 0 5/6/15)
// maturity occurs on a business day
Schedule cmsBondSchedule2 = new Schedule( new Date(06,Month.May,2005),
new Date(06,Month.May,2015),
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
Bond cmsBond2 = new CmsRateBond(settlementDays, vars.faceAmount, cmsBondSchedule2,
vars.swapIndex, new Thirty360(),
BusinessDayConvention.Following, fixingDays,
new List<double>(){0.84}, new List<double>(){0.0},
new List<double>(), new List<double>(),
inArrears,
100.0, new Date(06,Month.May,2005));
cmsBond2.setPricingEngine(bondEngine);
Utils.setCouponPricer(cmsBond2.cashflows(), vars.cmspricer);
vars.swapIndex.addFixing( new Date(04,Month.May,2006), 0.04217);
double cmsBondPrice2 = cmsBond2.cleanPrice();
AssetSwap cmsBondAssetSwap2 = new AssetSwap(payFixedRate,cmsBond2, cmsBondPrice2, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), parAssetSwap);
cmsBondAssetSwap2.setPricingEngine(swapEngine);
double cmsBondAssetSwapPrice2 = cmsBondAssetSwap2.fairCleanPrice();
double error7 = Math.Abs(cmsBondAssetSwapPrice2-cmsBondPrice2);
if (error7>tolerance) {
Assert.Fail("wrong zero spread asset swap price for cms bond:" +
"\n bond's clean price: " + cmsBondPrice2 +
"\n asset swap fair price: " + cmsBondAssetSwapPrice2 +
"\n error: " + error7 +
"\n tolerance: " + tolerance);
}
// Zero Coupon bond (Isin: DE0004771662 IBRD 0 12/20/15)
// maturity doesn't occur on a business day
Bond zeroCpnBond1 = new ZeroCouponBond(settlementDays, bondCalendar, vars.faceAmount,
new Date(20,Month.December,2015),
BusinessDayConvention.Following,
100.0, new Date(19,Month.December,1985));
zeroCpnBond1.setPricingEngine(bondEngine);
double zeroCpnBondPrice1 = zeroCpnBond1.cleanPrice();
AssetSwap zeroCpnAssetSwap1 = new AssetSwap(payFixedRate,zeroCpnBond1, zeroCpnBondPrice1, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), parAssetSwap);
zeroCpnAssetSwap1.setPricingEngine(swapEngine);
double zeroCpnBondAssetSwapPrice1 = zeroCpnAssetSwap1.fairCleanPrice();
double error8 = Math.Abs(cmsBondAssetSwapPrice1-cmsBondPrice1);
if (error8>tolerance) {
Assert.Fail("wrong zero spread asset swap price for zero cpn bond:" +
"\n bond's clean price: " + zeroCpnBondPrice1 +
"\n asset swap fair price: " + zeroCpnBondAssetSwapPrice1 +
"\n error: " + error8 +
"\n tolerance: " + tolerance);
}
// Zero Coupon bond (Isin: IT0001200390 ISPIM 0 02/17/28)
// maturity occurs on a business day
Bond zeroCpnBond2 = new ZeroCouponBond(settlementDays, bondCalendar, vars.faceAmount,
new Date(17,Month.February,2028),
BusinessDayConvention.Following,
100.0, new Date(17,Month.February,1998));
zeroCpnBond2.setPricingEngine(bondEngine);
double zeroCpnBondPrice2 = zeroCpnBond2.cleanPrice();
AssetSwap zeroCpnAssetSwap2 = new AssetSwap(payFixedRate, zeroCpnBond2, zeroCpnBondPrice2, vars.iborIndex, vars.spread,
null,vars.iborIndex.dayCounter(), parAssetSwap);
zeroCpnAssetSwap2.setPricingEngine(swapEngine);
double zeroCpnBondAssetSwapPrice2 = zeroCpnAssetSwap2.fairCleanPrice();
double error9 = Math.Abs(cmsBondAssetSwapPrice2-cmsBondPrice2);
if (error9>tolerance) {
Assert.Fail("wrong zero spread asset swap price for zero cpn bond:" +
"\n bond's clean price: " + zeroCpnBondPrice2 +
"\n asset swap fair price: " + zeroCpnBondAssetSwapPrice2 +
"\n error: " + error9 +
"\n tolerance: " + tolerance);
}
}
public void testSpecializedBondVsGenericBondUsingAsw()
{
// Testing asset-swap prices and spreads for specialized bond against equivalent generic bond...
CommonVars vars = new CommonVars();
Calendar bondCalendar = new TARGET();
int settlementDays = 3;
int fixingDays = 2;
bool payFixedRate = true;
bool parAssetSwap = true;
bool inArrears = false;
// Fixed bond (Isin: DE0001135275 DBR 4 01/04/37)
// maturity doesn't occur on a business day
Date fixedBondStartDate1 = new Date(4,Month.January,2005);
Date fixedBondMaturityDate1 = new Date(4,Month.January,2037);
Schedule fixedBondSchedule1 = new Schedule(fixedBondStartDate1,
fixedBondMaturityDate1,
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
List<CashFlow> fixedBondLeg1 = new FixedRateLeg(fixedBondSchedule1)
.withCouponRates(0.04, new ActualActual(ActualActual.Convention.ISDA))
.withNotionals(vars.faceAmount);
Date fixedbondRedemption1 = bondCalendar.adjust(fixedBondMaturityDate1, BusinessDayConvention.Following);
fixedBondLeg1.Add(new SimpleCashFlow(100.0, fixedbondRedemption1));
// generic bond
Bond fixedBond1 = new Bond(settlementDays, bondCalendar, vars.faceAmount,
fixedBondMaturityDate1, fixedBondStartDate1, fixedBondLeg1);
IPricingEngine bondEngine = new DiscountingBondEngine(vars.termStructure);
IPricingEngine swapEngine = new DiscountingSwapEngine(vars.termStructure);
fixedBond1.setPricingEngine(bondEngine);
// equivalent specialized fixed rate bond
Bond fixedSpecializedBond1 = new FixedRateBond(settlementDays, vars.faceAmount, fixedBondSchedule1,
new List<double>{0.04},
new ActualActual(ActualActual.Convention.ISDA), BusinessDayConvention.Following,
100.0, new Date(4,Month.January,2005));
fixedSpecializedBond1.setPricingEngine(bondEngine);
double fixedBondPrice1 = fixedBond1.cleanPrice();
double fixedSpecializedBondPrice1 = fixedSpecializedBond1.cleanPrice();
AssetSwap fixedBondAssetSwap1 = new AssetSwap(payFixedRate,
fixedBond1, fixedBondPrice1,
vars.iborIndex, vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedBondAssetSwap1.setPricingEngine(swapEngine);
AssetSwap fixedSpecializedBondAssetSwap1 = new AssetSwap(payFixedRate,
fixedSpecializedBond1,
fixedSpecializedBondPrice1,
vars.iborIndex,
vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedSpecializedBondAssetSwap1.setPricingEngine(swapEngine);
double fixedBondAssetSwapPrice1 = fixedBondAssetSwap1.fairCleanPrice();
double fixedSpecializedBondAssetSwapPrice1 =
fixedSpecializedBondAssetSwap1.fairCleanPrice();
double tolerance = 1.0e-13;
double error1 =
Math.Abs(fixedBondAssetSwapPrice1-fixedSpecializedBondAssetSwapPrice1);
if (error1>tolerance) {
Assert.Fail("wrong clean price for fixed bond:"
+ "\n generic fixed rate bond's clean price: "
+ fixedBondAssetSwapPrice1
+ "\n equivalent specialized bond's clean price: "
+ fixedSpecializedBondAssetSwapPrice1
+ "\n error: " + error1
+ "\n tolerance: " + tolerance);
}
// market executable price as of 4th sept 2007
double fixedBondMktPrice1= 91.832;
AssetSwap fixedBondASW1 = new AssetSwap(payFixedRate,
fixedBond1, fixedBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedBondASW1.setPricingEngine(swapEngine);
AssetSwap fixedSpecializedBondASW1 = new AssetSwap(payFixedRate,
fixedSpecializedBond1,
fixedBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedSpecializedBondASW1.setPricingEngine(swapEngine);
double fixedBondASWSpread1 = fixedBondASW1.fairSpread();
double fixedSpecializedBondASWSpread1 = fixedSpecializedBondASW1.fairSpread();
double error2 = Math.Abs(fixedBondASWSpread1-fixedSpecializedBondASWSpread1);
if (error2>tolerance) {
Assert.Fail("wrong asw spread for fixed bond:"
+ "\n generic fixed rate bond's asw spread: "
+ fixedBondASWSpread1
+ "\n equivalent specialized bond's asw spread: "
+ fixedSpecializedBondASWSpread1
+ "\n error: " + error2
+ "\n tolerance: " + tolerance);
}
//Fixed bond (Isin: IT0006527060 IBRD 5 02/05/19)
