void InflationTest::testZeroTermStructure() {
BOOST_MESSAGE("Testing zero inflation term structure...");
SavedSettings backup;
// try the Zero UK
Calendar calendar = UnitedKingdom();
BusinessDayConvention bdc = ModifiedFollowing;
Date evaluationDate(13, August, 2007);
evaluationDate = calendar.adjust(evaluationDate);
Settings::instance().evaluationDate() = evaluationDate;
// fixing data
Date from(1, January, 2005);
Date to(13, August, 2007);
Schedule rpiSchedule = MakeSchedule().from(from).to(to)
.withTenor(1*Months)
.withCalendar(UnitedKingdom())
.withConvention(ModifiedFollowing);
Real fixData[] = { 189.9, 189.9, 189.6, 190.5, 191.6, 192.0,
192.2, 192.2, 192.6, 193.1, 193.3, 193.6,
194.1, 193.4, 194.2, 195.0, 196.5, 197.7,
198.5, 198.5, 199.2, 200.1, 200.4, 201.1,
202.7, 201.6, 203.1, 204.4, 205.4, 206.2,
207.3, 206.1, -999.0 };
RelinkableHandle<ZeroInflationTermStructure> hz;
bool interp = false;
boost::shared_ptr<UKRPI> iiUKRPI(new UKRPI(interp, hz));
for (Size i=0; i<rpiSchedule.size();i++) {
iiUKRPI->addFixing(rpiSchedule[i], fixData[i]);
}
boost::shared_ptr<ZeroInflationIndex> ii = boost::dynamic_pointer_cast<ZeroInflationIndex>(iiUKRPI);
boost::shared_ptr<YieldTermStructure> nominalTS = nominalTermStructure();
// now build the zero inflation curve
Datum zcData[] = {
{ Date(13, August, 2008), 2.93 },
{ Date(13, August, 2009), 2.95 },
{ Date(13, August, 2010), 2.965 },
{ Date(15, August, 2011), 2.98 },
{ Date(13, August, 2012), 3.0 },
{ Date(13, August, 2014), 3.06 },
{ Date(13, August, 2017), 3.175 },
{ Date(13, August, 2019), 3.243 },
{ Date(15, August, 2022), 3.293 },
{ Date(14, August, 2027), 3.338 },
{ Date(13, August, 2032), 3.348 },
{ Date(15, August, 2037), 3.348 },
{ Date(13, August, 2047), 3.308 },
{ Date(13, August, 2057), 3.228 }
};
Period observationLag = Period(2,Months);
DayCounter dc = Thirty360();
Frequency frequency = Monthly;
std::vector<boost::shared_ptr<BootstrapHelper<ZeroInflationTermStructure> > > helpers =
makeHelpers<ZeroInflationTermStructure,ZeroCouponInflationSwapHelper,
ZeroInflationIndex>(zcData, LENGTH(zcData), ii,
observationLag,
calendar, bdc, dc);
Rate baseZeroRate = zcData[0].rate/100.0;
boost::shared_ptr<PiecewiseZeroInflationCurve<Linear> > pZITS(
new PiecewiseZeroInflationCurve<Linear>(
evaluationDate, calendar, dc, observationLag,
frequency, ii->interpolated(), baseZeroRate,
Handle<YieldTermStructure>(nominalTS), helpers));
pZITS->recalculate();
// first check that the zero rates on the curve match the data
// and that the helpers give the correct impled rates
const Real eps = 0.00000001;
bool forceLinearInterpolation = false;
for (Size i=0; i<LENGTH(zcData); i++) {
BOOST_REQUIRE_MESSAGE(std::fabs(zcData[i].rate/100.0
- pZITS->zeroRate(zcData[i].date, observationLag, forceLinearInterpolation)) < eps,
"ZITS zeroRate != instrument "
<< pZITS->zeroRate(zcData[i].date, observationLag, forceLinearInterpolation)
<< " vs " << zcData[i].rate/100.0
<< " interpolation: " << ii->interpolated()
<< " forceLinearInterpolation " << forceLinearInterpolation);
BOOST_REQUIRE_MESSAGE(std::fabs(helpers[i]->impliedQuote()
- zcData[i].rate/100.0) < eps,
"ZITS implied quote != instrument "
<< helpers[i]->impliedQuote()
<< " vs " << zcData[i].rate/100.0);
}
// now test the forecasting capability of the index.
