public void testCashedValues()
{
Date startDate = new Date(01, 03, 2007);
Period period = new Period(360, TimeUnit.Months);
Calendar calendar = new TARGET();
Date endDate = calendar.advance(startDate,period,BusinessDayConvention.Unadjusted);
Schedule schedule = new Schedule( startDate, endDate, new Period(1,TimeUnit.Months), calendar,
BusinessDayConvention.Unadjusted,
BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
// PSA 100%
PSACurve psa100 = new PSACurve(startDate);
double[] listCPR = {0.2000,0.4000,0.6000,0.8000,1.0000,1.2000,1.4000,1.6000,1.8000,2.0000,2.2000,2.4000,2.6000,2.8000,
3.0000,3.2000,3.4000,3.6000,3.8000,4.0000,4.2000,4.4000,4.6000,4.8000,5.0000,5.2000,5.4000,5.6000,
5.8000,6.0000};
for (int i = 0; i < schedule.Count; i++)
{
if ( i <= 29 )
Assert.AreEqual(listCPR[i], psa100.getCPR(schedule[i])*100,0.001);
else
Assert.AreEqual(6.0000, psa100.getCPR(schedule[i])*100);
}
}
public void testDefaultProbability()
{
// Testing default-probability structure...
double hazardRate = 0.0100;
Handle<Quote> hazardRateQuote = new Handle<Quote>(new SimpleQuote(hazardRate));
DayCounter dayCounter = new Actual360();
Calendar calendar = new TARGET();
int n = 20;
double tolerance = 1.0e-10;
Date today = Settings.evaluationDate();
Date startDate = today;
Date endDate = startDate;
FlatHazardRate flatHazardRate = new FlatHazardRate(startDate, hazardRateQuote, dayCounter);
for(int i=0; i<n; i++)
{
startDate = endDate;
endDate = calendar.advance(endDate, 1, TimeUnit.Years);
double pStart = flatHazardRate.defaultProbability(startDate);
double pEnd = flatHazardRate.defaultProbability(endDate);
double pBetweenComputed =
flatHazardRate.defaultProbability(startDate, endDate);
double pBetween = pEnd - pStart;
if (Math.Abs(pBetween - pBetweenComputed) > tolerance)
Assert.Fail( "Failed to reproduce probability(d1, d2) "
+ "for default probability structure\n"
+ " calculated probability: " + pBetweenComputed + "\n"
+ " expected probability: " + pBetween);
double t2 = dayCounter.yearFraction(today, endDate);
double timeProbability = flatHazardRate.defaultProbability(t2);
double dateProbability =
flatHazardRate.defaultProbability(endDate);
if (Math.Abs(timeProbability - dateProbability) > tolerance)
Assert.Fail( "single-time probability and single-date probability do not match\n"
+ " time probability: " + timeProbability + "\n"
+ " date probability: " + dateProbability);
double t1 = dayCounter.yearFraction(today, startDate);
timeProbability = flatHazardRate.defaultProbability(t1, t2);
dateProbability = flatHazardRate.defaultProbability(startDate, endDate);
if (Math.Abs(timeProbability - dateProbability) > tolerance)
Assert.Fail( "double-time probability and double-date probability do not match\n"
+ " time probability: " + timeProbability + "\n"
+ " date probability: " + dateProbability);
}
}
static void Main(string[] args) {
DateTime timer = DateTime.Now;
/*********************
*** MARKET DATA ***
*********************/
Calendar calendar = new TARGET();
Date settlementDate = new Date(18, Month.September, 2008);
// must be a business day
settlementDate = calendar.adjust(settlementDate);
int fixingDays = 3;
int settlementDays = 3;
Date todaysDate = calendar.advance(settlementDate, -fixingDays, TimeUnit.Days);
// nothing to do with Date::todaysDate
Settings.setEvaluationDate(todaysDate);
Console.WriteLine("Today: {0}, {1}", todaysDate.DayOfWeek, todaysDate);
Console.WriteLine("Settlement date: {0}, {1}", settlementDate.DayOfWeek, settlementDate);
// Building of the bonds discounting yield curve
/*********************
*** RATE HELPERS ***
*********************/
// RateHelpers are built from the above quotes together with
// other instrument dependant infos. Quotes are passed in
// relinkable handles which could be relinked to some other
// data source later.
// Common data
// ZC rates for the short end
double zc3mQuote=0.0096;
double zc6mQuote=0.0145;
double zc1yQuote=0.0194;
Quote zc3mRate = new SimpleQuote(zc3mQuote);
Quote zc6mRate = new SimpleQuote(zc6mQuote);
Quote zc1yRate = new SimpleQuote(zc1yQuote);
DayCounter zcBondsDayCounter = new Actual365Fixed();
RateHelper zc3m = new DepositRateHelper(new Handle<Quote>(zc3mRate),
new Period(3, TimeUnit.Months), fixingDays,
calendar, BusinessDayConvention.ModifiedFollowing,
true, zcBondsDayCounter);
RateHelper zc6m = new DepositRateHelper(new Handle<Quote>(zc6mRate),
new Period(6, TimeUnit.Months), fixingDays,
calendar, BusinessDayConvention.ModifiedFollowing,
true, zcBondsDayCounter);
RateHelper zc1y = new DepositRateHelper(new Handle<Quote>(zc1yRate),
new Period(1, TimeUnit.Years), fixingDays,
calendar, BusinessDayConvention.ModifiedFollowing,
true, zcBondsDayCounter);
// setup bonds
double redemption = 100.0;
const int numberOfBonds = 5;
Date[] issueDates = {
new Date (15, Month.March, 2005),
new Date (15, Month.June, 2005),
new Date (30, Month.June, 2006),
new Date (15, Month.November, 2002),
new Date (15, Month.May, 1987)
};
Date[] maturities = {
new Date (31, Month.August, 2010),
new Date (31, Month.August, 2011),
new Date (31, Month.August, 2013),
new Date (15, Month.August, 2018),
new Date (15, Month.May, 2038)
};
double[] couponRates = {
0.02375,
0.04625,
0.03125,
0.04000,
0.04500
};
double[] marketQuotes = {
100.390625,
106.21875,
100.59375,
101.6875,
102.140625
};
List<SimpleQuote> quote = new List<SimpleQuote>();
for (int i=0; i<numberOfBonds; i++) {
SimpleQuote cp = new SimpleQuote(marketQuotes[i]);
quote.Add(cp);
}
List<RelinkableHandle<Quote>> quoteHandle = new InitializedList<RelinkableHandle<Quote>>(numberOfBonds);
for (int i=0; i<numberOfBonds; i++) {
quoteHandle[i].linkTo(quote[i]);
}
// Definition of the rate helpers
List<FixedRateBondHelper> bondsHelpers = new List<FixedRateBondHelper>();
for (int i=0; i<numberOfBonds; i++) {
Schedule schedule = new Schedule(issueDates[i], maturities[i], new Period(Frequency.Semiannual),
new UnitedStates(UnitedStates.Market.GovernmentBond),
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Backward, false);
FixedRateBondHelper bondHelper = new FixedRateBondHelper(quoteHandle[i],
settlementDays,
100.0,
schedule,
new List<double>() { couponRates[i] },
new ActualActual(ActualActual.Convention.Bond),
BusinessDayConvention.Unadjusted,
redemption,
issueDates[i]);
bondsHelpers.Add(bondHelper);
}
/*********************
** CURVE BUILDING **
*********************/
// Any DayCounter would be fine.
// ActualActual::ISDA ensures that 30 years is 30.0
DayCounter termStructureDayCounter = new ActualActual(ActualActual.Convention.ISDA);
double tolerance = 1.0e-15;
// A depo-bond curve
List<RateHelper> bondInstruments = new List<RateHelper>();
// Adding the ZC bonds to the curve for the short end
bondInstruments.Add(zc3m);
bondInstruments.Add(zc6m);
bondInstruments.Add(zc1y);
// Adding the Fixed rate bonds to the curve for the long end
for (int i=0; i<numberOfBonds; i++) {
bondInstruments.Add(bondsHelpers[i]);
}
YieldTermStructure bondDiscountingTermStructure = new PiecewiseYieldCurve<Discount,LogLinear>(
settlementDate, bondInstruments,
termStructureDayCounter,
new List<Handle<Quote>>(),
new List<Date>(),
tolerance);
// Building of the Libor forecasting curve
// deposits
double d1wQuote=0.043375;
double d1mQuote=0.031875;
double d3mQuote=0.0320375;
double d6mQuote=0.03385;
double d9mQuote=0.0338125;
double d1yQuote=0.0335125;
// swaps
double s2yQuote=0.0295;
double s3yQuote=0.0323;
double s5yQuote=0.0359;
double s10yQuote=0.0412;
double s15yQuote=0.0433;
/********************
*** QUOTES ***
********************/
// SimpleQuote stores a value which can be manually changed;
// other Quote subclasses could read the value from a database
// or some kind of data feed.