//maturity occurs on a business day
Date fixedBondStartDate2 = new Date(5,Month.February,2005);
Date fixedBondMaturityDate2 = new Date(5,Month.February,2019);
Schedule fixedBondSchedule2= new Schedule(fixedBondStartDate2,
fixedBondMaturityDate2,
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
List<CashFlow> fixedBondLeg2 = new FixedRateLeg(fixedBondSchedule2)
.withCouponRates(0.05, new Thirty360(Thirty360.Thirty360Convention.BondBasis))
.withNotionals(vars.faceAmount);
Date fixedbondRedemption2 = bondCalendar.adjust(fixedBondMaturityDate2, BusinessDayConvention.Following);
fixedBondLeg2.Add(new SimpleCashFlow(100.0, fixedbondRedemption2));
// generic bond
Bond fixedBond2 = new Bond(settlementDays, bondCalendar, vars.faceAmount,
fixedBondMaturityDate2, fixedBondStartDate2, fixedBondLeg2);
fixedBond2.setPricingEngine(bondEngine);
// equivalent specialized fixed rate bond
Bond fixedSpecializedBond2 = new FixedRateBond(settlementDays, vars.faceAmount, fixedBondSchedule2,
new List<double>{ 0.05},
new Thirty360(Thirty360.Thirty360Convention.BondBasis), BusinessDayConvention.Following,
100.0, new Date(5,Month.February,2005));
fixedSpecializedBond2.setPricingEngine(bondEngine);
double fixedBondPrice2 = fixedBond2.cleanPrice();
double fixedSpecializedBondPrice2 = fixedSpecializedBond2.cleanPrice();
AssetSwap fixedBondAssetSwap2 = new AssetSwap(payFixedRate,
fixedBond2, fixedBondPrice2,
vars.iborIndex, vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedBondAssetSwap2.setPricingEngine(swapEngine);
AssetSwap fixedSpecializedBondAssetSwap2 = new AssetSwap(payFixedRate,
fixedSpecializedBond2,
fixedSpecializedBondPrice2,
vars.iborIndex,
vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedSpecializedBondAssetSwap2.setPricingEngine(swapEngine);
double fixedBondAssetSwapPrice2 = fixedBondAssetSwap2.fairCleanPrice();
double fixedSpecializedBondAssetSwapPrice2 = fixedSpecializedBondAssetSwap2.fairCleanPrice();
double error3 = Math.Abs(fixedBondAssetSwapPrice2-fixedSpecializedBondAssetSwapPrice2);
if (error3>tolerance) {
Assert.Fail("wrong clean price for fixed bond:"
+ "\n generic fixed rate bond's clean price: "
+ fixedBondAssetSwapPrice2
+ "\n equivalent specialized bond's clean price: "
+ fixedSpecializedBondAssetSwapPrice2
+ "\n error: " + error3
+ "\n tolerance: " + tolerance);
}
// market executable price as of 4th sept 2007
double fixedBondMktPrice2= 102.178;
AssetSwap fixedBondASW2 = new AssetSwap(payFixedRate,
fixedBond2, fixedBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedBondASW2.setPricingEngine(swapEngine);
AssetSwap fixedSpecializedBondASW2 = new AssetSwap(payFixedRate,
fixedSpecializedBond2,
fixedBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedSpecializedBondASW2.setPricingEngine(swapEngine);
double fixedBondASWSpread2 = fixedBondASW2.fairSpread();
double fixedSpecializedBondASWSpread2 = fixedSpecializedBondASW2.fairSpread();
double error4 = Math.Abs(fixedBondASWSpread2-fixedSpecializedBondASWSpread2);
if (error4>tolerance) {
Assert.Fail("wrong asw spread for fixed bond:"
+ "\n generic fixed rate bond's asw spread: "
+ fixedBondASWSpread2
+ "\n equivalent specialized bond's asw spread: "
+ fixedSpecializedBondASWSpread2
+ "\n error: " + error4
+ "\n tolerance: " + tolerance);
}
//FRN bond (Isin: IT0003543847 ISPIM 0 09/29/13)
//maturity doesn't occur on a business day
Date floatingBondStartDate1 = new Date(29,Month.September,2003);
Date floatingBondMaturityDate1 = new Date(29,Month.September,2013);
Schedule floatingBondSchedule1= new Schedule(floatingBondStartDate1,
floatingBondMaturityDate1,
new Period(Frequency.Semiannual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
List<CashFlow> floatingBondLeg1 = new IborLeg(floatingBondSchedule1, vars.iborIndex)
.withPaymentDayCounter(new Actual360())
.withFixingDays(fixingDays)
.withSpreads(0.0056)
.inArrears(inArrears)
.withNotionals(vars.faceAmount);
Date floatingbondRedemption1 = bondCalendar.adjust(floatingBondMaturityDate1, BusinessDayConvention.Following);
floatingBondLeg1.Add(new SimpleCashFlow(100.0, floatingbondRedemption1));
// generic bond
Bond floatingBond1 = new Bond(settlementDays, bondCalendar, vars.faceAmount,
floatingBondMaturityDate1, floatingBondStartDate1, floatingBondLeg1);
floatingBond1.setPricingEngine(bondEngine);
// equivalent specialized floater
Bond floatingSpecializedBond1 = new FloatingRateBond(settlementDays, vars.faceAmount,
floatingBondSchedule1,
vars.iborIndex, new Actual360(),
BusinessDayConvention.Following, fixingDays,
new List<double>{1},
new List<double>{0.0056},
new List<double>(), new List<double>(),
inArrears,
100.0, new Date(29,Month.September,2003));
floatingSpecializedBond1.setPricingEngine(bondEngine);
Utils.setCouponPricer(floatingBond1.cashflows(), vars.pricer);
Utils.setCouponPricer(floatingSpecializedBond1.cashflows(), vars.pricer);
vars.iborIndex.addFixing(new Date(27,Month.March,2007), 0.0402);
double floatingBondPrice1 = floatingBond1.cleanPrice();
double floatingSpecializedBondPrice1= floatingSpecializedBond1.cleanPrice();
AssetSwap floatingBondAssetSwap1= new AssetSwap(payFixedRate,
floatingBond1, floatingBondPrice1,
vars.iborIndex, vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingBondAssetSwap1.setPricingEngine(swapEngine);
AssetSwap floatingSpecializedBondAssetSwap1= new AssetSwap(payFixedRate,
floatingSpecializedBond1,
floatingSpecializedBondPrice1,
vars.iborIndex,
vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingSpecializedBondAssetSwap1.setPricingEngine(swapEngine);
double floatingBondAssetSwapPrice1 = floatingBondAssetSwap1.fairCleanPrice();
double floatingSpecializedBondAssetSwapPrice1 =
floatingSpecializedBondAssetSwap1.fairCleanPrice();
double error5 =
Math.Abs(floatingBondAssetSwapPrice1-floatingSpecializedBondAssetSwapPrice1);
if (error5>tolerance) {
Assert.Fail("wrong clean price for frnbond:"
+ "\n generic frn rate bond's clean price: "
+ floatingBondAssetSwapPrice1
+ "\n equivalent specialized bond's price: "
+ floatingSpecializedBondAssetSwapPrice1
+ "\n error: " + error5
+ "\n tolerance: " + tolerance);
}
// market executable price as of 4th sept 2007
double floatingBondMktPrice1= 101.33;
AssetSwap floatingBondASW1= new AssetSwap(payFixedRate,
floatingBond1, floatingBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingBondASW1.setPricingEngine(swapEngine);
AssetSwap floatingSpecializedBondASW1= new AssetSwap(payFixedRate,
floatingSpecializedBond1,
floatingBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingSpecializedBondASW1.setPricingEngine(swapEngine);
double floatingBondASWSpread1 = floatingBondASW1.fairSpread();
double floatingSpecializedBondASWSpread1 =
floatingSpecializedBondASW1.fairSpread();
double error6 =
Math.Abs(floatingBondASWSpread1-floatingSpecializedBondASWSpread1);
if (error6>tolerance) {
Assert.Fail("wrong asw spread for fixed bond:"
+ "\n generic frn rate bond's asw spread: "
+ floatingBondASWSpread1
+ "\n equivalent specialized bond's asw spread: "
+ floatingSpecializedBondASWSpread1
+ "\n error: " + error6
+ "\n tolerance: " + tolerance);
}
//FRN bond (Isin: XS0090566539 COE 0 09/24/18)
//maturity occurs on a business day