hz.linkTo(pZITS);
from = hz->baseDate();
to = hz->maxDate()-1*Months; // a bit of margin for adjustments
Schedule testIndex = MakeSchedule().from(from).to(to)
.withTenor(1*Months)
.withCalendar(UnitedKingdom())
.withConvention(ModifiedFollowing);
// we are testing UKRPI which is not interpolated
Date bd = hz->baseDate();
Real bf = ii->fixing(bd);
for (Size i=0; i<testIndex.size();i++) {
Date d = testIndex[i];
Real z = hz->zeroRate(d, Period(0,Days));
Real t = hz->dayCounter().yearFraction(bd, d);
if(!ii->interpolated()) // because fixing constant over period
t = hz->dayCounter().yearFraction(bd,
inflationPeriod(d, ii->frequency()).first);
Real calc = bf * pow( 1+z, t);
if (t<=0)
calc = ii->fixing(d,false); // still historical
if (std::fabs(calc - ii->fixing(d,true))/10000.0 > eps)
BOOST_ERROR("ZC index does not forecast correctly for date " << d
<< " from base date " << bd
<< " with fixing " << bf
<< ", correct: " << calc
<< ", fix: " << ii->fixing(d,true)
<< ", t " << t);
}
//===========================================================================================
// Test zero-inflation-indexed (i.e. cpi ratio) cashflow
// just ordinary indexed cashflow with a zero inflation index
Date baseDate(1, January, 2006);
Date fixDate(1, August, 2014);
Date payDate=UnitedKingdom().adjust(fixDate+Period(3,Months),ModifiedFollowing);
boost::shared_ptr<Index> ind = boost::dynamic_pointer_cast<Index>(ii);
BOOST_REQUIRE_MESSAGE(ind,"dynamic_pointer_cast to Index from InflationIndex failed");
Real notional = 1000000.0;//1m
IndexedCashFlow iicf(notional,ind,baseDate,fixDate,payDate);
Real correctIndexed = ii->fixing(iicf.fixingDate())/ii->fixing(iicf.baseDate());
Real calculatedIndexed = iicf.amount()/iicf.notional();
BOOST_REQUIRE_MESSAGE(std::fabs(correctIndexed - calculatedIndexed) < eps,
"IndexedCashFlow indexing wrong: " << calculatedIndexed << " vs correct = "
<< correctIndexed);
//===========================================================================================
// Test zero coupon swap
// first make one ...
boost::shared_ptr<ZeroInflationIndex> zii = boost::dynamic_pointer_cast<ZeroInflationIndex>(ii);
BOOST_REQUIRE_MESSAGE(zii,"dynamic_pointer_cast to ZeroInflationIndex from UKRPI failed");
ZeroCouponInflationSwap nzcis(ZeroCouponInflationSwap::Payer,
1000000.0,
evaluationDate,
zcData[6].date, // end date = maturity
calendar, bdc, dc, zcData[6].rate/100.0, // fixed rate
zii, observationLag);
// N.B. no coupon pricer because it is not a coupon, effect of inflation curve via
// inflation curve attached to the inflation index.
Handle<YieldTermStructure> hTS(nominalTS);
boost::shared_ptr<PricingEngine> sppe(new DiscountingSwapEngine(hTS));
nzcis.setPricingEngine(sppe);
// ... and price it, should be zero
BOOST_CHECK_MESSAGE(fabs(nzcis.NPV())<0.00001,"ZCIS does not reprice to zero "
<< nzcis.NPV()
<< evaluationDate << " to " << zcData[6].date << " becoming " << nzcis.maturityDate()
<< " rate " << zcData[6].rate
<< " fixed leg " << nzcis.legNPV(0)
<< " indexed-predicted inflated leg " << nzcis.legNPV(1)
<< " discount " << nominalTS->discount(nzcis.maturityDate())
);
//===========================================================================================
// Test multiplicative seasonality in price
//
//Seasonality factors NOT normalized
//and UKRPI is not interpolated
Date trueBaseDate = inflationPeriod(hz->baseDate(), ii->frequency()).second;
Date seasonallityBaseDate(31,January,trueBaseDate.year());
std::vector<Rate> seasonalityFactors(12);
seasonalityFactors[0] = 1.003245;
seasonalityFactors[1] = 1.000000;
seasonalityFactors[2] = 0.999715;
seasonalityFactors[3] = 1.000495;
seasonalityFactors[4] = 1.000929;
seasonalityFactors[5] = 0.998687;
seasonalityFactors[6] = 0.995949;
seasonalityFactors[7] = 0.994682;
seasonalityFactors[8] = 0.995949;
seasonalityFactors[9] = 1.000519;
seasonalityFactors[10] = 1.003705;
seasonalityFactors[11] = 1.004186;
//Creating two different seasonality objects
//
boost::shared_ptr<MultiplicativePriceSeasonality> seasonality_1(new MultiplicativePriceSeasonality());
std::vector<Rate> seasonalityFactors_1(12, 1.0);
seasonality_1->set(seasonallityBaseDate,Monthly,seasonalityFactors_1);
boost::shared_ptr<MultiplicativePriceSeasonality> seasonality_real(
new MultiplicativePriceSeasonality(seasonallityBaseDate,Monthly,seasonalityFactors));
//Testing seasonality correction when seasonality factors are = 1
//
Rate fixing[] = {
ii->fixing(Date(14,January ,2013),true),
ii->fixing(Date(14,February ,2013),true),
ii->fixing(Date(14,March ,2013),true),