// deposits
Quote d1wRate = new SimpleQuote(d1wQuote);
Quote d1mRate = new SimpleQuote(d1mQuote);
Quote d3mRate = new SimpleQuote(d3mQuote);
Quote d6mRate = new SimpleQuote(d6mQuote);
Quote d9mRate = new SimpleQuote(d9mQuote);
Quote d1yRate = new SimpleQuote(d1yQuote);
// swaps
Quote s2yRate = new SimpleQuote(s2yQuote);
Quote s3yRate = new SimpleQuote(s3yQuote);
Quote s5yRate = new SimpleQuote(s5yQuote);
Quote s10yRate = new SimpleQuote(s10yQuote);
Quote s15yRate = new SimpleQuote(s15yQuote);
/*********************
*** RATE HELPERS ***
*********************/
// RateHelpers are built from the above quotes together with
// other instrument dependant infos. Quotes are passed in
// relinkable handles which could be relinked to some other
// data source later.
// deposits
DayCounter depositDayCounter = new Actual360();
RateHelper d1w = new DepositRateHelper(
new Handle<Quote>(d1wRate),
new Period(1, TimeUnit.Weeks), fixingDays,
calendar, BusinessDayConvention.ModifiedFollowing,
true, depositDayCounter);
RateHelper d1m = new DepositRateHelper(
new Handle<Quote>(d1mRate),
new Period(1, TimeUnit.Months), fixingDays,
calendar, BusinessDayConvention.ModifiedFollowing,
true, depositDayCounter);
RateHelper d3m = new DepositRateHelper(
new Handle<Quote>(d3mRate),
new Period(3, TimeUnit.Months), fixingDays,
calendar, BusinessDayConvention.ModifiedFollowing,
true, depositDayCounter);
RateHelper d6m = new DepositRateHelper(
new Handle<Quote>(d6mRate),
new Period(6, TimeUnit.Months), fixingDays,
calendar, BusinessDayConvention.ModifiedFollowing,
true, depositDayCounter);
RateHelper d9m = new DepositRateHelper(
new Handle<Quote>(d9mRate),
new Period(9, TimeUnit.Months), fixingDays,
calendar, BusinessDayConvention.ModifiedFollowing,
true, depositDayCounter);
RateHelper d1y = new DepositRateHelper(
new Handle<Quote>(d1yRate),
new Period(1, TimeUnit.Years), fixingDays,
calendar, BusinessDayConvention.ModifiedFollowing,
true, depositDayCounter);
// setup swaps
Frequency swFixedLegFrequency =Frequency.Annual;
BusinessDayConvention swFixedLegConvention = BusinessDayConvention.Unadjusted;
DayCounter swFixedLegDayCounter = new Thirty360(Thirty360.Thirty360Convention.European);
IborIndex swFloatingLegIndex = new Euribor6M();
Period forwardStart = new Period(1, TimeUnit.Days);
RateHelper s2y = new SwapRateHelper(
new Handle<Quote>(s2yRate), new Period(2, TimeUnit.Years),
calendar, swFixedLegFrequency,
swFixedLegConvention, swFixedLegDayCounter,
swFloatingLegIndex, new Handle<Quote>(),forwardStart);
RateHelper s3y = new SwapRateHelper(
new Handle<Quote>(s3yRate), new Period(3, TimeUnit.Years),
calendar, swFixedLegFrequency,
swFixedLegConvention, swFixedLegDayCounter,
swFloatingLegIndex, new Handle<Quote>(),forwardStart);
RateHelper s5y = new SwapRateHelper(
new Handle<Quote>(s5yRate), new Period(5, TimeUnit.Years),
calendar, swFixedLegFrequency,
swFixedLegConvention, swFixedLegDayCounter,
swFloatingLegIndex, new Handle<Quote>(),forwardStart);
RateHelper s10y = new SwapRateHelper(
new Handle<Quote>(s10yRate), new Period(10, TimeUnit.Years),
calendar, swFixedLegFrequency,
swFixedLegConvention, swFixedLegDayCounter,
swFloatingLegIndex, new Handle<Quote>(),forwardStart);
RateHelper s15y = new SwapRateHelper(
new Handle<Quote>(s15yRate), new Period(15, TimeUnit.Years),
calendar, swFixedLegFrequency,
swFixedLegConvention, swFixedLegDayCounter,
swFloatingLegIndex, new Handle<Quote>(),forwardStart);
/*********************
** CURVE BUILDING **
*********************/
// Any DayCounter would be fine.
// ActualActual::ISDA ensures that 30 years is 30.0
// A depo-swap curve
List<RateHelper> depoSwapInstruments = new List<RateHelper>();
depoSwapInstruments.Add(d1w);
depoSwapInstruments.Add(d1m);
depoSwapInstruments.Add(d3m);
depoSwapInstruments.Add(d6m);
depoSwapInstruments.Add(d9m);
depoSwapInstruments.Add(d1y);
depoSwapInstruments.Add(s2y);
depoSwapInstruments.Add(s3y);
depoSwapInstruments.Add(s5y);
depoSwapInstruments.Add(s10y);
depoSwapInstruments.Add(s15y);
YieldTermStructure depoSwapTermStructure = new PiecewiseYieldCurve<Discount,LogLinear>(
settlementDate, depoSwapInstruments,
termStructureDayCounter,
new List<Handle<Quote> >(),
new List<Date>(),
tolerance);
// Term structures that will be used for pricing:
// the one used for discounting cash flows
RelinkableHandle<YieldTermStructure> discountingTermStructure = new RelinkableHandle<YieldTermStructure>();
// the one used for forward rate forecasting
RelinkableHandle<YieldTermStructure> forecastingTermStructure = new RelinkableHandle<YieldTermStructure>();
/*********************
* BONDS TO BE PRICED *
**********************/
// Common data
double faceAmount = 100;
// Pricing engine
IPricingEngine bondEngine = new DiscountingBondEngine(discountingTermStructure);
// Zero coupon bond
ZeroCouponBond zeroCouponBond = new ZeroCouponBond(
settlementDays,
new UnitedStates(UnitedStates.Market.GovernmentBond),
faceAmount,
new Date(15, Month.August,2013),
BusinessDayConvention.Following,
116.92,
new Date(15, Month.August,2003));
zeroCouponBond.setPricingEngine(bondEngine);
// Fixed 4.5% US Treasury Note
Schedule fixedBondSchedule = new Schedule(new Date(15, Month.May, 2007),
new Date(15,Month.May,2017), new Period(Frequency.Semiannual),
new UnitedStates(UnitedStates.Market.GovernmentBond),
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted, DateGeneration.Rule.Backward, false);
FixedRateBond fixedRateBond = new FixedRateBond(
settlementDays,
faceAmount,
fixedBondSchedule,
new List<double>() { 0.045 },
new ActualActual(ActualActual.Convention.Bond),
BusinessDayConvention.ModifiedFollowing,
100.0, new Date(15, Month.May, 2007));
fixedRateBond.setPricingEngine(bondEngine);
// Floating rate bond (3M USD Libor + 0.1%)
// Should and will be priced on another curve later...