Date floatingBondStartDate2 = new Date(24,Month.September,2004);
Date floatingBondMaturityDate2 = new Date(24,Month.September,2018);
Schedule floatingBondSchedule2= new Schedule(floatingBondStartDate2,
floatingBondMaturityDate2,
new Period(Frequency.Semiannual), bondCalendar,
BusinessDayConvention.ModifiedFollowing, BusinessDayConvention.ModifiedFollowing,
DateGeneration.Rule.Backward, false);
List<CashFlow> floatingBondLeg2 = new IborLeg(floatingBondSchedule2, vars.iborIndex)
.withPaymentDayCounter(new Actual360())
.withFixingDays(fixingDays)
.withSpreads(0.0025)
.inArrears(inArrears)
.withPaymentAdjustment(BusinessDayConvention.ModifiedFollowing)
.withNotionals(vars.faceAmount);
Date floatingbondRedemption2 = bondCalendar.adjust(floatingBondMaturityDate2, BusinessDayConvention.ModifiedFollowing);
floatingBondLeg2.Add(new SimpleCashFlow(100.0, floatingbondRedemption2));
// generic bond
Bond floatingBond2 = new Bond(settlementDays, bondCalendar, vars.faceAmount,
floatingBondMaturityDate2, floatingBondStartDate2,floatingBondLeg2);
floatingBond2.setPricingEngine(bondEngine);
// equivalent specialized floater
Bond floatingSpecializedBond2 = new FloatingRateBond(settlementDays, vars.faceAmount,
floatingBondSchedule2,
vars.iborIndex, new Actual360(),
BusinessDayConvention.ModifiedFollowing, fixingDays,
new List<double>{1},
new List<double>{0.0025},
new List<double>(), new List<double>(),
inArrears,
100.0, new Date(24,Month.September,2004));
floatingSpecializedBond2.setPricingEngine(bondEngine);
Utils.setCouponPricer(floatingBond2.cashflows(), vars.pricer);
Utils.setCouponPricer(floatingSpecializedBond2.cashflows(), vars.pricer);
vars.iborIndex.addFixing(new Date(22,Month.March,2007), 0.04013);
double floatingBondPrice2 = floatingBond2.cleanPrice();
double floatingSpecializedBondPrice2= floatingSpecializedBond2.cleanPrice();
AssetSwap floatingBondAssetSwap2= new AssetSwap(payFixedRate,
floatingBond2, floatingBondPrice2,
vars.iborIndex, vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingBondAssetSwap2.setPricingEngine(swapEngine);
AssetSwap floatingSpecializedBondAssetSwap2= new AssetSwap(payFixedRate,
floatingSpecializedBond2,
floatingSpecializedBondPrice2,
vars.iborIndex,
vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingSpecializedBondAssetSwap2.setPricingEngine(swapEngine);
double floatingBondAssetSwapPrice2 = floatingBondAssetSwap2.fairCleanPrice();
double floatingSpecializedBondAssetSwapPrice2 =
floatingSpecializedBondAssetSwap2.fairCleanPrice();
double error7 =
Math.Abs(floatingBondAssetSwapPrice2-floatingSpecializedBondAssetSwapPrice2);
if (error7>tolerance) {
Assert.Fail("wrong clean price for frnbond:"
+ "\n generic frn rate bond's clean price: "
+ floatingBondAssetSwapPrice2
+ "\n equivalent specialized frn bond's price: "
+ floatingSpecializedBondAssetSwapPrice2
+ "\n error: " + error7
+ "\n tolerance: " + tolerance);
}
// market executable price as of 4th sept 2007
double floatingBondMktPrice2 = 101.26;
AssetSwap floatingBondASW2= new AssetSwap(payFixedRate,
floatingBond2, floatingBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingBondASW2.setPricingEngine(swapEngine);
AssetSwap floatingSpecializedBondASW2= new AssetSwap(payFixedRate,
floatingSpecializedBond2,
floatingBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingSpecializedBondASW2.setPricingEngine(swapEngine);
double floatingBondASWSpread2 = floatingBondASW2.fairSpread();
double floatingSpecializedBondASWSpread2 =
floatingSpecializedBondASW2.fairSpread();
double error8 =
Math.Abs(floatingBondASWSpread2-floatingSpecializedBondASWSpread2);
if (error8>tolerance) {
Assert.Fail("wrong asw spread for frn bond:"
+ "\n generic frn rate bond's asw spread: "
+ floatingBondASWSpread2
+ "\n equivalent specialized bond's asw spread: "
+ floatingSpecializedBondASWSpread2
+ "\n error: " + error8
+ "\n tolerance: " + tolerance);
}
// CMS bond (Isin: XS0228052402 CRDIT 0 8/22/20)
// maturity doesn't occur on a business day
Date cmsBondStartDate1 = new Date(22,Month.August,2005);
Date cmsBondMaturityDate1 = new Date(22,Month.August,2020);
Schedule cmsBondSchedule1= new Schedule(cmsBondStartDate1,
cmsBondMaturityDate1,
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
List<CashFlow> cmsBondLeg1 = new CmsLeg(cmsBondSchedule1, vars.swapIndex)
.withPaymentDayCounter(new Thirty360())
.withFixingDays(fixingDays)
.withCaps(0.055)
.withFloors(0.025)
.inArrears(inArrears)
.withNotionals(vars.faceAmount);
Date cmsbondRedemption1 = bondCalendar.adjust(cmsBondMaturityDate1, BusinessDayConvention.Following);
cmsBondLeg1.Add(new SimpleCashFlow(100.0, cmsbondRedemption1));
// generic cms bond
Bond cmsBond1 = new Bond(settlementDays, bondCalendar, vars.faceAmount,
cmsBondMaturityDate1, cmsBondStartDate1, cmsBondLeg1);
cmsBond1.setPricingEngine(bondEngine);
// equivalent specialized cms bond
Bond cmsSpecializedBond1 = new CmsRateBond(settlementDays, vars.faceAmount, cmsBondSchedule1,
vars.swapIndex, new Thirty360(),
BusinessDayConvention.Following, fixingDays,
new List<double>{1.0}, new List<double>{0.0},
new List<double>{0.055}, new List<double>{0.025},
inArrears,
100.0, new Date(22,Month.August,2005));
cmsSpecializedBond1.setPricingEngine(bondEngine);
Utils.setCouponPricer(cmsBond1.cashflows(), vars.cmspricer);
Utils.setCouponPricer(cmsSpecializedBond1.cashflows(), vars.cmspricer);
vars.swapIndex.addFixing(new Date(18,Month.August,2006), 0.04158);
double cmsBondPrice1 = cmsBond1.cleanPrice();
double cmsSpecializedBondPrice1 = cmsSpecializedBond1.cleanPrice();
AssetSwap cmsBondAssetSwap1= new AssetSwap(payFixedRate,cmsBond1, cmsBondPrice1,
vars.iborIndex, vars.nonnullspread,
null,vars.iborIndex.dayCounter(),
parAssetSwap);
cmsBondAssetSwap1.setPricingEngine(swapEngine);
AssetSwap cmsSpecializedBondAssetSwap1= new AssetSwap(payFixedRate,cmsSpecializedBond1,
cmsSpecializedBondPrice1,
vars.iborIndex,
vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
cmsSpecializedBondAssetSwap1.setPricingEngine(swapEngine);
double cmsBondAssetSwapPrice1 = cmsBondAssetSwap1.fairCleanPrice();
double cmsSpecializedBondAssetSwapPrice1 =
cmsSpecializedBondAssetSwap1.fairCleanPrice();
double error9 =
Math.Abs(cmsBondAssetSwapPrice1-cmsSpecializedBondAssetSwapPrice1);
if (error9>tolerance) {
Assert.Fail("wrong clean price for cmsbond:"
+ "\n generic bond's clean price: "
+ cmsBondAssetSwapPrice1
+ "\n equivalent specialized cms rate bond's price: "
+ cmsSpecializedBondAssetSwapPrice1
+ "\n error: " + error9
+ "\n tolerance: " + tolerance);
}
double cmsBondMktPrice1 = 87.02;// market executable price as of 4th sept 2007
AssetSwap cmsBondASW1= new AssetSwap(payFixedRate,
cmsBond1, cmsBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
cmsBondASW1.setPricingEngine(swapEngine);
AssetSwap cmsSpecializedBondASW1= new AssetSwap(payFixedRate,
cmsSpecializedBond1,
cmsBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
cmsSpecializedBondASW1.setPricingEngine(swapEngine);
double cmsBondASWSpread1 = cmsBondASW1.fairSpread();
double cmsSpecializedBondASWSpread1 = cmsSpecializedBondASW1.fairSpread();
double error10 = Math.Abs(cmsBondASWSpread1-cmsSpecializedBondASWSpread1);
if (error10>tolerance) {
Assert.Fail("wrong asw spread for cm bond:"