ii->fixing(Date(14,April ,2013),true),
ii->fixing(Date(14,May ,2013),true),
ii->fixing(Date(14,June ,2013),true),
ii->fixing(Date(14,July ,2013),true),
ii->fixing(Date(14,August ,2013),true),
ii->fixing(Date(14,September,2013),true),
ii->fixing(Date(14,October ,2013),true),
ii->fixing(Date(14,November ,2013),true),
ii->fixing(Date(14,December ,2013),true)
};
hz->setSeasonality(seasonality_1);
QL_REQUIRE(hz->hasSeasonality(),"[44] incorrectly believes NO seasonality correction");
Rate seasonalityFixing_1[] = {
ii->fixing(Date(14,January ,2013),true),
ii->fixing(Date(14,February ,2013),true),
ii->fixing(Date(14,March ,2013),true),
ii->fixing(Date(14,April ,2013),true),
ii->fixing(Date(14,May ,2013),true),
ii->fixing(Date(14,June ,2013),true),
ii->fixing(Date(14,July ,2013),true),
ii->fixing(Date(14,August ,2013),true),
ii->fixing(Date(14,September,2013),true),
ii->fixing(Date(14,October ,2013),true),
ii->fixing(Date(14,November ,2013),true),
ii->fixing(Date(14,December ,2013),true)
};
for(int i=0;i<12;i++){
if(std::fabs(fixing[i] - seasonalityFixing_1[i]) > eps) {
BOOST_ERROR("Seasonality doesn't work correctly when seasonality factors are set = 1");
}
}
//Testing seasonality correction when seasonality factors are different from 1
//
//0.998687 is the seasonality factor corresponding to June (the base CPI curve month)
//
Rate expectedFixing[] = {
ii->fixing(Date(14,January ,2013),true) * 1.003245/0.998687,
ii->fixing(Date(14,February ,2013),true) * 1.000000/0.998687,
ii->fixing(Date(14,March ,2013),true) * 0.999715/0.998687,
ii->fixing(Date(14,April ,2013),true) * 1.000495/0.998687,
ii->fixing(Date(14,May ,2013),true) * 1.000929/0.998687,
ii->fixing(Date(14,June ,2013),true) * 0.998687/0.998687,
ii->fixing(Date(14,July ,2013),true) * 0.995949/0.998687,
ii->fixing(Date(14,August ,2013),true) * 0.994682/0.998687,
ii->fixing(Date(14,September,2013),true) * 0.995949/0.998687,
ii->fixing(Date(14,October ,2013),true) * 1.000519/0.998687,
ii->fixing(Date(14,November ,2013),true) * 1.003705/0.998687,
ii->fixing(Date(14,December ,2013),true) * 1.004186/0.998687
};
hz->setSeasonality(seasonality_real);
Rate seasonalityFixing_real[] = {
ii->fixing(Date(14,January ,2013),true),
ii->fixing(Date(14,February ,2013),true),
ii->fixing(Date(14,March ,2013),true),
ii->fixing(Date(14,April ,2013),true),
ii->fixing(Date(14,May ,2013),true),
ii->fixing(Date(14,June ,2013),true),
ii->fixing(Date(14,July ,2013),true),
ii->fixing(Date(14,August ,2013),true),
ii->fixing(Date(14,September,2013),true),
ii->fixing(Date(14,October ,2013),true),
ii->fixing(Date(14,November ,2013),true),
ii->fixing(Date(14,December ,2013),true)
};
for(int i=0;i<12;i++){
if(std::fabs(expectedFixing[i] - seasonalityFixing_real[i]) > 0.01) {
BOOST_ERROR("Seasonality doesn't work correctly when considering seasonality factors != 1 "
<< expectedFixing[i] << " vs " << seasonalityFixing_real[i]);
}
}
//Testing Unset function
//
QL_REQUIRE(hz->hasSeasonality(),"[4] incorrectly believes NO seasonality correction");
hz->setSeasonality();
QL_REQUIRE(!hz->hasSeasonality(),"[5] incorrectly believes HAS seasonality correction");
Rate seasonalityFixing_unset[] = {
ii->fixing(Date(14,January ,2013),true),
ii->fixing(Date(14,February ,2013),true),
ii->fixing(Date(14,March ,2013),true),
ii->fixing(Date(14,April ,2013),true),
ii->fixing(Date(14,May ,2013),true),
ii->fixing(Date(14,June ,2013),true),
ii->fixing(Date(14,July ,2013),true),
ii->fixing(Date(14,August ,2013),true),
ii->fixing(Date(14,September,2013),true),
ii->fixing(Date(14,October ,2013),true),
ii->fixing(Date(14,November ,2013),true),
ii->fixing(Date(14,December ,2013),true)
};
for(int i=0;i<12;i++){
if(std::fabs(seasonalityFixing_unset[i] - seasonalityFixing_1[i]) > eps) {
BOOST_ERROR("UnsetSeasonality doesn't work correctly "
<< seasonalityFixing_unset[i] << " vs " << seasonalityFixing_1[i]);
}
}
//==============================================================================
// now do an INTERPOLATED index, i.e. repeat everything on a fake version of
// UKRPI (to save making another term structure)
bool interpYES = true;
boost::shared_ptr<UKRPI> iiUKRPIyes(new UKRPI(interpYES, hz));
for (Size i=0; i<rpiSchedule.size();i++) {
iiUKRPIyes->addFixing(rpiSchedule[i], fixData[i]);
}
boost::shared_ptr<ZeroInflationIndex> iiyes
= boost::dynamic_pointer_cast<ZeroInflationIndex>(iiUKRPIyes);
// now build the zero inflation curve
// same data, bigger lag or it will be a self-contradiction
Period observationLagyes = Period(3,Months);