RelinkableHandle<YieldTermStructure> liborTermStructure = new RelinkableHandle<YieldTermStructure>();
IborIndex libor3m = new USDLibor(new Period(3, TimeUnit.Months), liborTermStructure);
libor3m.addFixing(new Date(17, Month.July, 2008),0.0278625);
Schedule floatingBondSchedule = new Schedule(new Date(21, Month.October, 2005),
new Date(21, Month.October, 2010), new Period(Frequency.Quarterly),
new UnitedStates(UnitedStates.Market.NYSE),
BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted, DateGeneration.Rule.Backward, true);
FloatingRateBond floatingRateBond = new FloatingRateBond(
settlementDays,
faceAmount,
floatingBondSchedule,
libor3m,
new Actual360(),
BusinessDayConvention.ModifiedFollowing,
2,
// Gearings
new List<double>() { 1.0 },
// Spreads
new List<double>() { 0.001 },
// Caps
new List<double>(),
// Floors
new List<double>(),
// Fixing in arrears
true,
100.0,
new Date(21, Month.October, 2005));
floatingRateBond.setPricingEngine(bondEngine);
// Coupon pricers
IborCouponPricer pricer = new BlackIborCouponPricer();
// optionLet volatilities
double volatility = 0.0;
Handle<OptionletVolatilityStructure> vol;
vol = new Handle<OptionletVolatilityStructure>(
new ConstantOptionletVolatility(
settlementDays,
calendar,
BusinessDayConvention.ModifiedFollowing,
volatility,
new Actual365Fixed()));
pricer.setCapletVolatility(vol);
Utils.setCouponPricer(floatingRateBond.cashflows(),pricer);
// Yield curve bootstrapping
forecastingTermStructure.linkTo(depoSwapTermStructure);
discountingTermStructure.linkTo(bondDiscountingTermStructure);
// We are using the depo & swap curve to estimate the future Libor rates
liborTermStructure.linkTo(depoSwapTermStructure);
/***************
* BOND PRICING *
****************/
// write column headings
int[] widths = { 18, 10, 10, 10 };
Console.WriteLine("{0,18}{1,10}{2,10}{3,10}", "", "ZC", "Fixed", "Floating");
string separator = " | ";
int width = widths[0]
+ widths[1]
+ widths[2]
+ widths[3];
string rule = "".PadLeft(width, '-'), dblrule = "".PadLeft(width, '=');
string tab = "".PadLeft(8, ' ');
Console.WriteLine(rule);
Console.WriteLine("Net present value".PadLeft(widths[0]) + "{0,10:n2}{1,10:n2}{2,10:n2}",
zeroCouponBond.NPV(),
fixedRateBond.NPV(),
floatingRateBond.NPV());
Console.WriteLine("Clean price".PadLeft(widths[0]) + "{0,10:n2}{1,10:n2}{2,10:n2}",
zeroCouponBond.cleanPrice(),
fixedRateBond.cleanPrice(),
floatingRateBond.cleanPrice());
Console.WriteLine("Dirty price".PadLeft(widths[0]) + "{0,10:n2}{1,10:n2}{2,10:n2}",
zeroCouponBond.dirtyPrice(),
fixedRateBond.dirtyPrice(),
floatingRateBond.dirtyPrice());
Console.WriteLine("Accrued coupon".PadLeft(widths[0]) + "{0,10:n2}{1,10:n2}{2,10:n2}",
zeroCouponBond.accruedAmount(),
fixedRateBond.accruedAmount(),
floatingRateBond.accruedAmount());
Console.WriteLine("Previous coupon".PadLeft(widths[0]) + "{0,10:0.00%}{1,10:0.00%}{2,10:0.00%}",
"N/A",
fixedRateBond.previousCoupon(),
floatingRateBond.previousCoupon());
Console.WriteLine("Next coupon".PadLeft(widths[0]) + "{0,10:0.00%}{1,10:0.00%}{2,10:0.00%}",
"N/A",
fixedRateBond.nextCoupon(),
floatingRateBond.nextCoupon());
Console.WriteLine("Yield".PadLeft(widths[0]) + "{0,10:0.00%}{1,10:0.00%}{2,10:0.00%}",
zeroCouponBond.yield(new Actual360(), Compounding.Compounded, Frequency.Annual),
fixedRateBond.yield(new Actual360(), Compounding.Compounded, Frequency.Annual),
floatingRateBond.yield(new Actual360(), Compounding.Compounded, Frequency.Annual));
Console.WriteLine();
// Other computations
Console.WriteLine("Sample indirect computations (for the floating rate bond): ");
Console.WriteLine(rule);
Console.WriteLine("Yield to Clean Price: {0:n2}",
floatingRateBond.cleanPrice(floatingRateBond.yield(new Actual360(), Compounding.Compounded, Frequency.Annual),
new Actual360(), Compounding.Compounded, Frequency.Annual,
settlementDate));
Console.WriteLine("Clean Price to Yield: {0:0.00%}",
floatingRateBond.yield(floatingRateBond.cleanPrice(),new Actual360(), Compounding.Compounded, Frequency.Annual,
settlementDate));
/* "Yield to Price"
"Price to Yield" */
Console.WriteLine(" \nRun completed in {0}", DateTime.Now - timer);
Console.WriteLine();
Console.Write("Press any key to continue ...");
Console.ReadKey();
}
public void testFlatHazardRate()
{
// Testing flat hazard rate...
double hazardRate = 0.0100;
Handle<Quote> hazardRateQuote = new Handle<Quote>(new SimpleQuote(hazardRate));
DayCounter dayCounter = new Actual360();
Calendar calendar = new TARGET();
int n = 20;
double tolerance = 1.0e-10;
Date today = Settings.evaluationDate();
Date startDate = today;
Date endDate = startDate;
FlatHazardRate flatHazardRate = new FlatHazardRate(today, hazardRateQuote, dayCounter);
for(int i=0; i<n; i++)
{
endDate = calendar.advance(endDate, 1, TimeUnit.Years);
double t = dayCounter.yearFraction(startDate, endDate);
double probability = 1.0 - Math.Exp(-hazardRate * t);
double computedProbability = flatHazardRate.defaultProbability(t);
if (Math.Abs(probability - computedProbability) > tolerance)
Assert.Fail( "Failed to reproduce probability for flat hazard rate\n"
+ " calculated probability: " + computedProbability + "\n"
+ " expected probability: " + probability);
}
}
static void Main(string[] args)
{
DateTime timer = DateTime.Now;
/*********************
*** MARKET DATA ***
*********************/
Calendar calendar = new TARGET();
Date settlementDate = new Date(22, Month.September, 2004);
// must be a business day
settlementDate = calendar.adjust(settlementDate);
int fixingDays = 2;
Date todaysDate = calendar.advance(settlementDate, -fixingDays, TimeUnit.Days);
// nothing to do with Date::todaysDate
Settings.setEvaluationDate(todaysDate);
todaysDate = Settings.evaluationDate();
Console.WriteLine("Today: {0}, {1}", todaysDate.DayOfWeek, todaysDate);
Console.WriteLine("Settlement date: {0}, {1}", settlementDate.DayOfWeek, settlementDate);
// deposits
double d1wQuote = 0.0382;
double d1mQuote = 0.0372;
double d3mQuote = 0.0363;
double d6mQuote = 0.0353;
double d9mQuote = 0.0348;
double d1yQuote = 0.0345;
// FRAs
double fra3x6Quote = 0.037125;
double fra6x9Quote = 0.037125;
double fra6x12Quote = 0.037125;
// futures
double fut1Quote = 96.2875;
double fut2Quote = 96.7875;
double fut3Quote = 96.9875;
double fut4Quote = 96.6875;
double fut5Quote = 96.4875;
double fut6Quote = 96.3875;
double fut7Quote = 96.2875;
double fut8Quote = 96.0875;
// swaps
double s2yQuote = 0.037125;
double s3yQuote = 0.0398;
double s5yQuote = 0.0443;
double s10yQuote = 0.05165;
double s15yQuote = 0.055175;
/********************
*** QUOTES ***
********************/
// SimpleQuote stores a value which can be manually changed;
// other Quote subclasses could read the value from a database
// or some kind of data feed.
// deposits
Quote d1wRate = new SimpleQuote(d1wQuote);
Quote d1mRate = new SimpleQuote(d1mQuote);
Quote d3mRate = new SimpleQuote(d3mQuote);
Quote d6mRate = new SimpleQuote(d6mQuote);
Quote d9mRate = new SimpleQuote(d9mQuote);
Quote d1yRate = new SimpleQuote(d1yQuote);
// FRAs
Quote fra3x6Rate = new SimpleQuote(fra3x6Quote);
Quote fra6x9Rate = new SimpleQuote(fra6x9Quote);
Quote fra6x12Rate = new SimpleQuote(fra6x12Quote);
// futures
Quote fut1Price = new SimpleQuote(fut1Quote);
Quote fut2Price = new SimpleQuote(fut2Quote);
Quote fut3Price = new SimpleQuote(fut3Quote);
Quote fut4Price = new SimpleQuote(fut4Quote);
Quote fut5Price = new SimpleQuote(fut5Quote);
Quote fut6Price = new SimpleQuote(fut6Quote);
Quote fut7Price = new SimpleQuote(fut7Quote);
Quote fut8Price = new SimpleQuote(fut8Quote);
// swaps
Quote s2yRate = new SimpleQuote(s2yQuote);
Quote s3yRate = new SimpleQuote(s3yQuote);
Quote s5yRate = new SimpleQuote(s5yQuote);
Quote s10yRate = new SimpleQuote(s10yQuote);
Quote s15yRate = new SimpleQuote(s15yQuote);
/*********************
*** RATE HELPERS ***
*********************/
// RateHelpers are built from the above quotes together with
// other instrument dependant infos. Quotes are passed in
// relinkable handles which could be relinked to some other
// data source later.