+ "\n generic cms rate bond's asw spread: "
+ cmsBondASWSpread1
+ "\n equivalent specialized bond's asw spread: "
+ cmsSpecializedBondASWSpread1
+ "\n error: " + error10
+ "\n tolerance: " + tolerance);
}
//CMS bond (Isin: XS0218766664 ISPIM 0 5/6/15)
//maturity occurs on a business day
Date cmsBondStartDate2 = new Date(06,Month.May,2005);
Date cmsBondMaturityDate2 = new Date(06,Month.May,2015);
Schedule cmsBondSchedule2= new Schedule(cmsBondStartDate2,
cmsBondMaturityDate2,
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
List<CashFlow> cmsBondLeg2 = new CmsLeg(cmsBondSchedule2, vars.swapIndex)
.withPaymentDayCounter(new Thirty360())
.withFixingDays(fixingDays)
.withGearings(0.84)
.inArrears(inArrears)
.withNotionals(vars.faceAmount);
Date cmsbondRedemption2 = bondCalendar.adjust(cmsBondMaturityDate2,
BusinessDayConvention.Following);
cmsBondLeg2.Add(new SimpleCashFlow(100.0, cmsbondRedemption2));
// generic bond
Bond cmsBond2 = new Bond(settlementDays, bondCalendar, vars.faceAmount,
cmsBondMaturityDate2, cmsBondStartDate2, cmsBondLeg2);
cmsBond2.setPricingEngine(bondEngine);
// equivalent specialized cms bond
Bond cmsSpecializedBond2 = new CmsRateBond(settlementDays, vars.faceAmount, cmsBondSchedule2,
vars.swapIndex, new Thirty360(),
BusinessDayConvention.Following, fixingDays,
new List<double>{0.84}, new List<double>{0.0},
new List<double>(), new List<double>(),
inArrears,
100.0, new Date(06,Month.May,2005));
cmsSpecializedBond2.setPricingEngine(bondEngine);
Utils.setCouponPricer(cmsBond2.cashflows(), vars.cmspricer);
Utils.setCouponPricer(cmsSpecializedBond2.cashflows(), vars.cmspricer);
vars.swapIndex.addFixing(new Date(04,Month.May,2006), 0.04217);
double cmsBondPrice2 = cmsBond2.cleanPrice();
double cmsSpecializedBondPrice2 = cmsSpecializedBond2.cleanPrice();
AssetSwap cmsBondAssetSwap2= new AssetSwap(payFixedRate,cmsBond2, cmsBondPrice2,
vars.iborIndex, vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
cmsBondAssetSwap2.setPricingEngine(swapEngine);
AssetSwap cmsSpecializedBondAssetSwap2= new AssetSwap(payFixedRate,cmsSpecializedBond2,
cmsSpecializedBondPrice2,
vars.iborIndex,
vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
cmsSpecializedBondAssetSwap2.setPricingEngine(swapEngine);
double cmsBondAssetSwapPrice2 = cmsBondAssetSwap2.fairCleanPrice();
double cmsSpecializedBondAssetSwapPrice2 =
cmsSpecializedBondAssetSwap2.fairCleanPrice();
double error11 =
Math.Abs(cmsBondAssetSwapPrice2-cmsSpecializedBondAssetSwapPrice2);
if (error11>tolerance) {
Assert.Fail("wrong clean price for cmsbond:"
+ "\n generic bond's clean price: "
+ cmsBondAssetSwapPrice2
+ "\n equivalent specialized cms rate bond's price: "
+ cmsSpecializedBondAssetSwapPrice2
+ "\n error: " + error11
+ "\n tolerance: " + tolerance);
}
double cmsBondMktPrice2 = 94.35;// market executable price as of 4th sept 2007
AssetSwap cmsBondASW2= new AssetSwap(payFixedRate,
cmsBond2, cmsBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
cmsBondASW2.setPricingEngine(swapEngine);
AssetSwap cmsSpecializedBondASW2= new AssetSwap(payFixedRate,
cmsSpecializedBond2,
cmsBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
cmsSpecializedBondASW2.setPricingEngine(swapEngine);
double cmsBondASWSpread2 = cmsBondASW2.fairSpread();
double cmsSpecializedBondASWSpread2 = cmsSpecializedBondASW2.fairSpread();
double error12 = Math.Abs(cmsBondASWSpread2-cmsSpecializedBondASWSpread2);
if (error12>tolerance) {
Assert.Fail("wrong asw spread for cm bond:"
+ "\n generic cms rate bond's asw spread: "
+ cmsBondASWSpread2
+ "\n equivalent specialized bond's asw spread: "
+ cmsSpecializedBondASWSpread2
+ "\n error: " + error12
+ "\n tolerance: " + tolerance);
}
// Zero-Coupon bond (Isin: DE0004771662 IBRD 0 12/20/15)
// maturity doesn't occur on a business day
Date zeroCpnBondStartDate1 = new Date(19,Month.December,1985);
Date zeroCpnBondMaturityDate1 = new Date(20,Month.December,2015);
Date zeroCpnBondRedemption1 = bondCalendar.adjust(zeroCpnBondMaturityDate1,
BusinessDayConvention.Following);
List<CashFlow> zeroCpnBondLeg1 = new List<CashFlow>{new SimpleCashFlow(100.0, zeroCpnBondRedemption1)};
// generic bond
Bond zeroCpnBond1 = new Bond(settlementDays, bondCalendar, vars.faceAmount,
zeroCpnBondMaturityDate1, zeroCpnBondStartDate1, zeroCpnBondLeg1);
zeroCpnBond1.setPricingEngine(bondEngine);
// specialized zerocpn bond
Bond zeroCpnSpecializedBond1= new ZeroCouponBond(settlementDays, bondCalendar, vars.faceAmount,
new Date(20,Month.December,2015),
BusinessDayConvention.Following,
100.0, new Date(19,Month.December,1985));
zeroCpnSpecializedBond1.setPricingEngine(bondEngine);
double zeroCpnBondPrice1 = zeroCpnBond1.cleanPrice();
double zeroCpnSpecializedBondPrice1 = zeroCpnSpecializedBond1.cleanPrice();
AssetSwap zeroCpnBondAssetSwap1= new AssetSwap(payFixedRate,zeroCpnBond1,
zeroCpnBondPrice1,
vars.iborIndex, vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnBondAssetSwap1.setPricingEngine(swapEngine);
AssetSwap zeroCpnSpecializedBondAssetSwap1= new AssetSwap(payFixedRate,
zeroCpnSpecializedBond1,
zeroCpnSpecializedBondPrice1,
vars.iborIndex,
vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnSpecializedBondAssetSwap1.setPricingEngine(swapEngine);
double zeroCpnBondAssetSwapPrice1 = zeroCpnBondAssetSwap1.fairCleanPrice();
double zeroCpnSpecializedBondAssetSwapPrice1 =
zeroCpnSpecializedBondAssetSwap1.fairCleanPrice();
double error13 =
Math.Abs(zeroCpnBondAssetSwapPrice1-zeroCpnSpecializedBondAssetSwapPrice1);
if (error13>tolerance) {
Assert.Fail("wrong clean price for zerocpn bond:"
+ "\n generic zero cpn bond's clean price: "
+ zeroCpnBondAssetSwapPrice1
+ "\n specialized equivalent bond's price: "
+ zeroCpnSpecializedBondAssetSwapPrice1
+ "\n error: " + error13
+ "\n tolerance: " + tolerance);
}
// market executable price as of 4th sept 2007
double zeroCpnBondMktPrice1 = 72.277;
AssetSwap zeroCpnBondASW1= new AssetSwap(payFixedRate,
zeroCpnBond1,zeroCpnBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnBondASW1.setPricingEngine(swapEngine);
AssetSwap zeroCpnSpecializedBondASW1= new AssetSwap(payFixedRate,
zeroCpnSpecializedBond1,
zeroCpnBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnSpecializedBondASW1.setPricingEngine(swapEngine);
double zeroCpnBondASWSpread1 = zeroCpnBondASW1.fairSpread();
double zeroCpnSpecializedBondASWSpread1 =
zeroCpnSpecializedBondASW1.fairSpread();
double error14 =
Math.Abs(zeroCpnBondASWSpread1-zeroCpnSpecializedBondASWSpread1);
if (error14>tolerance) {
Assert.Fail("wrong asw spread for zeroCpn bond:"
+ "\n generic zeroCpn bond's asw spread: "
+ zeroCpnBondASWSpread1
+ "\n equivalent specialized bond's asw spread: "
+ zeroCpnSpecializedBondASWSpread1
+ "\n error: " + error14
+ "\n tolerance: " + tolerance);
}
// Zero Coupon bond (Isin: IT0001200390 ISPIM 0 02/17/28)
// maturity doesn't occur on a business day
Date zeroCpnBondStartDate2 = new Date(17,Month.February,1998);
Date zeroCpnBondMaturityDate2 = new Date(17,Month.February,2028);
Date zerocpbondRedemption2 = bondCalendar.adjust(zeroCpnBondMaturityDate2,
BusinessDayConvention.Following);
List<CashFlow> zeroCpnBondLeg2 = new List<CashFlow>{new SimpleCashFlow(100.0, zerocpbondRedemption2)};