std::vector<boost::shared_ptr<BootstrapHelper<ZeroInflationTermStructure> > > helpersyes =
makeHelpers<ZeroInflationTermStructure,ZeroCouponInflationSwapHelper,
ZeroInflationIndex>(zcData, LENGTH(zcData), iiyes,
observationLagyes,
calendar, bdc, dc);
boost::shared_ptr<PiecewiseZeroInflationCurve<Linear> > pZITSyes(
new PiecewiseZeroInflationCurve<Linear>(
evaluationDate, calendar, dc, observationLagyes,
frequency, iiyes->interpolated(), baseZeroRate,
Handle<YieldTermStructure>(nominalTS), helpersyes));
pZITSyes->recalculate();
// first check that the zero rates on the curve match the data
// and that the helpers give the correct impled rates
forceLinearInterpolation = false; // still
for (Size i=0; i<LENGTH(zcData); i++) {
BOOST_CHECK_MESSAGE(std::fabs(zcData[i].rate/100.0
- pZITSyes->zeroRate(zcData[i].date, observationLagyes, forceLinearInterpolation)) < eps,
"ZITS INTERPOLATED zeroRate != instrument "
<< pZITSyes->zeroRate(zcData[i].date, observationLagyes, forceLinearInterpolation)
<< " date " << zcData[i].date << " observationLagyes " << observationLagyes
<< " vs " << zcData[i].rate/100.0
<< " interpolation: " << iiyes->interpolated()
<< " forceLinearInterpolation " << forceLinearInterpolation);
BOOST_CHECK_MESSAGE(std::fabs(helpersyes[i]->impliedQuote()
- zcData[i].rate/100.0) < eps,
"ZITS INTERPOLATED implied quote != instrument "
<< helpersyes[i]->impliedQuote()
<< " vs " << zcData[i].rate/100.0);
}
//======================================================================================
// now test the forecasting capability of the index.
hz.linkTo(pZITSyes);
from = hz->baseDate()+1*Months; // to avoid historical linear bit for rest of base month
to = hz->maxDate()-1*Months; // a bit of margin for adjustments
testIndex = MakeSchedule().from(from).to(to)
.withTenor(1*Months)
.withCalendar(UnitedKingdom())
.withConvention(ModifiedFollowing);
// we are testing UKRPI which is FAKE interpolated for testing here
bd = hz->baseDate();
bf = iiyes->fixing(bd);
for (Size i=0; i<testIndex.size();i++) {
Date d = testIndex[i];
Real z = hz->zeroRate(d, Period(0,Days));
Real t = hz->dayCounter().yearFraction(bd, d);
Real calc = bf * pow( 1+z, t);
if (t<=0) calc = iiyes->fixing(d); // still historical
if (std::fabs(calc - iiyes->fixing(d)) > eps)
BOOST_ERROR("ZC INTERPOLATED index does not forecast correctly for date " << d
<< " from base date " << bd
<< " with fixing " << bf
<< ", correct: " << calc
<< ", fix: " << iiyes->fixing(d)
<< ", t " << t
<< ", zero " << z);
}
//===========================================================================================
// Test zero coupon swap
boost::shared_ptr<ZeroInflationIndex> ziiyes = boost::dynamic_pointer_cast<ZeroInflationIndex>(iiyes);
BOOST_REQUIRE_MESSAGE(ziiyes,"dynamic_pointer_cast to ZeroInflationIndex from UKRPI-I failed");
ZeroCouponInflationSwap nzcisyes(ZeroCouponInflationSwap::Payer,
1000000.0,
evaluationDate,
zcData[6].date, // end date = maturity
calendar, bdc, dc, zcData[6].rate/100.0, // fixed rate
ziiyes, observationLagyes);
// N.B. no coupon pricer because it is not a coupon, effect of inflation curve via
// inflation curve attached to the inflation index.
nzcisyes.setPricingEngine(sppe);
// ... and price it, should be zero
BOOST_CHECK_MESSAGE(fabs(nzcisyes.NPV())<0.00001,"ZCIS-I does not reprice to zero "
<< nzcisyes.NPV()
<< evaluationDate << " to " << zcData[6].date << " becoming " << nzcisyes.maturityDate()
<< " rate " << zcData[6].rate
<< " fixed leg " << nzcisyes.legNPV(0)
<< " indexed-predicted inflated leg " << nzcisyes.legNPV(1)
<< " discount " << nominalTS->discount(nzcisyes.maturityDate())
);
}
int main(int, char* []) {
try {
boost::timer timer;
std::cout << std::endl;
/*********************
*** MARKET DATA ***
*********************/
RelinkableHandle<YieldTermStructure> euriborTermStructure;
boost::shared_ptr<IborIndex> euribor3m(
new Euribor3M(euriborTermStructure));
Date todaysDate = Date(23, May, 2006);
Settings::instance().evaluationDate() = todaysDate;
Calendar calendar = euribor3m->fixingCalendar();
Integer fixingDays = euribor3m->fixingDays();
Date settlementDate = calendar.advance(todaysDate, fixingDays, Days);
std::cout << "Today: " << todaysDate.weekday()
<< ", " << todaysDate << std::endl;
std::cout << "Settlement date: " << settlementDate.weekday()
<< ", " << settlementDate << std::endl;
// 3 month term FRA quotes (index refers to monthsToStart)
Rate threeMonthFraQuote[10];
threeMonthFraQuote[1]=0.030;
threeMonthFraQuote[2]=0.031;
threeMonthFraQuote[3]=0.032;
threeMonthFraQuote[6]=0.033;
threeMonthFraQuote[9]=0.034;