// deposits
DayCounter depositDayCounter = new Actual360();
RateHelper d1w = new DepositRateHelper(new Handle<Quote>(d1wRate), new Period(1, TimeUnit.Weeks),
fixingDays, calendar, BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
RateHelper d1m = new DepositRateHelper(new Handle<Quote>(d1mRate), new Period(1, TimeUnit.Months),
fixingDays, calendar, BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
RateHelper d3m = new DepositRateHelper(new Handle<Quote>(d3mRate), new Period(3, TimeUnit.Months),
fixingDays, calendar, BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
RateHelper d6m = new DepositRateHelper(new Handle<Quote>(d6mRate), new Period(6, TimeUnit.Months),
fixingDays, calendar, BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
RateHelper d9m = new DepositRateHelper(new Handle<Quote>(d9mRate), new Period(9, TimeUnit.Months),
fixingDays, calendar, BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
RateHelper d1y = new DepositRateHelper(new Handle<Quote>(d1yRate), new Period(1, TimeUnit.Years),
fixingDays, calendar, BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
// setup FRAs
RateHelper fra3x6 = new FraRateHelper(new Handle<Quote>(fra3x6Rate), 3, 6, fixingDays, calendar,
BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
RateHelper fra6x9 = new FraRateHelper(new Handle<Quote>(fra6x9Rate), 6, 9, fixingDays, calendar,
BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
RateHelper fra6x12 = new FraRateHelper(new Handle<Quote>(fra6x12Rate), 6, 12, fixingDays, calendar,
BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
// setup futures
// Handle<Quote> convexityAdjustment = new Handle<Quote>(new SimpleQuote(0.0));
int futMonths = 3;
Date imm = IMM.nextDate(settlementDate);
RateHelper fut1 = new FuturesRateHelper(new Handle<Quote>(fut1Price), imm, futMonths, calendar,
BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
imm = IMM.nextDate(imm + 1);
RateHelper fut2 = new FuturesRateHelper(new Handle<Quote>(fut2Price), imm, futMonths, calendar,
BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
imm = IMM.nextDate(imm + 1);
RateHelper fut3 = new FuturesRateHelper(new Handle<Quote>(fut3Price), imm, futMonths, calendar,
BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
imm = IMM.nextDate(imm + 1);
RateHelper fut4 = new FuturesRateHelper(new Handle<Quote>(fut4Price), imm, futMonths, calendar,
BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
imm = IMM.nextDate(imm + 1);
RateHelper fut5 = new FuturesRateHelper(new Handle<Quote>(fut5Price), imm, futMonths, calendar,
BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
imm = IMM.nextDate(imm + 1);
RateHelper fut6 = new FuturesRateHelper(new Handle<Quote>(fut6Price), imm, futMonths, calendar,
BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
imm = IMM.nextDate(imm + 1);
RateHelper fut7 = new FuturesRateHelper(new Handle<Quote>(fut7Price), imm, futMonths, calendar,
BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
imm = IMM.nextDate(imm + 1);
RateHelper fut8 = new FuturesRateHelper(new Handle<Quote>(fut8Price), imm, futMonths, calendar,
BusinessDayConvention.ModifiedFollowing, true, depositDayCounter);
// setup swaps
Frequency swFixedLegFrequency = Frequency.Annual;
BusinessDayConvention swFixedLegConvention = BusinessDayConvention.Unadjusted;
DayCounter swFixedLegDayCounter = new Thirty360(Thirty360.Thirty360Convention.European);
IborIndex swFloatingLegIndex = new Euribor6M();
RateHelper s2y = new SwapRateHelper(new Handle<Quote>(s2yRate), new Period(2, TimeUnit.Years),
calendar, swFixedLegFrequency, swFixedLegConvention, swFixedLegDayCounter, swFloatingLegIndex);
RateHelper s3y = new SwapRateHelper(new Handle<Quote>(s3yRate), new Period(3, TimeUnit.Years),
calendar, swFixedLegFrequency, swFixedLegConvention, swFixedLegDayCounter, swFloatingLegIndex);
RateHelper s5y = new SwapRateHelper(new Handle<Quote>(s5yRate), new Period(5, TimeUnit.Years),
calendar, swFixedLegFrequency, swFixedLegConvention, swFixedLegDayCounter, swFloatingLegIndex);
RateHelper s10y = new SwapRateHelper(new Handle<Quote>(s10yRate), new Period(10, TimeUnit.Years),
calendar, swFixedLegFrequency, swFixedLegConvention, swFixedLegDayCounter, swFloatingLegIndex);
RateHelper s15y = new SwapRateHelper(new Handle<Quote>(s15yRate), new Period(15, TimeUnit.Years),
calendar, swFixedLegFrequency, swFixedLegConvention, swFixedLegDayCounter, swFloatingLegIndex);
/*********************
** CURVE BUILDING **
*********************/
// Any DayCounter would be fine.
// ActualActual::ISDA ensures that 30 years is 30.0
DayCounter termStructureDayCounter = new ActualActual(ActualActual.Convention.ISDA);
double tolerance = 1.0e-15;
// A depo-swap curve
List<RateHelper> depoSwapInstruments = new List<RateHelper>();
depoSwapInstruments.Add(d1w);
depoSwapInstruments.Add(d1m);
depoSwapInstruments.Add(d3m);
depoSwapInstruments.Add(d6m);
depoSwapInstruments.Add(d9m);
depoSwapInstruments.Add(d1y);
depoSwapInstruments.Add(s2y);
depoSwapInstruments.Add(s3y);
depoSwapInstruments.Add(s5y);
depoSwapInstruments.Add(s10y);
depoSwapInstruments.Add(s15y);
YieldTermStructure depoSwapTermStructure = new PiecewiseYieldCurve<Discount,LogLinear>(
settlementDate, depoSwapInstruments, termStructureDayCounter, new List<Handle<Quote>>(), new List<Date>(), tolerance);
// A depo-futures-swap curve
List<RateHelper> depoFutSwapInstruments = new List<RateHelper>();
depoFutSwapInstruments.Add(d1w);
depoFutSwapInstruments.Add(d1m);
depoFutSwapInstruments.Add(fut1);
depoFutSwapInstruments.Add(fut2);
depoFutSwapInstruments.Add(fut3);
depoFutSwapInstruments.Add(fut4);
depoFutSwapInstruments.Add(fut5);
depoFutSwapInstruments.Add(fut6);
depoFutSwapInstruments.Add(fut7);
depoFutSwapInstruments.Add(fut8);
depoFutSwapInstruments.Add(s3y);
depoFutSwapInstruments.Add(s5y);
depoFutSwapInstruments.Add(s10y);
depoFutSwapInstruments.Add(s15y);
YieldTermStructure depoFutSwapTermStructure = new PiecewiseYieldCurve<Discount,LogLinear>(
settlementDate, depoFutSwapInstruments, termStructureDayCounter, new List<Handle<Quote>>(), new List<Date>(), tolerance);
// A depo-FRA-swap curve
List<RateHelper> depoFRASwapInstruments = new List<RateHelper>();
depoFRASwapInstruments.Add(d1w);
depoFRASwapInstruments.Add(d1m);
depoFRASwapInstruments.Add(d3m);
depoFRASwapInstruments.Add(fra3x6);
depoFRASwapInstruments.Add(fra6x9);
depoFRASwapInstruments.Add(fra6x12);
depoFRASwapInstruments.Add(s2y);
depoFRASwapInstruments.Add(s3y);
depoFRASwapInstruments.Add(s5y);
depoFRASwapInstruments.Add(s10y);
depoFRASwapInstruments.Add(s15y);
YieldTermStructure depoFRASwapTermStructure = new PiecewiseYieldCurve<Discount,LogLinear>(
settlementDate, depoFRASwapInstruments, termStructureDayCounter, new List<Handle<Quote>>(), new List<Date>(), tolerance);