// generic bond
Bond zeroCpnBond2 = new Bond(settlementDays, bondCalendar, vars.faceAmount,
zeroCpnBondMaturityDate2, zeroCpnBondStartDate2, zeroCpnBondLeg2);
zeroCpnBond2.setPricingEngine(bondEngine);
// specialized zerocpn bond
Bond zeroCpnSpecializedBond2 = new ZeroCouponBond(settlementDays, bondCalendar, vars.faceAmount,
new Date(17,Month.February,2028),
BusinessDayConvention.Following,
100.0, new Date(17,Month.February,1998));
zeroCpnSpecializedBond2.setPricingEngine(bondEngine);
double zeroCpnBondPrice2 = zeroCpnBond2.cleanPrice();
double zeroCpnSpecializedBondPrice2 = zeroCpnSpecializedBond2.cleanPrice();
AssetSwap zeroCpnBondAssetSwap2= new AssetSwap(payFixedRate,zeroCpnBond2,
zeroCpnBondPrice2,
vars.iborIndex, vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnBondAssetSwap2.setPricingEngine(swapEngine);
AssetSwap zeroCpnSpecializedBondAssetSwap2= new AssetSwap(payFixedRate,
zeroCpnSpecializedBond2,
zeroCpnSpecializedBondPrice2,
vars.iborIndex,
vars.nonnullspread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnSpecializedBondAssetSwap2.setPricingEngine(swapEngine);
double zeroCpnBondAssetSwapPrice2 = zeroCpnBondAssetSwap2.fairCleanPrice();
double zeroCpnSpecializedBondAssetSwapPrice2 =
zeroCpnSpecializedBondAssetSwap2.fairCleanPrice();
double error15 = Math.Abs(zeroCpnBondAssetSwapPrice2
-zeroCpnSpecializedBondAssetSwapPrice2);
if (error15>tolerance) {
Assert.Fail("wrong clean price for zerocpn bond:"
+ "\n generic zero cpn bond's clean price: "
+ zeroCpnBondAssetSwapPrice2
+ "\n equivalent specialized bond's price: "
+ zeroCpnSpecializedBondAssetSwapPrice2
+ "\n error: " + error15
+ "\n tolerance: " + tolerance);
}
// market executable price as of 4th sept 2007
double zeroCpnBondMktPrice2 = 72.277;
AssetSwap zeroCpnBondASW2= new AssetSwap(payFixedRate,
zeroCpnBond2,zeroCpnBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnBondASW2.setPricingEngine(swapEngine);
AssetSwap zeroCpnSpecializedBondASW2= new AssetSwap(payFixedRate,
zeroCpnSpecializedBond2,
zeroCpnBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnSpecializedBondASW2.setPricingEngine(swapEngine);
double zeroCpnBondASWSpread2 = zeroCpnBondASW2.fairSpread();
double zeroCpnSpecializedBondASWSpread2 =
zeroCpnSpecializedBondASW2.fairSpread();
double error16 =
Math.Abs(zeroCpnBondASWSpread2-zeroCpnSpecializedBondASWSpread2);
if (error16>tolerance) {
Assert.Fail("wrong asw spread for zeroCpn bond:"
+ "\n generic zeroCpn bond's asw spread: "
+ zeroCpnBondASWSpread2
+ "\n equivalent specialized bond's asw spread: "
+ zeroCpnSpecializedBondASWSpread2
+ "\n error: " + error16
+ "\n tolerance: " + tolerance);
}
}
public void testConsistency()
{
// Testing consistency between fair price and fair spread...");
CommonVars vars = new CommonVars();
Calendar bondCalendar = new TARGET();
int settlementDays = 3;
// Fixed Underlying bond (Isin: DE0001135275 DBR 4 01/04/37)
// maturity doesn't occur on a business day
Schedule bondSchedule = new Schedule(new Date(4, Month.January, 2005),
new Date(4, Month.January, 2037),
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
Bond bond = new FixedRateBond(settlementDays, vars.faceAmount,
bondSchedule, new List<double>() { 0.04 },
new ActualActual(ActualActual.Convention.ISDA),
BusinessDayConvention.Following,
100.0, new Date(4, Month.January, 2005));
bool payFixedRate = true;
double bondPrice = 95.0;
bool isPar = true;
AssetSwap parAssetSwap = new AssetSwap(payFixedRate, bond, bondPrice, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), isPar);
IPricingEngine swapEngine = new DiscountingSwapEngine(vars.termStructure, true, bond.settlementDate(),
Settings.evaluationDate());
parAssetSwap.setPricingEngine(swapEngine);
double fairCleanPrice = parAssetSwap.fairCleanPrice();
double fairSpread = parAssetSwap.fairSpread();
double tolerance = 1.0e-13;
AssetSwap assetSwap2 = new AssetSwap(payFixedRate, bond, fairCleanPrice, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), isPar);
assetSwap2.setPricingEngine(swapEngine);
if (Math.Abs(assetSwap2.NPV()) > tolerance)
{
Assert.Fail("npar asset swap fair clean price doesn't zero the NPV: " +
"\n clean price: " + bondPrice +
"\n fair clean price: " + fairCleanPrice +
"\n NPV: " + assetSwap2.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap2.fairCleanPrice() - fairCleanPrice) > tolerance)
{
Assert.Fail("\npar asset swap fair clean price doesn't equal input clean price at zero NPV: " +
"\n input clean price: " + fairCleanPrice +
"\n fair clean price: " + assetSwap2.fairCleanPrice() +
"\n NPV: " + assetSwap2.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap2.fairSpread() - vars.spread) > tolerance)
{
Assert.Fail("\npar asset swap fair spread doesn't equal input spread at zero NPV: " +
"\n input spread: " + vars.spread +
"\n fair spread: " + assetSwap2.fairSpread() +
"\n NPV: " + assetSwap2.NPV() +
"\n tolerance: " + tolerance);
}
AssetSwap assetSwap3 = new AssetSwap(payFixedRate, bond, bondPrice, vars.iborIndex, fairSpread,
null, vars.iborIndex.dayCounter(), isPar);
assetSwap3.setPricingEngine(swapEngine);
if (Math.Abs(assetSwap3.NPV()) > tolerance)
{
Assert.Fail("\npar asset swap fair spread doesn't zero the NPV: " +
"\n spread: " + vars.spread +
"\n fair spread: " + fairSpread +
"\n NPV: " + assetSwap3.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap3.fairCleanPrice() - bondPrice) > tolerance)
{
Assert.Fail("\npar asset swap fair clean price doesn't equal input clean price at zero NPV: " +
"\n input clean price: " + bondPrice +
"\n fair clean price: " + assetSwap3.fairCleanPrice() +
"\n NPV: " + assetSwap3.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap3.fairSpread() - fairSpread) > tolerance)
{
Assert.Fail("\npar asset swap fair spread doesn't equal input spread at zero NPV: " +
"\n input spread: " + fairSpread +
"\n fair spread: " + assetSwap3.fairSpread() +
"\n NPV: " + assetSwap3.NPV() +
"\n tolerance: " + tolerance);
}
// let's change the npv date
swapEngine = new DiscountingSwapEngine(vars.termStructure, true, bond.settlementDate(), bond.settlementDate());
parAssetSwap.setPricingEngine(swapEngine);
// fair clean price and fair spread should not change
if (Math.Abs(parAssetSwap.fairCleanPrice() - fairCleanPrice) > tolerance)
{
Assert.Fail("\npar asset swap fair clean price changed with NpvDate:" +
"\n expected clean price: " + fairCleanPrice +
"\n fair clean price: " + parAssetSwap.fairCleanPrice() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(parAssetSwap.fairSpread() - fairSpread) > tolerance)
{
Assert.Fail("\npar asset swap fair spread changed with NpvDate:" +
"\n expected spread: " + fairSpread +
"\n fair spread: " + parAssetSwap.fairSpread() +
"\n tolerance: " + tolerance);
}
assetSwap2 = new AssetSwap(payFixedRate, bond, fairCleanPrice, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), isPar);
assetSwap2.setPricingEngine(swapEngine);
if (Math.Abs(assetSwap2.NPV()) > tolerance)
{
Assert.Fail("\npar asset swap fair clean price doesn't zero the NPV: " +
"\n clean price: " + bondPrice +
"\n fair clean price: " + fairCleanPrice +
"\n NPV: " + assetSwap2.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap2.fairCleanPrice() - fairCleanPrice) > tolerance)