/********************
*** 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.
// FRAs
boost::shared_ptr<SimpleQuote> fra1x4Rate(
new SimpleQuote(threeMonthFraQuote[1]));
boost::shared_ptr<SimpleQuote> fra2x5Rate(
new SimpleQuote(threeMonthFraQuote[2]));
boost::shared_ptr<SimpleQuote> fra3x6Rate(
new SimpleQuote(threeMonthFraQuote[3]));
boost::shared_ptr<SimpleQuote> fra6x9Rate(
new SimpleQuote(threeMonthFraQuote[6]));
boost::shared_ptr<SimpleQuote> fra9x12Rate(
new SimpleQuote(threeMonthFraQuote[9]));
RelinkableHandle<Quote> h1x4; h1x4.linkTo(fra1x4Rate);
RelinkableHandle<Quote> h2x5; h2x5.linkTo(fra2x5Rate);
RelinkableHandle<Quote> h3x6; h3x6.linkTo(fra3x6Rate);
RelinkableHandle<Quote> h6x9; h6x9.linkTo(fra6x9Rate);
RelinkableHandle<Quote> h9x12; h9x12.linkTo(fra9x12Rate);
/*********************
*** 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.
DayCounter fraDayCounter = euribor3m->dayCounter();
BusinessDayConvention convention = euribor3m->businessDayConvention();
bool endOfMonth = euribor3m->endOfMonth();
boost::shared_ptr<RateHelper> fra1x4(
new FraRateHelper(h1x4, 1, 4,
fixingDays, calendar, convention,
endOfMonth, fraDayCounter));
boost::shared_ptr<RateHelper> fra2x5(
new FraRateHelper(h2x5, 2, 5,
fixingDays, calendar, convention,
endOfMonth, fraDayCounter));
boost::shared_ptr<RateHelper> fra3x6(
new FraRateHelper(h3x6, 3, 6,
fixingDays, calendar, convention,
endOfMonth, fraDayCounter));
boost::shared_ptr<RateHelper> fra6x9(
new FraRateHelper(h6x9, 6, 9,
fixingDays, calendar, convention,
endOfMonth, fraDayCounter));
boost::shared_ptr<RateHelper> fra9x12(
new FraRateHelper(h9x12, 9, 12,
fixingDays, calendar, convention,
endOfMonth, fraDayCounter));
/*********************
** CURVE BUILDING **
*********************/
// Any DayCounter would be fine.
// ActualActual::ISDA ensures that 30 years is 30.0
DayCounter termStructureDayCounter =
ActualActual(ActualActual::ISDA);
double tolerance = 1.0e-15;
// A FRA curve
std::vector<boost::shared_ptr<RateHelper> > fraInstruments;
fraInstruments.push_back(fra1x4);
fraInstruments.push_back(fra2x5);
fraInstruments.push_back(fra3x6);
fraInstruments.push_back(fra6x9);
fraInstruments.push_back(fra9x12);
boost::shared_ptr<YieldTermStructure> fraTermStructure(
new PiecewiseYieldCurve<Discount,LogLinear>(
settlementDate, fraInstruments,
termStructureDayCounter,
tolerance));
// Term structures used for pricing/discounting
RelinkableHandle<YieldTermStructure> discountingTermStructure;
discountingTermStructure.linkTo(fraTermStructure);
/***********************
*** construct FRA's ***
***********************/
Calendar fraCalendar = euribor3m->fixingCalendar();
BusinessDayConvention fraBusinessDayConvention =
euribor3m->businessDayConvention();
Position::Type fraFwdType = Position::Long;
Real fraNotional = 100.0;
const Integer FraTermMonths = 3;
Integer monthsToStart[] = { 1, 2, 3, 6, 9 };
euriborTermStructure.linkTo(fraTermStructure);
cout << endl;
cout << "Test FRA construction, NPV calculation, and FRA purchase"
<< endl
<< endl;
Size i;
for (i=0; i<LENGTH(monthsToStart); i++) {
Date fraValueDate = fraCalendar.advance(
settlementDate,monthsToStart[i],Months,
fraBusinessDayConvention);
Date fraMaturityDate = fraCalendar.advance(
fraValueDate,FraTermMonths,Months,
fraBusinessDayConvention);
Rate fraStrikeRate = threeMonthFraQuote[monthsToStart[i]];
ForwardRateAgreement myFRA(fraValueDate, fraMaturityDate,
fraFwdType,fraStrikeRate,
fraNotional, euribor3m,
discountingTermStructure);
cout << "3m Term FRA, Months to Start: "
<< monthsToStart[i]
<< endl;
cout << "strike FRA rate: "
<< io::rate(fraStrikeRate)
<< endl;
cout << "FRA 3m forward rate: "
<< myFRA.forwardRate()
<< endl;
cout << "FRA market quote: "
<< io::rate(threeMonthFraQuote[monthsToStart[i]])
<< endl;
cout << "FRA spot value: "
<< myFRA.spotValue()
<< endl;
cout << "FRA forward value: "
<< myFRA.forwardValue()
<< endl;