// Term structures that will be used for pricing:
// the one used for discounting cash flows
RelinkableHandle<YieldTermStructure> discountingTermStructure = new RelinkableHandle<YieldTermStructure>();
// the one used for forward rate forecasting
RelinkableHandle<YieldTermStructure> forecastingTermStructure = new RelinkableHandle<YieldTermStructure>();
/*********************
* SWAPS TO BE PRICED *
**********************/
// constant nominal 1,000,000 Euro
double nominal = 1000000.0;
// fixed leg
Frequency fixedLegFrequency = Frequency.Annual;
BusinessDayConvention fixedLegConvention = BusinessDayConvention.Unadjusted;
BusinessDayConvention floatingLegConvention = BusinessDayConvention.ModifiedFollowing;
DayCounter fixedLegDayCounter = new Thirty360(Thirty360.Thirty360Convention.European);
double fixedRate = 0.04;
DayCounter floatingLegDayCounter = new Actual360();
// floating leg
Frequency floatingLegFrequency = Frequency.Semiannual;
IborIndex euriborIndex = new Euribor6M(forecastingTermStructure);
double spread = 0.0;
int lenghtInYears = 5;
VanillaSwap.Type swapType = VanillaSwap.Type.Payer;
Date maturity = settlementDate + new Period(lenghtInYears, TimeUnit.Years);
Schedule fixedSchedule = new Schedule(settlementDate, maturity, new Period(fixedLegFrequency),
calendar, fixedLegConvention, fixedLegConvention, DateGeneration.Rule.Forward, false);
Schedule floatSchedule = new Schedule(settlementDate, maturity, new Period(floatingLegFrequency),
calendar, floatingLegConvention, floatingLegConvention, DateGeneration.Rule.Forward, false);
VanillaSwap spot5YearSwap = new VanillaSwap(swapType, nominal, fixedSchedule, fixedRate, fixedLegDayCounter,
floatSchedule, euriborIndex, spread, floatingLegDayCounter);
Date fwdStart = calendar.advance(settlementDate, 1, TimeUnit.Years);
Date fwdMaturity = fwdStart + new Period(lenghtInYears, TimeUnit.Years);
Schedule fwdFixedSchedule = new Schedule(fwdStart, fwdMaturity, new Period(fixedLegFrequency),
calendar, fixedLegConvention, fixedLegConvention, DateGeneration.Rule.Forward, false);
Schedule fwdFloatSchedule = new Schedule(fwdStart, fwdMaturity, new Period(floatingLegFrequency),
calendar, floatingLegConvention, floatingLegConvention, DateGeneration.Rule.Forward, false);
VanillaSwap oneYearForward5YearSwap = new VanillaSwap(swapType, nominal, fwdFixedSchedule, fixedRate, fixedLegDayCounter,
fwdFloatSchedule, euriborIndex, spread, floatingLegDayCounter);
/***************
* SWAP PRICING *
****************/
// utilities for reporting
List<string> headers = new List<string>();
headers.Add("term structure");
headers.Add("net present value");
headers.Add("fair spread");
headers.Add("fair fixed rate");
string separator = " | ";
int width = headers[0].Length + separator.Length
+ headers[1].Length + separator.Length
+ headers[2].Length + separator.Length
+ headers[3].Length + separator.Length - 1;
string rule = string.Format("").PadLeft(width, '-'), dblrule = string.Format("").PadLeft(width, '=');
string tab = string.Format("").PadLeft(8, ' ');
// calculations
Console.WriteLine(dblrule);
Console.WriteLine("5-year market swap-rate = {0:0.00%}", s5yRate.value());
Console.WriteLine(dblrule);
Console.WriteLine(tab + "5-years swap paying {0:0.00%}", fixedRate);
Console.WriteLine(headers[0] + separator
+ headers[1] + separator
+ headers[2] + separator
+ headers[3] + separator);
Console.WriteLine(rule);
double NPV;
double fairRate;
double fairSpread;
IPricingEngine swapEngine = new DiscountingSwapEngine(discountingTermStructure);
spot5YearSwap.setPricingEngine(swapEngine);
oneYearForward5YearSwap.setPricingEngine(swapEngine);
// Of course, you're not forced to really use different curves
forecastingTermStructure.linkTo(depoSwapTermStructure);
discountingTermStructure.linkTo(depoSwapTermStructure);
NPV = spot5YearSwap.NPV();
fairSpread = spot5YearSwap.fairSpread();
fairRate = spot5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
// let's check that the 5 years swap has been correctly re-priced
if (!(Math.Abs(fairRate-s5yQuote)<1e-8))
throw new ApplicationException("5-years swap mispriced by " + Math.Abs(fairRate-s5yQuote));
forecastingTermStructure.linkTo(depoFutSwapTermStructure);
discountingTermStructure.linkTo(depoFutSwapTermStructure);
NPV = spot5YearSwap.NPV();
fairSpread = spot5YearSwap.fairSpread();
fairRate = spot5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-fut-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
if (!(Math.Abs(fairRate-s5yQuote)<1e-8))
throw new ApplicationException("5-years swap mispriced by " + Math.Abs(fairRate-s5yQuote));
forecastingTermStructure.linkTo(depoFRASwapTermStructure);
discountingTermStructure.linkTo(depoFRASwapTermStructure);
NPV = spot5YearSwap.NPV();
fairSpread = spot5YearSwap.fairSpread();
fairRate = spot5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-FRA-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
if (!(Math.Abs(fairRate-s5yQuote)<1e-8))
throw new ApplicationException("5-years swap mispriced by " + Math.Abs(fairRate-s5yQuote));
Console.WriteLine(rule);
// now let's price the 1Y forward 5Y swap
Console.WriteLine(tab + "5-years, 1-year forward swap paying {0:0.00%}", fixedRate);
Console.WriteLine(headers[0] + separator
+ headers[1] + separator
+ headers[2] + separator
+ headers[3] + separator);
Console.WriteLine(rule);
forecastingTermStructure.linkTo(depoSwapTermStructure);
discountingTermStructure.linkTo(depoSwapTermStructure);
NPV = oneYearForward5YearSwap.NPV();
fairSpread = oneYearForward5YearSwap.fairSpread();
fairRate = oneYearForward5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
forecastingTermStructure.linkTo(depoFutSwapTermStructure);
discountingTermStructure.linkTo(depoFutSwapTermStructure);
NPV = oneYearForward5YearSwap.NPV();
fairSpread = oneYearForward5YearSwap.fairSpread();
fairRate = oneYearForward5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-fut-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
forecastingTermStructure.linkTo(depoFRASwapTermStructure);
discountingTermStructure.linkTo(depoFRASwapTermStructure);
NPV = oneYearForward5YearSwap.NPV();
fairSpread = oneYearForward5YearSwap.fairSpread();
fairRate = oneYearForward5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-FRA-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
// now let's say that the 5-years swap rate goes up to 4.60%.
// A smarter market element--say, connected to a data source-- would
// notice the change itself. Since we're using SimpleQuotes,
// we'll have to change the value manually--which forces us to
// downcast the handle and use the SimpleQuote
// interface. In any case, the point here is that a change in the
// value contained in the Quote triggers a new bootstrapping
// of the curve and a repricing of the swap.