{
Assert.Fail("\npar asset swap fair clean price doesn't equal input clean price at zero NPV: " +
"\n input clean price: " + fairCleanPrice +
"\n fair clean price: " + assetSwap2.fairCleanPrice() +
"\n NPV: " + assetSwap2.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap2.fairSpread() - vars.spread) > tolerance)
{
Assert.Fail("\npar asset swap fair spread doesn't equal input spread at zero NPV: " +
"\n input spread: " + vars.spread +
"\n fair spread: " + assetSwap2.fairSpread() +
"\n NPV: " + assetSwap2.NPV() +
"\n tolerance: " + tolerance);
}
assetSwap3 = new AssetSwap(payFixedRate, bond, bondPrice, vars.iborIndex, fairSpread,
null, vars.iborIndex.dayCounter(), isPar);
assetSwap3.setPricingEngine(swapEngine);
if (Math.Abs(assetSwap3.NPV()) > tolerance)
{
Assert.Fail("\npar asset swap fair spread doesn't zero the NPV: " +
"\n spread: " + vars.spread +
"\n fair spread: " + fairSpread +
"\n NPV: " + assetSwap3.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap3.fairCleanPrice() - bondPrice) > tolerance)
{
Assert.Fail("\npar asset swap fair clean price doesn't equal input clean price at zero NPV: " +
"\n input clean price: " + bondPrice +
"\n fair clean price: " + assetSwap3.fairCleanPrice() +
"\n NPV: " + assetSwap3.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap3.fairSpread() - fairSpread) > tolerance)
{
Assert.Fail("\npar asset swap fair spread doesn't equal input spread at zero NPV: " +
"\n input spread: " + fairSpread +
"\n fair spread: " + assetSwap3.fairSpread() +
"\n NPV: " + assetSwap3.NPV() +
"\n tolerance: " + tolerance);
}
// now market asset swap
isPar = false;
AssetSwap mktAssetSwap = new AssetSwap(payFixedRate, bond, bondPrice, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), isPar);
swapEngine = new DiscountingSwapEngine(vars.termStructure, true, bond.settlementDate(),
Settings.evaluationDate());
mktAssetSwap.setPricingEngine(swapEngine);
fairCleanPrice = mktAssetSwap.fairCleanPrice();
fairSpread = mktAssetSwap.fairSpread();
AssetSwap assetSwap4 = new AssetSwap(payFixedRate, bond, fairCleanPrice, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), isPar);
assetSwap4.setPricingEngine(swapEngine);
if (Math.Abs(assetSwap4.NPV()) > tolerance)
{
Assert.Fail("\nmarket asset swap fair clean price doesn't zero the NPV: " +
"\n clean price: " + bondPrice +
"\n fair clean price: " + fairCleanPrice +
"\n NPV: " + assetSwap4.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap4.fairCleanPrice() - fairCleanPrice) > tolerance)
{
Assert.Fail("\nmarket asset swap fair clean price doesn't equal input clean price at zero NPV: " +
"\n input clean price: " + fairCleanPrice +
"\n fair clean price: " + assetSwap4.fairCleanPrice() +
"\n NPV: " + assetSwap4.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap4.fairSpread() - vars.spread) > tolerance)
{
Assert.Fail("\nmarket asset swap fair spread doesn't equal input spread at zero NPV: " +
"\n input spread: " + vars.spread +
"\n fair spread: " + assetSwap4.fairSpread() +
"\n NPV: " + assetSwap4.NPV() +
"\n tolerance: " + tolerance);
}
AssetSwap assetSwap5 = new AssetSwap(payFixedRate, bond, bondPrice, vars.iborIndex, fairSpread,
null, vars.iborIndex.dayCounter(), isPar);
assetSwap5.setPricingEngine(swapEngine);
if (Math.Abs(assetSwap5.NPV()) > tolerance)
{
Assert.Fail("\nmarket asset swap fair spread doesn't zero the NPV: " +
"\n spread: " + vars.spread +
"\n fair spread: " + fairSpread +
"\n NPV: " + assetSwap5.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap5.fairCleanPrice() - bondPrice) > tolerance)
{
Assert.Fail("\nmarket asset swap fair clean price doesn't equal input clean price at zero NPV: " +
"\n input clean price: " + bondPrice +
"\n fair clean price: " + assetSwap5.fairCleanPrice() +
"\n NPV: " + assetSwap5.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap5.fairSpread() - fairSpread) > tolerance)
{
Assert.Fail("\nmarket asset swap fair spread doesn't equal input spread at zero NPV: " +
"\n input spread: " + fairSpread +
"\n fair spread: " + assetSwap5.fairSpread() +
"\n NPV: " + assetSwap5.NPV() +
"\n tolerance: " + tolerance);
}
// let's change the npv date
swapEngine = new DiscountingSwapEngine(vars.termStructure, true, bond.settlementDate(), bond.settlementDate());
mktAssetSwap.setPricingEngine(swapEngine);
// fair clean price and fair spread should not change
if (Math.Abs(mktAssetSwap.fairCleanPrice() - fairCleanPrice) > tolerance)
{
Assert.Fail("\nmarket asset swap fair clean price changed with NpvDate:" +
"\n expected clean price: " + fairCleanPrice +
"\n fair clean price: " + mktAssetSwap.fairCleanPrice() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(mktAssetSwap.fairSpread() - fairSpread) > tolerance)
{
Assert.Fail("\nmarket asset swap fair spread changed with NpvDate:" +
"\n expected spread: " + fairSpread +
"\n fair spread: " + mktAssetSwap.fairSpread() +
"\n tolerance: " + tolerance);
}
assetSwap4 = new AssetSwap(payFixedRate, bond, fairCleanPrice, vars.iborIndex, vars.spread,
null, vars.iborIndex.dayCounter(), isPar);
assetSwap4.setPricingEngine(swapEngine);
if (Math.Abs(assetSwap4.NPV()) > tolerance)
{
Assert.Fail("\nmarket asset swap fair clean price doesn't zero the NPV: " +
"\n clean price: " + bondPrice +
"\n fair clean price: " + fairCleanPrice +
"\n NPV: " + assetSwap4.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap4.fairCleanPrice() - fairCleanPrice) > tolerance)
{
Assert.Fail("\nmarket asset swap fair clean price doesn't equal input clean price at zero NPV: " +
"\n input clean price: " + fairCleanPrice +
"\n fair clean price: " + assetSwap4.fairCleanPrice() +
"\n NPV: " + assetSwap4.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap4.fairSpread() - vars.spread) > tolerance)
{
Assert.Fail("\nmarket asset swap fair spread doesn't equal input spread at zero NPV: " +
"\n input spread: " + vars.spread +
"\n fair spread: " + assetSwap4.fairSpread() +
"\n NPV: " + assetSwap4.NPV() +
"\n tolerance: " + tolerance);
}
assetSwap5 = new AssetSwap(payFixedRate, bond, bondPrice, vars.iborIndex, fairSpread,
null, vars.iborIndex.dayCounter(), isPar);
assetSwap5.setPricingEngine(swapEngine);
if (Math.Abs(assetSwap5.NPV()) > tolerance)
{
Assert.Fail("\nmarket asset swap fair spread doesn't zero the NPV: " +
"\n spread: " + vars.spread +
"\n fair spread: " + fairSpread +
"\n NPV: " + assetSwap5.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap5.fairCleanPrice() - bondPrice) > tolerance)
{
Assert.Fail("\nmarket asset swap fair clean price doesn't equal input clean price at zero NPV: " +
"\n input clean price: " + bondPrice +
"\n fair clean price: " + assetSwap5.fairCleanPrice() +
"\n NPV: " + assetSwap5.NPV() +
"\n tolerance: " + tolerance);
}
if (Math.Abs(assetSwap5.fairSpread() - fairSpread) > tolerance)
{
Assert.Fail("\nmarket asset swap fair spread doesn't equal input spread at zero NPV: " +
"\n input spread: " + fairSpread +
"\n fair spread: " + assetSwap5.fairSpread() +
"\n NPV: " + assetSwap5.NPV() +
"\n tolerance: " + tolerance);
}
}
public void testMASWWithGenericBond()
{
// Testing market asset swap against par asset swap with generic bond...