cout << "FRA implied Yield: "
<< myFRA.impliedYield(myFRA.spotValue(),
myFRA.forwardValue(),
settlementDate,
Simple,
fraDayCounter)
<< endl;
cout << "market Zero Rate: "
<< discountingTermStructure->zeroRate(fraMaturityDate,
fraDayCounter,
Simple)
<< endl;
cout << "FRA NPV [should be zero]: "
<< myFRA.NPV()
<< endl
<< endl;
}
cout << endl << endl;
cout << "Now take a 100 basis-point upward shift in FRA quotes "
<< "and examine NPV"
<< endl
<< endl;
const Real BpsShift = 0.01;
threeMonthFraQuote[1]=0.030+BpsShift;
threeMonthFraQuote[2]=0.031+BpsShift;
threeMonthFraQuote[3]=0.032+BpsShift;
threeMonthFraQuote[6]=0.033+BpsShift;
threeMonthFraQuote[9]=0.034+BpsShift;
fra1x4Rate->setValue(threeMonthFraQuote[1]);
fra2x5Rate->setValue(threeMonthFraQuote[2]);
fra3x6Rate->setValue(threeMonthFraQuote[3]);
fra6x9Rate->setValue(threeMonthFraQuote[6]);
fra9x12Rate->setValue(threeMonthFraQuote[9]);
for (i=0; i<LENGTH(monthsToStart); i++) {
Date fraValueDate = fraCalendar.advance(
settlementDate,monthsToStart[i],Months,
fraBusinessDayConvention);
Date fraMaturityDate = fraCalendar.advance(
fraValueDate,FraTermMonths,Months,
fraBusinessDayConvention);
Rate fraStrikeRate =
threeMonthFraQuote[monthsToStart[i]] - BpsShift;
ForwardRateAgreement myFRA(fraValueDate, fraMaturityDate,
fraFwdType, fraStrikeRate,
fraNotional, euribor3m,
discountingTermStructure);
cout << "3m Term FRA, 100 notional, Months to Start = "
<< monthsToStart[i]
<< endl;
cout << "strike FRA rate: "
<< io::rate(fraStrikeRate)
<< endl;
cout << "FRA 3m forward rate: "
<< myFRA.forwardRate()
<< endl;
cout << "FRA market quote: "
<< io::rate(threeMonthFraQuote[monthsToStart[i]])
<< endl;
cout << "FRA spot value: "
<< myFRA.spotValue()
<< endl;
cout << "FRA forward value: "
<< myFRA.forwardValue()
<< endl;
cout << "FRA implied Yield: "
<< myFRA.impliedYield(myFRA.spotValue(),
myFRA.forwardValue(),
settlementDate,
Simple,
fraDayCounter)
<< endl;
cout << "market Zero Rate: "
<< discountingTermStructure->zeroRate(fraMaturityDate,
fraDayCounter,
Simple)
<< endl;
cout << "FRA NPV [should be positive]: "
<< myFRA.NPV()
<< endl
<< endl;
}
double seconds = timer.elapsed();
Integer hours = int(seconds/3600);
seconds -= hours * 3600;
Integer minutes = int(seconds/60);
seconds -= minutes * 60;
cout << " \nRun completed in ";
if (hours > 0)
cout << hours << " h ";
if (hours > 0 || minutes > 0)
cout << minutes << " m ";
cout << fixed << setprecision(0)
<< seconds << " s\n" << endl;
return 0;
} catch (exception& e) {
cerr << e.what() << endl;
return 1;
} catch (...) {
cerr << "unknown error" << endl;
return 1;
}
}
/*Market Data -> FRA Quote -> FRA rate helper -> Curve Building -> Construct FRA*/
int main(int, char* []) {
try {
boost::timer timer;
std::cout << std::endl;
std::ifstream file("data.csv");
CSVRow data_row;
file >> data_row;
const size_t num_data = data_row.size()/2;
/*********************
*** MARKET DATA ***
*********************/
RelinkableHandle<YieldTermStructure> euriborTermStructure;
boost::shared_ptr<IborIndex> euribor3m(
new Euribor3M(euriborTermStructure));
Date todaysDate = Date(23, May, 2006);
Settings::instance().evaluationDate() = todaysDate;
Calendar calendar = euribor3m->fixingCalendar();
Integer fixingDays = euribor3m->fixingDays();
Date settlementDate = calendar.advance(todaysDate, fixingDays, Days);
std::cout << "Today: " << todaysDate.weekday()
<< ", " << todaysDate << std::endl;
std::cout << "Settlement date: " << settlementDate.weekday()
<< ", " << settlementDate << std::endl;
// 3 month term FRA quotes (index refers to monthsToStart)
vector <stFRAMarketData> vecMarketData;
for(size_t i = 0 ; i < num_data; i++) {
stFRAMarketData element_data;
convertFromString(element_data.iMonthToStart, data_row[i]);
element_data.iTermDuration = 3; //3 month term
convertFromString(element_data.rateFraQuote, data_row[i + num_data]);
vecMarketData.push_back(element_data);