SimpleQuote fiveYearsRate = s5yRate as SimpleQuote;
fiveYearsRate.setValue(0.0460);
Console.WriteLine(dblrule);
Console.WriteLine("5-year market swap-rate = {0:0.00%}", s5yRate.value());
Console.WriteLine(dblrule);
Console.WriteLine(tab + "5-years swap paying {0:0.00%}", fixedRate);
Console.WriteLine(headers[0] + separator
+ headers[1] + separator
+ headers[2] + separator
+ headers[3] + separator);
Console.WriteLine(rule);
// now get the updated results
forecastingTermStructure.linkTo(depoSwapTermStructure);
discountingTermStructure.linkTo(depoSwapTermStructure);
NPV = spot5YearSwap.NPV();
fairSpread = spot5YearSwap.fairSpread();
fairRate = spot5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
if (!(Math.Abs(fairRate-s5yRate.value())<1e-8))
throw new ApplicationException("5-years swap mispriced by " + Math.Abs(fairRate-s5yRate.value()));
forecastingTermStructure.linkTo(depoFutSwapTermStructure);
discountingTermStructure.linkTo(depoFutSwapTermStructure);
NPV = spot5YearSwap.NPV();
fairSpread = spot5YearSwap.fairSpread();
fairRate = spot5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-fut-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
if (!(Math.Abs(fairRate-s5yRate.value())<1e-8))
throw new ApplicationException("5-years swap mispriced by " + Math.Abs(fairRate-s5yRate.value()));
forecastingTermStructure.linkTo(depoFRASwapTermStructure);
discountingTermStructure.linkTo(depoFRASwapTermStructure);
NPV = spot5YearSwap.NPV();
fairSpread = spot5YearSwap.fairSpread();
fairRate = spot5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-FRA-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
if (!(Math.Abs(fairRate-s5yRate.value())<1e-8))
throw new ApplicationException("5-years swap mispriced by " + Math.Abs(fairRate-s5yRate.value()));
Console.WriteLine(rule);
// the 1Y forward 5Y swap changes as well
Console.WriteLine(tab + "5-years, 1-year forward swap paying {0:0.00%}", fixedRate);
Console.WriteLine(headers[0] + separator
+ headers[1] + separator
+ headers[2] + separator
+ headers[3] + separator);
Console.WriteLine(rule);
forecastingTermStructure.linkTo(depoSwapTermStructure);
discountingTermStructure.linkTo(depoSwapTermStructure);
NPV = oneYearForward5YearSwap.NPV();
fairSpread = oneYearForward5YearSwap.fairSpread();
fairRate = oneYearForward5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
forecastingTermStructure.linkTo(depoFutSwapTermStructure);
discountingTermStructure.linkTo(depoFutSwapTermStructure);
NPV = oneYearForward5YearSwap.NPV();
fairSpread = oneYearForward5YearSwap.fairSpread();
fairRate = oneYearForward5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-fut-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
forecastingTermStructure.linkTo(depoFRASwapTermStructure);
discountingTermStructure.linkTo(depoFRASwapTermStructure);
NPV = oneYearForward5YearSwap.NPV();
fairSpread = oneYearForward5YearSwap.fairSpread();
fairRate = oneYearForward5YearSwap.fairRate();
Console.Write("{0," + headers[0].Length + ":0.00}" + separator, "depo-FRA-swap");
Console.Write("{0," + headers[1].Length + ":0.00}" + separator, NPV);
Console.Write("{0," + headers[2].Length + ":0.00%}" + separator, fairSpread);
Console.WriteLine("{0," + headers[3].Length + ":0.00%}" + separator, fairRate);
Console.WriteLine(" \nRun completed in {0}", DateTime.Now - timer);
Console.Write("Press any key to continue ...");
Console.ReadKey();
}
static void Main(string[] args)
{
DateTime timer = DateTime.Now;
Date todaysDate = new Date(15, 2, 2002);
Calendar calendar = new TARGET();
Date settlementDate = new Date(19, 2, 2002);
Settings.setEvaluationDate(todaysDate);
// flat yield term structure impling 1x5 swap at 5%
Quote flatRate = new SimpleQuote(0.04875825);
Handle<YieldTermStructure> rhTermStructure = new Handle<YieldTermStructure>(
new FlatForward(settlementDate, new Handle<Quote>(flatRate),
new Actual365Fixed()));
// Define the ATM/OTM/ITM swaps
Frequency fixedLegFrequency = Frequency.Annual;
BusinessDayConvention fixedLegConvention = BusinessDayConvention.Unadjusted;
BusinessDayConvention floatingLegConvention = BusinessDayConvention.ModifiedFollowing;
DayCounter fixedLegDayCounter = new Thirty360(Thirty360.Thirty360Convention.European);
Frequency floatingLegFrequency = Frequency.Semiannual;
VanillaSwap.Type type = VanillaSwap.Type.Payer;
double dummyFixedRate = 0.03;
IborIndex indexSixMonths = new Euribor6M(rhTermStructure);
Date startDate = calendar.advance(settlementDate, 1, TimeUnit.Years,
floatingLegConvention);
Date maturity = calendar.advance(startDate, 5, TimeUnit.Years,
floatingLegConvention);
Schedule fixedSchedule = new Schedule(startDate, maturity, new Period(fixedLegFrequency),
calendar, fixedLegConvention, fixedLegConvention,
DateGeneration.Rule.Forward, false);
Schedule floatSchedule = new Schedule(startDate, maturity, new Period(floatingLegFrequency),
calendar, floatingLegConvention, floatingLegConvention,
DateGeneration.Rule.Forward, false);
VanillaSwap swap = new VanillaSwap(
type, 1000.0,
fixedSchedule, dummyFixedRate, fixedLegDayCounter,
floatSchedule, indexSixMonths, 0.0,
indexSixMonths.dayCounter());
swap.setPricingEngine(new DiscountingSwapEngine(rhTermStructure));
double fixedAtmRate = swap.fairRate();
double fixedOtmRate = fixedAtmRate * 1.2;
double fixedItmRate = fixedAtmRate * 0.8;
VanillaSwap atmSwap = new VanillaSwap(
type, 1000.0,
fixedSchedule, fixedAtmRate, fixedLegDayCounter,
floatSchedule, indexSixMonths, 0.0,
indexSixMonths.dayCounter());
VanillaSwap otmSwap = new VanillaSwap(
type, 1000.0,
fixedSchedule, fixedOtmRate, fixedLegDayCounter,
floatSchedule, indexSixMonths, 0.0,
indexSixMonths.dayCounter());
VanillaSwap itmSwap = new VanillaSwap(
type, 1000.0,
fixedSchedule, fixedItmRate, fixedLegDayCounter,
floatSchedule, indexSixMonths, 0.0,
indexSixMonths.dayCounter());
// defining the swaptions to be used in model calibration
List<Period> swaptionMaturities = new List<Period>(5);
swaptionMaturities.Add(new Period(1, TimeUnit.Years));
swaptionMaturities.Add(new Period(2, TimeUnit.Years));
swaptionMaturities.Add(new Period(3, TimeUnit.Years));
swaptionMaturities.Add(new Period(4, TimeUnit.Years));
swaptionMaturities.Add(new Period(5, TimeUnit.Years));
List<CalibrationHelper> swaptions = new List<CalibrationHelper>();
// List of times that have to be included in the timegrid
List<double> times = new List<double>();
for (int i = 0; i < NumRows; i++)
{
int j = NumCols - i - 1; // 1x5, 2x4, 3x3, 4x2, 5x1
int k = i * NumCols + j;
Quote vol = new SimpleQuote(SwaptionVols[k]);
swaptions.Add(new SwaptionHelper(swaptionMaturities[i],
new Period(SwapLenghts[j], TimeUnit.Years),
new Handle<Quote>(vol),
indexSixMonths,
indexSixMonths.tenor(),
indexSixMonths.dayCounter(),
indexSixMonths.dayCounter(),
rhTermStructure, false));
swaptions.Last().addTimesTo(times);
}
// Building time-grid
TimeGrid grid = new TimeGrid(times, 30);
// defining the models
G2 modelG2 = new G2(rhTermStructure);
HullWhite modelHw = new HullWhite(rhTermStructure);
HullWhite modelHw2 = new HullWhite(rhTermStructure);
BlackKarasinski modelBk = new BlackKarasinski(rhTermStructure);
// model calibrations
Console.WriteLine("G2 (analytic formulae) calibration");
for (int i = 0; i < swaptions.Count; i++)
swaptions[i].setPricingEngine(new G2SwaptionEngine(modelG2, 6.0, 16));
CalibrateModel(modelG2, swaptions);
Console.WriteLine("calibrated to:\n" +
"a = {0:0.000000}, " +
"sigma = {1:0.0000000}\n" +
"b = {2:0.000000}, " +
"eta = {3:0.0000000}\n" +
"rho = {4:0.00000}\n",
modelG2.parameters()[0],
modelG2.parameters()[1],
modelG2.parameters()[2],
modelG2.parameters()[3],
modelG2.parameters()[4]);
Console.WriteLine("Hull-White (analytic formulae) calibration");
for (int i = 0; i < swaptions.Count; i++)
swaptions[i].setPricingEngine(new JamshidianSwaptionEngine(modelHw));
CalibrateModel(modelHw, swaptions);
Console.WriteLine("calibrated to:\n" +
"a = {0:0.000000}, " +
"sigma = {1:0.0000000}\n",
modelHw.parameters()[0],
modelHw.parameters()[1]);
Console.WriteLine("Hull-White (numerical) calibration");
for (int i = 0; i < swaptions.Count(); i++)
swaptions[i].setPricingEngine(new TreeSwaptionEngine(modelHw2, grid));
CalibrateModel(modelHw2, swaptions);
Console.WriteLine("calibrated to:\n" +
"a = {0:0.000000}, " +
"sigma = {1:0.0000000}\n",
modelHw2.parameters()[0],
modelHw2.parameters()[1]);
Console.WriteLine("Black-Karasinski (numerical) calibration");
for (int i = 0; i < swaptions.Count; i++)
swaptions[i].setPricingEngine(new TreeSwaptionEngine(modelBk, grid));
CalibrateModel(modelBk, swaptions);
Console.WriteLine("calibrated to:\n" +
"a = {0:0.000000}, " +
"sigma = {1:0.00000}\n",
modelBk.parameters()[0],
modelBk.parameters()[1]);
// ATM Bermudan swaption pricing
Console.WriteLine("Payer bermudan swaption "
+ "struck at {0:0.00000 %} (ATM)",
fixedAtmRate);
List<Date> bermudanDates = new List<Date>();
List<CashFlow> leg = swap.fixedLeg();
for (int i = 0; i < leg.Count; i++)
{
Coupon coupon = (Coupon)leg[i];