CommonVars vars = new CommonVars();
Calendar bondCalendar = new TARGET();
int settlementDays = 3;
int fixingDays = 2;
bool payFixedRate = true;
bool parAssetSwap = true;
bool mktAssetSwap = false;
bool inArrears = false;
// Fixed Underlying bond (Isin: DE0001135275 DBR 4 01/04/37)
// maturity doesn't occur on a business day
Date fixedBondStartDate1 = new Date(4,Month.January,2005);
Date fixedBondMaturityDate1 = new Date(4,Month.January,2037);
Schedule fixedBondSchedule1 = new Schedule(fixedBondStartDate1,
fixedBondMaturityDate1,
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
List<CashFlow> fixedBondLeg1 = new FixedRateLeg(fixedBondSchedule1)
.withCouponRates(0.04, new ActualActual(ActualActual.Convention.ISDA))
.withNotionals(vars.faceAmount);
Date fixedbondRedemption1 = bondCalendar.adjust(fixedBondMaturityDate1, BusinessDayConvention.Following);
fixedBondLeg1.Add(new SimpleCashFlow(100.0, fixedbondRedemption1));
Bond fixedBond1 = new Bond(settlementDays, bondCalendar, vars.faceAmount, fixedBondMaturityDate1,
fixedBondStartDate1, fixedBondLeg1);
IPricingEngine bondEngine = new DiscountingBondEngine(vars.termStructure);
IPricingEngine swapEngine = new DiscountingSwapEngine(vars.termStructure);
fixedBond1.setPricingEngine(bondEngine);
double fixedBondMktPrice1 = 89.22 ; // market price observed on 7th June 2007
double fixedBondMktFullPrice1=fixedBondMktPrice1+fixedBond1.accruedAmount();
AssetSwap fixedBondParAssetSwap1= new AssetSwap(payFixedRate,
fixedBond1, fixedBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedBondParAssetSwap1.setPricingEngine(swapEngine);
double fixedBondParAssetSwapSpread1 = fixedBondParAssetSwap1.fairSpread();
AssetSwap fixedBondMktAssetSwap1 = new AssetSwap(payFixedRate,
fixedBond1, fixedBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
fixedBondMktAssetSwap1.setPricingEngine(swapEngine);
double fixedBondMktAssetSwapSpread1 = fixedBondMktAssetSwap1.fairSpread();
double tolerance = 1.0e-13;
double error1 =
Math.Abs(fixedBondMktAssetSwapSpread1-
100*fixedBondParAssetSwapSpread1/fixedBondMktFullPrice1);
if (error1>tolerance)
Assert.Fail("wrong asset swap spreads for fixed bond:" +
"\n market asset swap spread: " + fixedBondMktAssetSwapSpread1 +
"\n par asset swap spread: " + fixedBondParAssetSwapSpread1 +
"\n error: " + error1 +
"\n tolerance: " + tolerance);
// Fixed Underlying bond (Isin: IT0006527060 IBRD 5 02/05/19)
// maturity occurs on a business day
Date fixedBondStartDate2 = new Date(5,Month.February,2005);
Date fixedBondMaturityDate2 = new Date(5,Month.February,2019);
Schedule fixedBondSchedule2 = new Schedule(fixedBondStartDate2,
fixedBondMaturityDate2,
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
List<CashFlow> fixedBondLeg2 = new FixedRateLeg(fixedBondSchedule2)
.withCouponRates(0.05, new Thirty360(Thirty360.Thirty360Convention.BondBasis))
.withNotionals(vars.faceAmount);
Date fixedbondRedemption2 = bondCalendar.adjust(fixedBondMaturityDate2, BusinessDayConvention.Following);
fixedBondLeg2.Add(new SimpleCashFlow(100.0, fixedbondRedemption2));
Bond fixedBond2 = new Bond(settlementDays, bondCalendar, vars.faceAmount, fixedBondMaturityDate2, fixedBondStartDate2,
fixedBondLeg2);
fixedBond2.setPricingEngine(bondEngine);
double fixedBondMktPrice2 = 99.98 ; // market price observed on 7th June 2007
double fixedBondMktFullPrice2=fixedBondMktPrice2+fixedBond2.accruedAmount();
AssetSwap fixedBondParAssetSwap2= new AssetSwap(payFixedRate,
fixedBond2, fixedBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
fixedBondParAssetSwap2.setPricingEngine(swapEngine);
double fixedBondParAssetSwapSpread2 = fixedBondParAssetSwap2.fairSpread();
AssetSwap fixedBondMktAssetSwap2= new AssetSwap(payFixedRate,
fixedBond2, fixedBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
fixedBondMktAssetSwap2.setPricingEngine(swapEngine);
double fixedBondMktAssetSwapSpread2 = fixedBondMktAssetSwap2.fairSpread();
double error2 = Math.Abs(fixedBondMktAssetSwapSpread2-
100*fixedBondParAssetSwapSpread2/fixedBondMktFullPrice2);
if (error2>tolerance)
Assert.Fail("wrong asset swap spreads for fixed bond:" +
"\n market asset swap spread: " + fixedBondMktAssetSwapSpread2 +
"\n par asset swap spread: " + fixedBondParAssetSwapSpread2 +
"\n error: " + error2 +
"\n tolerance: " + tolerance);
// FRN Underlying bond (Isin: IT0003543847 ISPIM 0 09/29/13)
// maturity doesn't occur on a business day
Date floatingBondStartDate1 = new Date(29,Month.September,2003);
Date floatingBondMaturityDate1 = new Date(29,Month.September,2013);
Schedule floatingBondSchedule1= new Schedule(floatingBondStartDate1,
floatingBondMaturityDate1,
new Period(Frequency.Semiannual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
List<CashFlow> floatingBondLeg1 = new IborLeg(floatingBondSchedule1, vars.iborIndex)
.withPaymentDayCounter(new Actual360())
.withFixingDays(fixingDays)
.withSpreads(0.0056)
.inArrears(inArrears)
.withNotionals(vars.faceAmount);
Date floatingbondRedemption1 =
bondCalendar.adjust(floatingBondMaturityDate1, BusinessDayConvention.Following);
floatingBondLeg1.Add(new SimpleCashFlow(100.0, floatingbondRedemption1));
Bond floatingBond1 = new Bond(settlementDays, bondCalendar, vars.faceAmount, floatingBondMaturityDate1,
floatingBondStartDate1, floatingBondLeg1);
floatingBond1.setPricingEngine(bondEngine);
Utils.setCouponPricer(floatingBond1.cashflows(), vars.pricer);
vars.iborIndex.addFixing(new Date(27,Month.March,2007), 0.0402);
// market price observed on 7th June 2007
double floatingBondMktPrice1 = 101.64 ;
double floatingBondMktFullPrice1 =
floatingBondMktPrice1+floatingBond1.accruedAmount();
AssetSwap floatingBondParAssetSwap1 = new AssetSwap(payFixedRate,
floatingBond1, floatingBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingBondParAssetSwap1.setPricingEngine(swapEngine);
double floatingBondParAssetSwapSpread1 =
floatingBondParAssetSwap1.fairSpread();
AssetSwap floatingBondMktAssetSwap1 = new AssetSwap(payFixedRate,
floatingBond1, floatingBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
floatingBondMktAssetSwap1.setPricingEngine(swapEngine);
double floatingBondMktAssetSwapSpread1 =
floatingBondMktAssetSwap1.fairSpread();
double error3 = Math.Abs(floatingBondMktAssetSwapSpread1-
100*floatingBondParAssetSwapSpread1/floatingBondMktFullPrice1);
if (error3>tolerance)
Assert.Fail("wrong asset swap spreads for floating bond:" +
"\n market asset swap spread: " + floatingBondMktAssetSwapSpread1 +
"\n par asset swap spread: " + floatingBondParAssetSwapSpread1 +
"\n error: " + error3 +
"\n tolerance: " + tolerance);
// FRN Underlying bond (Isin: XS0090566539 COE 0 09/24/18)
// maturity occurs on a business day
Date floatingBondStartDate2 = new Date(24,Month.September,2004);
Date floatingBondMaturityDate2 = new Date(24,Month.September,2018);
Schedule floatingBondSchedule2 = new Schedule(floatingBondStartDate2,
floatingBondMaturityDate2,
new Period(Frequency.Semiannual), bondCalendar,
BusinessDayConvention.ModifiedFollowing, BusinessDayConvention.ModifiedFollowing,
DateGeneration.Rule.Backward, false);
List<CashFlow> floatingBondLeg2 = new IborLeg(floatingBondSchedule2, vars.iborIndex)
.withFixingDays(fixingDays)
.withSpreads(0.0025)
.inArrears(inArrears)
.withPaymentDayCounter(new Actual360())
.withPaymentAdjustment(BusinessDayConvention.ModifiedFollowing)
.withNotionals(vars.faceAmount);
Date floatingbondRedemption2 =
bondCalendar.adjust(floatingBondMaturityDate2, BusinessDayConvention.ModifiedFollowing);
floatingBondLeg2.Add(new
SimpleCashFlow(100.0, floatingbondRedemption2));
Bond floatingBond2 = new Bond(settlementDays, bondCalendar, vars.faceAmount, floatingBondMaturityDate2,
floatingBondStartDate2, floatingBondLeg2);
floatingBond2.setPricingEngine(bondEngine);
Utils.setCouponPricer(floatingBond2.cashflows(), vars.pricer);
vars.iborIndex.addFixing(new Date(22,Month.March,2007), 0.04013);
// market price observed on 7th June 2007
double floatingBondMktPrice2 = 101.248 ;
double floatingBondMktFullPrice2 =
floatingBondMktPrice2+floatingBond2.accruedAmount();
AssetSwap floatingBondParAssetSwap2 = new AssetSwap(payFixedRate,
floatingBond2, floatingBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
floatingBondParAssetSwap2.setPricingEngine(swapEngine);
double floatingBondParAssetSwapSpread2 = floatingBondParAssetSwap2.fairSpread();
AssetSwap floatingBondMktAssetSwap2 = new AssetSwap(payFixedRate,