}
/********************
*** 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.
// FRAs
std::vector <boost::shared_ptr<SimpleQuote> > vecFRAQuote;
for(size_t i = 0 ; i < num_data; i++) {
boost::shared_ptr<SimpleQuote> fraRate(new SimpleQuote(vecMarketData[i].rateFraQuote));
vecFRAQuote.push_back(fraRate);
}
std::vector <RelinkableHandle<Quote> > vecQuoteHandle;
for(size_t i = 0 ; i < num_data; i++) {
RelinkableHandle<Quote> hQuote;
hQuote.linkTo(vecFRAQuote[i]);
vecQuoteHandle.push_back(hQuote);
}
/*********************
*** 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.
DayCounter fraDayCounter = euribor3m->dayCounter();
BusinessDayConvention convention = euribor3m->businessDayConvention();
bool endOfMonth = euribor3m->endOfMonth();
std::vector < boost::shared_ptr<RateHelper> > vecRateHelper;
for(size_t i = 0 ; i < num_data; i++) {
boost::shared_ptr<RateHelper> fra_helper(
new FraRateHelper(vecQuoteHandle[i],vecMarketData[i].iMonthToStart,
vecMarketData[i].iMonthToStart + vecMarketData[i].iTermDuration,
fixingDays, calendar, convention,
endOfMonth, fraDayCounter));
vecRateHelper.push_back(fra_helper);
}
/*********************
** CURVE BUILDING **
*********************/
// Any DayCounter would be fine.
// ActualActual::ISDA ensures that 30 years is 30.0
DayCounter termStructureDayCounter =
ActualActual(ActualActual::ISDA);
double tolerance = 1.0e-15;
// A FRA curve
boost::shared_ptr<YieldTermStructure> fraTermStructure(
new PiecewiseYieldCurve<Discount,LogLinear>(
settlementDate, vecRateHelper,
termStructureDayCounter,
tolerance));
// Term structures used for pricing/discounting
RelinkableHandle<YieldTermStructure> discountingTermStructure;
discountingTermStructure.linkTo(fraTermStructure);
/***********************
*** construct FRA's ***
***********************/
Calendar fraCalendar = euribor3m->fixingCalendar();
BusinessDayConvention fraBusinessDayConvention =
euribor3m->businessDayConvention();
Position::Type fraFwdType = Position::Long;
Real fraNotional = 100.0;
//const Integer FraTermMonths = 3;
//Integer monthsToStart[] = { 1, 2, 3, 6, 9 };
euriborTermStructure.linkTo(fraTermStructure);
cout << endl;
cout << "Test FRA construction, NPV calculation, and FRA purchase"
<< endl
<< endl;
Size i;
for (i=0; i < num_data; i++) {
Date fraValueDate = fraCalendar.advance(
settlementDate,vecMarketData[i].iMonthToStart, Months,
fraBusinessDayConvention);
Date fraMaturityDate = fraCalendar.advance(
fraValueDate,vecMarketData[i].iTermDuration,Months,
fraBusinessDayConvention);
Rate fraStrikeRate = vecMarketData[i].rateFraQuote;
ForwardRateAgreement myFRA(fraValueDate, fraMaturityDate,
fraFwdType,fraStrikeRate,
fraNotional, euribor3m,
discountingTermStructure);
cout << vecMarketData[i].iTermDuration<<"m Term FRA, Months to Start: "
<< vecMarketData[i].iMonthToStart
<< endl;
cout << "strike FRA rate: "
<< io::rate(fraStrikeRate)
<< endl;
cout << "FRA 3m forward rate: "
<< myFRA.forwardRate()
<< endl;
cout << "FRA market quote: "
<< io::rate(vecMarketData[i].rateFraQuote)
<< endl;
cout << "FRA spot value: "
<< myFRA.spotValue()
<< endl;
cout << "FRA forward value: "
<< myFRA.forwardValue()
<< endl;
cout << "FRA implied Yield: "
<< myFRA.impliedYield(myFRA.spotValue(),
myFRA.forwardValue(),
settlementDate,
Simple,
fraDayCounter)
<< endl;
cout << "market Zero Rate: "
<< discountingTermStructure->zeroRate(fraMaturityDate,
fraDayCounter,
Simple)
<< endl;
cout << "FRA NPV [should be zero]: "
<< myFRA.NPV()
<< endl
<< endl;
}
cout << endl << endl;
cout << "Now take a 100 basis-point upward shift in FRA quotes "
<< "and examine NPV"
<< endl
<< endl;
const Real BpsShift = 0.01;
for(size_t i = 0; i< num_data; i++ ) {
vecMarketData[i].rateFraQuote += BpsShift;