bermudanDates.Add(coupon.accrualStartDate());
}
Exercise bermudanExercise = new BermudanExercise(bermudanDates);
Swaption bermudanSwaption = new Swaption(atmSwap, bermudanExercise);
// Do the pricing for each model
// G2 price the European swaption here, it should switch to bermudan
bermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelG2, 50));
Console.WriteLine("G2: {0:0.00}", bermudanSwaption.NPV());
bermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelHw, 50));
Console.WriteLine("HW: {0:0.000}", bermudanSwaption.NPV());
bermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelHw2, 50));
Console.WriteLine("HW (num): {0:0.000}", bermudanSwaption.NPV());
bermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelBk, 50));
Console.WriteLine("BK: {0:0.000}", bermudanSwaption.NPV());
// OTM Bermudan swaption pricing
Console.WriteLine("Payer bermudan swaption "
+ "struck at {0:0.00000 %} (OTM)",
fixedOtmRate);
Swaption otmBermudanSwaption = new Swaption(otmSwap, bermudanExercise);
// Do the pricing for each model
otmBermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelG2, 50));
Console.WriteLine("G2: {0:0.0000}", otmBermudanSwaption.NPV());
otmBermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelHw, 50));
Console.WriteLine("HW: {0:0.0000}", otmBermudanSwaption.NPV());
otmBermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelHw2, 50));
Console.WriteLine("HW (num): {0:0.000}", otmBermudanSwaption.NPV());
otmBermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelBk, 50));
Console.WriteLine("BK: {0:0.0000}", otmBermudanSwaption.NPV());
// ITM Bermudan swaption pricing
Console.WriteLine("Payer bermudan swaption "
+ "struck at {0:0.00000 %} (ITM)",
fixedItmRate);
Swaption itmBermudanSwaption = new Swaption(itmSwap, bermudanExercise);
// Do the pricing for each model
itmBermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelG2, 50));
Console.WriteLine("G2: {0:0.000}", itmBermudanSwaption.NPV());
itmBermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelHw, 50));
Console.WriteLine("HW: {0:0.000}", itmBermudanSwaption.NPV());
itmBermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelHw2, 50));
Console.WriteLine("HW (num): {0:0.000}", itmBermudanSwaption.NPV());
itmBermudanSwaption.setPricingEngine(new TreeSwaptionEngine(modelBk, 50));
Console.WriteLine("BK: {0:0.000}", itmBermudanSwaption.NPV());
Console.WriteLine(" \nRun completed in {0}", DateTime.Now - timer);
Console.WriteLine();
Console.Write("Press any key to continue ...");
Console.ReadKey();
}
public void testSwaps()
{
//BOOST_MESSAGE("Testing Hull-White swap pricing against known values...");
Date today; //=Settings::instance().evaluationDate();;
Calendar calendar = new TARGET();
today = calendar.adjust(Date.Today);
Settings.setEvaluationDate(today);
Date settlement = calendar.advance(today, 2, TimeUnit.Days);
Date[] dates = {
settlement,
calendar.advance(settlement,1,TimeUnit.Weeks),
calendar.advance(settlement,1,TimeUnit.Months),
calendar.advance(settlement,3,TimeUnit.Months),
calendar.advance(settlement,6,TimeUnit.Months),
calendar.advance(settlement,9,TimeUnit.Months),
calendar.advance(settlement,1,TimeUnit.Years),
calendar.advance(settlement,2,TimeUnit.Years),
calendar.advance(settlement,3,TimeUnit.Years),
calendar.advance(settlement,5,TimeUnit.Years),
calendar.advance(settlement,10,TimeUnit.Years),
calendar.advance(settlement,15,TimeUnit.Years)
};
double[] discounts = {
1.0,
0.999258,
0.996704,
0.990809,
0.981798,
0.972570,
0.963430,
0.929532,
0.889267,
0.803693,
0.596903,
0.433022
};
//for (int i = 0; i < dates.Length; i++)
// dates[i] + dates.Length;
LogLinear Interpolator = new LogLinear();
Handle<YieldTermStructure> termStructure =
new Handle<YieldTermStructure>(
new InterpolatedDiscountCurve<LogLinear>(
dates.ToList<Date>(),
discounts.ToList<double>(),
new Actual365Fixed(),new Calendar(), null, null , Interpolator)
);
HullWhite model = new HullWhite(termStructure);
int[] start = { -3, 0, 3 };
int[] length = { 2, 5, 10 };
double[] rates = { 0.02, 0.04, 0.06 };
IborIndex euribor = new Euribor6M(termStructure);
IPricingEngine engine = new TreeVanillaSwapEngine(model, 120, termStructure);
#if QL_USE_INDEXED_COUPON
double tolerance = 4.0e-3;
#else
double tolerance = 1.0e-8;
#endif
for (int i=0; i<start.Length; i++) {
Date startDate = calendar.advance(settlement,start[i],TimeUnit.Months);
if (startDate < today) {
Date fixingDate = calendar.advance(startDate,-2,TimeUnit.Days);
//TimeSeries<double> pastFixings;
ObservableValue<TimeSeries<double>> pastFixings = new ObservableValue<TimeSeries<double>>();
pastFixings.value()[fixingDate] = 0.03;
IndexManager.instance().setHistory(euribor.name(),
pastFixings);
}
for (int j=0; j<length.Length; j++) {
Date maturity = calendar.advance(startDate, length[i], TimeUnit.Years);
Schedule fixedSchedule = new Schedule(startDate, maturity, new Period(Frequency.Annual),
calendar, BusinessDayConvention.Unadjusted, BusinessDayConvention.Unadjusted,
DateGeneration.Rule.Forward, false);
Schedule floatSchedule = new Schedule(startDate, maturity, new Period(Frequency.Semiannual),
calendar, BusinessDayConvention.Following, BusinessDayConvention.Following,
DateGeneration.Rule.Forward, false);
for (int k=0; k<rates.Length; k++) {
VanillaSwap swap = new VanillaSwap(VanillaSwap.Type.Payer, 1000000.0,
fixedSchedule, rates[k], new Thirty360(),
floatSchedule, euribor, 0.0, new Actual360());
swap.setPricingEngine(new DiscountingSwapEngine(termStructure));
double expected = swap.NPV();
swap.setPricingEngine(engine);
double calculated = swap.NPV();
double error = Math.Abs((expected-calculated)/expected);
if (error > tolerance) {
Assert.Fail("Failed to reproduce swap NPV:"
//+ QL_FIXED << std::setprecision(9)
+ "\n calculated: " + calculated
+ "\n expected: " + expected
//+ QL_SCIENTIFIC
+ "\n rel. error: " + error);
}
}
}
}
}
public void testImpliedHazardRate()
{
// Testing implied hazard-rate for credit-default swaps...
SavedSettings backup = new SavedSettings();
// Initialize curves
Calendar calendar = new TARGET();
Date today = calendar.adjust(Date.Today);
Settings.setEvaluationDate(today);
double h1 = 0.30, h2 = 0.40;
DayCounter dayCounter = new Actual365Fixed();
List<Date> dates = new List<Date>(3);
List<double> hazardRates = new List<double>(3);
dates.Add(today);
hazardRates.Add(h1);
dates.Add(today + new Period(5,TimeUnit.Years));
hazardRates.Add(h1);
dates.Add(today + new Period(10,TimeUnit.Years));
hazardRates.Add(h2);
RelinkableHandle<DefaultProbabilityTermStructure> probabilityCurve =
new RelinkableHandle<DefaultProbabilityTermStructure>();
probabilityCurve.linkTo(new InterpolatedHazardRateCurve<BackwardFlat>(dates,
hazardRates,
dayCounter));
RelinkableHandle<YieldTermStructure> discountCurve = new RelinkableHandle<YieldTermStructure>();
discountCurve.linkTo(new FlatForward(today,0.03,new Actual360()));
Frequency frequency = Frequency.Semiannual;
BusinessDayConvention convention = BusinessDayConvention.ModifiedFollowing;
Date issueDate = calendar.advance(today, -6, TimeUnit.Months);
double fixedRate = 0.0120;
DayCounter cdsDayCount = new Actual360();
double notional = 10000.0;
double recoveryRate = 0.4;
double? latestRate = null;
for (int n=6; n<=10; ++n)
{
Date maturity = calendar.advance(issueDate, n, TimeUnit.Years);
Schedule schedule = new Schedule(issueDate, maturity, new Period(frequency), calendar,
convention, convention,
DateGeneration.Rule.Forward, false);
CreditDefaultSwap cds = new CreditDefaultSwap(Protection.Side.Seller, notional, fixedRate,
schedule, convention, cdsDayCount,true, true);
cds.setPricingEngine(new MidPointCdsEngine(probabilityCurve, recoveryRate, discountCurve));
double NPV = cds.NPV();
double flatRate = cds.impliedHazardRate(NPV, discountCurve,
dayCounter,
recoveryRate);
if (flatRate < h1 || flatRate > h2) {
Assert.Fail("implied hazard rate outside expected range\n"
+ " maturity: " + n + " years\n"
+ " expected minimum: " + h1 + "\n"
+ " expected maximum: " + h2 + "\n"
+ " implied rate: " + flatRate);
}
if (n > 6 && flatRate < latestRate) {
Assert.Fail("implied hazard rate decreasing with swap maturity\n"
+ " maturity: " + n + " years\n"
+ " previous rate: " + latestRate + "\n"
+ " implied rate: " + flatRate);
}
latestRate = flatRate;
RelinkableHandle<DefaultProbabilityTermStructure> probability = new RelinkableHandle<DefaultProbabilityTermStructure>();
probability.linkTo(new FlatHazardRate( today,new Handle<Quote>(new SimpleQuote(flatRate)),dayCounter));
CreditDefaultSwap cds2 = new CreditDefaultSwap(Protection.Side.Seller, notional, fixedRate,
schedule, convention, cdsDayCount,true, true);
cds2.setPricingEngine(new MidPointCdsEngine(probability,recoveryRate,discountCurve));
double NPV2 = cds2.NPV();
double tolerance = 1.0;
if (Math.Abs(NPV-NPV2) > tolerance) {
Assert.Fail("failed to reproduce NPV with implied rate\n"
+ " expected: " + NPV + "\n"
+ " calculated: " + NPV2);
}
}
}
public void testFairUpfront()
{
// Testing fair-upfront calculation for credit-default swaps...