floatingBond2, floatingBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
floatingBondMktAssetSwap2.setPricingEngine(swapEngine);
double floatingBondMktAssetSwapSpread2 =
floatingBondMktAssetSwap2.fairSpread();
double error4 = Math.Abs(floatingBondMktAssetSwapSpread2-
100*floatingBondParAssetSwapSpread2/floatingBondMktFullPrice2);
if (error4>tolerance)
Assert.Fail("wrong asset swap spreads for floating bond:" +
"\n market asset swap spread: " + floatingBondMktAssetSwapSpread2 +
"\n par asset swap spread: " + floatingBondParAssetSwapSpread2 +
"\n error: " + error4 +
"\n tolerance: " + tolerance);
// CMS Underlying bond (Isin: XS0228052402 CRDIT 0 8/22/20)
// maturity doesn't occur on a business day
Date cmsBondStartDate1 = new Date(22,Month.August,2005);
Date cmsBondMaturityDate1 = new Date(22,Month.August,2020);
Schedule cmsBondSchedule1= new Schedule(cmsBondStartDate1,
cmsBondMaturityDate1,
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
List<CashFlow> cmsBondLeg1 = new CmsLeg(cmsBondSchedule1, vars.swapIndex)
.withPaymentDayCounter(new Thirty360())
.withFixingDays(fixingDays)
.withCaps(0.055)
.withFloors(0.025)
.inArrears(inArrears)
.withNotionals(vars.faceAmount);
Date cmsbondRedemption1 = bondCalendar.adjust(cmsBondMaturityDate1, BusinessDayConvention.Following);
cmsBondLeg1.Add(new SimpleCashFlow(100.0, cmsbondRedemption1));
Bond cmsBond1 = new Bond(settlementDays, bondCalendar, vars.faceAmount, cmsBondMaturityDate1, cmsBondStartDate1,
cmsBondLeg1);
cmsBond1.setPricingEngine(bondEngine);
Utils.setCouponPricer(cmsBond1.cashflows(), vars.cmspricer);
vars.swapIndex.addFixing(new Date(18,Month.August,2006), 0.04158);
double cmsBondMktPrice1 = 88.45 ; // market price observed on 7th June 2007
double cmsBondMktFullPrice1 = cmsBondMktPrice1+cmsBond1.accruedAmount();
AssetSwap cmsBondParAssetSwap1 = new AssetSwap(payFixedRate,
cmsBond1, cmsBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
cmsBondParAssetSwap1.setPricingEngine(swapEngine);
double cmsBondParAssetSwapSpread1 = cmsBondParAssetSwap1.fairSpread();
AssetSwap cmsBondMktAssetSwap1 = new AssetSwap(payFixedRate,
cmsBond1, cmsBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
cmsBondMktAssetSwap1.setPricingEngine(swapEngine);
double cmsBondMktAssetSwapSpread1 = cmsBondMktAssetSwap1.fairSpread();
double error5 =
Math.Abs(cmsBondMktAssetSwapSpread1-
100*cmsBondParAssetSwapSpread1/cmsBondMktFullPrice1);
if (error5>tolerance)
Assert.Fail("wrong asset swap spreads for cms bond:" +
"\n market asset swap spread: " + cmsBondMktAssetSwapSpread1 +
"\n par asset swap spread: " + cmsBondParAssetSwapSpread1 +
"\n error: " + error5 +
"\n tolerance: " + tolerance);
// CMS Underlying bond (Isin: XS0218766664 ISPIM 0 5/6/15)
// maturity occurs on a business day
Date cmsBondStartDate2 = new Date(06,Month.May,2005);
Date cmsBondMaturityDate2 = new Date(06,Month.May,2015);
Schedule cmsBondSchedule2= new Schedule(cmsBondStartDate2,
cmsBondMaturityDate2,
new Period(Frequency.Annual), bondCalendar,
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
List<CashFlow> cmsBondLeg2 = new CmsLeg(cmsBondSchedule2, vars.swapIndex)
.withPaymentDayCounter(new Thirty360())
.withFixingDays(fixingDays)
.withGearings(0.84)
.inArrears(inArrears)
.withNotionals(vars.faceAmount);
Date cmsbondRedemption2 = bondCalendar.adjust(cmsBondMaturityDate2, BusinessDayConvention.Following);
cmsBondLeg2.Add(new SimpleCashFlow(100.0, cmsbondRedemption2));
Bond cmsBond2 = new Bond(settlementDays, bondCalendar, vars.faceAmount, cmsBondMaturityDate2, cmsBondStartDate2,
cmsBondLeg2);
cmsBond2.setPricingEngine(bondEngine);
Utils.setCouponPricer(cmsBond2.cashflows(), vars.cmspricer);
vars.swapIndex.addFixing(new Date(04,Month.May,2006), 0.04217);
double cmsBondMktPrice2 = 94.08 ; // market price observed on 7th June 2007
double cmsBondMktFullPrice2 = cmsBondMktPrice2+cmsBond2.accruedAmount();
AssetSwap cmsBondParAssetSwap2 = new AssetSwap(payFixedRate,
cmsBond2, cmsBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
cmsBondParAssetSwap2.setPricingEngine(swapEngine);
double cmsBondParAssetSwapSpread2 = cmsBondParAssetSwap2.fairSpread();
AssetSwap cmsBondMktAssetSwap2 = new AssetSwap(payFixedRate,
cmsBond2, cmsBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
cmsBondMktAssetSwap2.setPricingEngine(swapEngine);
double cmsBondMktAssetSwapSpread2 = cmsBondMktAssetSwap2.fairSpread();
double error6 =
Math.Abs(cmsBondMktAssetSwapSpread2-
100*cmsBondParAssetSwapSpread2/cmsBondMktFullPrice2);
if (error6>tolerance)
Assert.Fail("wrong asset swap spreads for cms bond:" +
"\n market asset swap spread: " + cmsBondMktAssetSwapSpread2 +
"\n par asset swap spread: " + cmsBondParAssetSwapSpread2 +
"\n error: " + error6 +
"\n tolerance: " + tolerance);
// Zero Coupon bond (Isin: DE0004771662 IBRD 0 12/20/15)
// maturity doesn't occur on a business day
Date zeroCpnBondStartDate1 = new Date(19,Month.December,1985);
Date zeroCpnBondMaturityDate1 = new Date(20,Month.December,2015);
Date zeroCpnBondRedemption1 = bondCalendar.adjust(zeroCpnBondMaturityDate1,
BusinessDayConvention.Following);
List<CashFlow> zeroCpnBondLeg1 = new List<CashFlow>{new SimpleCashFlow(100.0, zeroCpnBondRedemption1)};
Bond zeroCpnBond1 = new Bond(settlementDays, bondCalendar, vars.faceAmount, zeroCpnBondMaturityDate1,
zeroCpnBondStartDate1, zeroCpnBondLeg1);
zeroCpnBond1.setPricingEngine(bondEngine);
// market price observed on 12th June 2007
double zeroCpnBondMktPrice1 = 70.436 ;
double zeroCpnBondMktFullPrice1 =
zeroCpnBondMktPrice1+zeroCpnBond1.accruedAmount();
AssetSwap zeroCpnBondParAssetSwap1 = new AssetSwap(payFixedRate,zeroCpnBond1,
zeroCpnBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnBondParAssetSwap1.setPricingEngine(swapEngine);
double zeroCpnBondParAssetSwapSpread1 = zeroCpnBondParAssetSwap1.fairSpread();
AssetSwap zeroCpnBondMktAssetSwap1 = new AssetSwap(payFixedRate,zeroCpnBond1,
zeroCpnBondMktPrice1,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
zeroCpnBondMktAssetSwap1.setPricingEngine(swapEngine);
double zeroCpnBondMktAssetSwapSpread1 = zeroCpnBondMktAssetSwap1.fairSpread();
double error7 =
Math.Abs(zeroCpnBondMktAssetSwapSpread1-
100*zeroCpnBondParAssetSwapSpread1/zeroCpnBondMktFullPrice1);
if (error7>tolerance)
Assert.Fail("wrong asset swap spreads for zero cpn bond:" +
"\n market asset swap spread: " + zeroCpnBondMktAssetSwapSpread1 +
"\n par asset swap spread: " + zeroCpnBondParAssetSwapSpread1 +
"\n error: " + error7 +
"\n tolerance: " + tolerance);
// Zero Coupon bond (Isin: IT0001200390 ISPIM 0 02/17/28)
// maturity occurs on a business day
Date zeroCpnBondStartDate2 = new Date(17,Month.February,1998);
Date zeroCpnBondMaturityDate2 = new Date(17,Month.February,2028);
Date zerocpbondRedemption2 = bondCalendar.adjust(zeroCpnBondMaturityDate2,
BusinessDayConvention.Following);
List<CashFlow> zeroCpnBondLeg2 = new List<CashFlow>{new SimpleCashFlow(100.0, zerocpbondRedemption2)};
Bond zeroCpnBond2 = new Bond(settlementDays, bondCalendar, vars.faceAmount,
zeroCpnBondMaturityDate2, zeroCpnBondStartDate2, zeroCpnBondLeg2);
zeroCpnBond2.setPricingEngine(bondEngine);
// double zeroCpnBondPrice2 = zeroCpnBond2.cleanPrice();
// market price observed on 12th June 2007
double zeroCpnBondMktPrice2 = 35.160 ;
double zeroCpnBondMktFullPrice2 =
zeroCpnBondMktPrice2+zeroCpnBond2.accruedAmount();
AssetSwap zeroCpnBondParAssetSwap2 = new AssetSwap(payFixedRate,zeroCpnBond2,
zeroCpnBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
parAssetSwap);
zeroCpnBondParAssetSwap2.setPricingEngine(swapEngine);
double zeroCpnBondParAssetSwapSpread2 = zeroCpnBondParAssetSwap2.fairSpread();
AssetSwap zeroCpnBondMktAssetSwap2 = new AssetSwap(payFixedRate,zeroCpnBond2,
zeroCpnBondMktPrice2,
vars.iborIndex, vars.spread,
null,
vars.iborIndex.dayCounter(),
mktAssetSwap);
zeroCpnBondMktAssetSwap2.setPricingEngine(swapEngine);
double zeroCpnBondMktAssetSwapSpread2 = zeroCpnBondMktAssetSwap2.fairSpread();
double error8 =
Math.Abs(zeroCpnBondMktAssetSwapSpread2-
100*zeroCpnBondParAssetSwapSpread2/zeroCpnBondMktFullPrice2);
if (error8>tolerance)
Assert.Fail("wrong asset swap spreads for zero cpn bond:" +
"\n market asset swap spread: " + zeroCpnBondMktAssetSwapSpread2 +
"\n par asset swap spread: " + zeroCpnBondParAssetSwapSpread2 +
"\n error: " + error8 +
"\n tolerance: " + tolerance);
}