SavedSettings backup = new SavedSettings();
// Initialize curves
Calendar calendar = new TARGET();
Date today = calendar.adjust(Date.Today);
Settings.setEvaluationDate(today);
Handle<Quote> hazardRate = new Handle<Quote>(new SimpleQuote(0.01234));
RelinkableHandle<DefaultProbabilityTermStructure> probabilityCurve =
new RelinkableHandle<DefaultProbabilityTermStructure>();
probabilityCurve.linkTo(new FlatHazardRate(0, calendar, hazardRate, new Actual360()));
RelinkableHandle<YieldTermStructure> discountCurve =
new RelinkableHandle<YieldTermStructure>();
discountCurve.linkTo(new FlatForward(today,0.06,new Actual360()));
// Build the schedule
Date issueDate = today;
Date maturity = calendar.advance(issueDate, 10, TimeUnit.Years);
BusinessDayConvention convention = BusinessDayConvention.Following;
Schedule schedule =
new MakeSchedule().from(issueDate)
.to(maturity)
.withFrequency(Frequency.Quarterly)
.withCalendar(calendar)
.withTerminationDateConvention(convention)
.withRule(DateGeneration.Rule.TwentiethIMM).value();
// Build the CDS
double fixedRate = 0.05;
double upfront = 0.001;
DayCounter dayCount = new Actual360();
double notional = 10000.0;
double recoveryRate = 0.4;
IPricingEngine engine = new MidPointCdsEngine(probabilityCurve, recoveryRate, discountCurve, true);
CreditDefaultSwap cds = new CreditDefaultSwap(Protection.Side.Seller, notional, upfront, fixedRate,
schedule, convention, dayCount, true, true);
cds.setPricingEngine(engine);
double fairUpfront = cds.fairUpfront();
CreditDefaultSwap fairCds = new CreditDefaultSwap(Protection.Side.Seller, notional,
fairUpfront, fixedRate, schedule, convention, dayCount, true, true);
fairCds.setPricingEngine(engine);
double fairNPV = fairCds.NPV();
double tolerance = 1e-10;
if (Math.Abs(fairNPV) > tolerance)
Assert.Fail(
"Failed to reproduce null NPV with calculated fair upfront\n"
+ " calculated upfront: " + fairUpfront + "\n"
+ " calculated NPV: " + fairNPV);
// same with null upfront to begin with
upfront = 0.0;
CreditDefaultSwap cds2 = new CreditDefaultSwap(Protection.Side.Seller, notional, upfront, fixedRate,
schedule, convention, dayCount, true, true);
cds2.setPricingEngine(engine);
fairUpfront = cds2.fairUpfront();
CreditDefaultSwap fairCds2 = new CreditDefaultSwap(Protection.Side.Seller, notional,
fairUpfront, fixedRate, schedule, convention, dayCount, true, true);
fairCds2.setPricingEngine(engine);
fairNPV = fairCds2.NPV();
if (Math.Abs(fairNPV) > tolerance)
Assert.Fail(
"Failed to reproduce null NPV with calculated fair upfront\n"
+ " calculated upfront: " + fairUpfront + "\n"
+ " calculated NPV: " + fairNPV);
}
public void testCachedValue()
{
// Testing credit-default swap against cached values...
SavedSettings backup = new SavedSettings();
// Initialize curves
Settings.setEvaluationDate(new Date(9,Month.June,2006));
Date today = Settings.evaluationDate();
Calendar calendar = new TARGET();
Handle<Quote> hazardRate = new Handle<Quote>(new SimpleQuote(0.01234));
RelinkableHandle<DefaultProbabilityTermStructure> probabilityCurve = new RelinkableHandle<DefaultProbabilityTermStructure>();
probabilityCurve.linkTo(new FlatHazardRate(0, calendar, hazardRate, new Actual360()));
RelinkableHandle<YieldTermStructure> discountCurve = new RelinkableHandle<YieldTermStructure>();
discountCurve.linkTo(new FlatForward(today,0.06,new Actual360()));
// Build the schedule
Date issueDate = calendar.advance(today, -1, TimeUnit.Years);
Date maturity = calendar.advance(issueDate, 10, TimeUnit.Years);
Frequency frequency = Frequency.Semiannual;
BusinessDayConvention convention = BusinessDayConvention.ModifiedFollowing;
Schedule schedule = new Schedule(issueDate, maturity, new Period(frequency), calendar,
convention, convention, DateGeneration.Rule.Forward, false);
// Build the CDS
double fixedRate = 0.0120;
DayCounter dayCount = new Actual360();
double notional = 10000.0;
double recoveryRate = 0.4;
CreditDefaultSwap cds = new CreditDefaultSwap(Protection.Side.Seller, notional, fixedRate,
schedule, convention, dayCount, true, true);
cds.setPricingEngine(new MidPointCdsEngine(probabilityCurve,recoveryRate,discountCurve));
double npv = 295.0153398;
double fairRate = 0.007517539081;
double calculatedNpv = cds.NPV();
double calculatedFairRate = cds.fairSpread();
double tolerance = 1.0e-7;
if (Math.Abs(calculatedNpv - npv) > tolerance)
Assert.Fail(
"Failed to reproduce NPV with mid-point engine\n"
+ " calculated NPV: " + calculatedNpv + "\n"
+ " expected NPV: " + npv);
if (Math.Abs(calculatedFairRate - fairRate) > tolerance)
Assert.Fail(
"Failed to reproduce fair rate with mid-point engine\n"
+ " calculated fair rate: " + calculatedFairRate + "\n"
+ " expected fair rate: " + fairRate);
cds.setPricingEngine(new IntegralCdsEngine(new Period(1,TimeUnit.Days),probabilityCurve,
recoveryRate,discountCurve));
calculatedNpv = cds.NPV();
calculatedFairRate = cds.fairSpread();
tolerance = 1.0e-5;
if (Math.Abs(calculatedNpv - npv) > notional*tolerance*10)
Assert.Fail(
"Failed to reproduce NPV with integral engine "
+ "(step = 1 day)\n"
+ " calculated NPV: " + calculatedNpv + "\n"
+ " expected NPV: " + npv);
if (Math.Abs(calculatedFairRate - fairRate) > tolerance)
Assert.Fail(
"Failed to reproduce fair rate with integral engine "
+ "(step = 1 day)\n"
+ " calculated fair rate: " + calculatedFairRate + "\n"
+ " expected fair rate: " + fairRate);
cds.setPricingEngine(new IntegralCdsEngine(new Period(1,TimeUnit.Weeks),probabilityCurve,recoveryRate,discountCurve));
calculatedNpv = cds.NPV();
calculatedFairRate = cds.fairSpread();
tolerance = 1.0e-5;
if (Math.Abs(calculatedNpv - npv) > notional*tolerance*10)
Assert.Fail(
"Failed to reproduce NPV with integral engine "
+"(step = 1 week)\n"
+ " calculated NPV: " + calculatedNpv + "\n"
+ " expected NPV: " + npv);
if (Math.Abs(calculatedFairRate - fairRate) > tolerance)
Assert.Fail(
"Failed to reproduce fair rate with integral engine "
+"(step = 1 week)\n"
+ " calculated fair rate: " + calculatedFairRate + "\n"
+ " expected fair rate: " + fairRate);
}