vecFRAQuote[i]->setValue(vecMarketData[i].rateFraQuote);
}
for (i=0; i<num_data; i++) {
Date fraValueDate = fraCalendar.advance(
settlementDate,vecMarketData[i].iMonthToStart,Months,
fraBusinessDayConvention);
Date fraMaturityDate = fraCalendar.advance(
fraValueDate,vecMarketData[i].iTermDuration,Months,
fraBusinessDayConvention);
Rate fraStrikeRate =
vecMarketData[i].rateFraQuote - BpsShift;
ForwardRateAgreement myFRA(fraValueDate, fraMaturityDate,
fraFwdType, fraStrikeRate,
fraNotional, euribor3m,
discountingTermStructure);
cout << vecMarketData[i].iTermDuration <<"m Term FRA, 100 notional, Months to Start = "
<< vecMarketData[i].iMonthToStart
<< endl;
cout << "strike FRA rate: "
<< io::rate(fraStrikeRate)
<< endl;
cout << "FRA 3m forward rate: "
<< myFRA.forwardRate()
<< endl;
cout << "FRA market quote: "
<< io::rate(vecMarketData[i].rateFraQuote)
<< endl;
cout << "FRA spot value: "
<< myFRA.spotValue()
<< endl;
cout << "FRA forward value: "
<< myFRA.forwardValue()
<< endl;
cout << "FRA implied Yield: "
<< myFRA.impliedYield(myFRA.spotValue(),
myFRA.forwardValue(),
settlementDate,
Simple,
fraDayCounter)
<< endl;
cout << "market Zero Rate: "
<< discountingTermStructure->zeroRate(fraMaturityDate,
fraDayCounter,
Simple)
<< endl;
cout << "FRA NPV [should be positive]: "
<< myFRA.NPV()
<< endl
<< endl;
}
Real seconds = timer.elapsed();
Integer hours = int(seconds/3600);
seconds -= hours * 3600;
Integer minutes = int(seconds/60);
seconds -= minutes * 60;
cout << " \nRun completed in ";
if (hours > 0)
cout << hours << " h ";
if (hours > 0 || minutes > 0)
cout << minutes << " m ";
cout << fixed << setprecision(0)
<< seconds << " s\n" << endl;
return 0;
} catch (exception& e) {
cerr << e.what() << endl;
return 1;
} catch (...) {
cerr << "unknown error" << endl;
return 1;
}
}
int main(int, char* []) {
try {
boost::timer timer;
std::cout << std::endl;
Date repoSettlementDate(14,February,2000);;
Date repoDeliveryDate(15,August,2000);
Rate repoRate = 0.05;
DayCounter repoDayCountConvention = Actual360();
Integer repoSettlementDays = 0;
Compounding repoCompounding = Simple;
Frequency repoCompoundFreq = Annual;
// assume a ten year bond- this is irrelevant
Date bondIssueDate(15,September,1995);
Date bondDatedDate(15,September,1995);
Date bondMaturityDate(15,September,2005);
Real bondCoupon = 0.08;
Frequency bondCouponFrequency = Semiannual;
// unknown what calendar fincad is using
Calendar bondCalendar = NullCalendar();
DayCounter bondDayCountConvention = Thirty360(Thirty360::BondBasis);
// unknown what fincad is using. this may affect accrued calculation
Integer bondSettlementDays = 0;
BusinessDayConvention bondBusinessDayConvention = Unadjusted;
Real bondCleanPrice = 89.97693786;
Real bondRedemption = 100.0;
Real faceAmount = 100.0;
Settings::instance().evaluationDate() = repoSettlementDate;
RelinkableHandle<YieldTermStructure> bondCurve;
bondCurve.linkTo(boost::shared_ptr<YieldTermStructure>(
new FlatForward(repoSettlementDate,
.01, // dummy rate
bondDayCountConvention,
Compounded,
bondCouponFrequency)));
/*
boost::shared_ptr<FixedRateBond> bond(
new FixedRateBond(faceAmount,
bondIssueDate,
bondDatedDate,
bondMaturityDate,
bondSettlementDays,
std::vector<Rate>(1,bondCoupon),
bondCouponFrequency,
bondCalendar,
bondDayCountConvention,
bondBusinessDayConvention,
bondBusinessDayConvention,
bondRedemption,
bondCurve));
*/
Schedule bondSchedule(bondDatedDate, bondMaturityDate,
Period(bondCouponFrequency),
bondCalendar,bondBusinessDayConvention,
bondBusinessDayConvention,
DateGeneration::Backward,false);
boost::shared_ptr<FixedRateBond> bond(
new FixedRateBond(bondSettlementDays,
faceAmount,
bondSchedule,
std::vector<Rate>(1,bondCoupon),
bondDayCountConvention,
bondBusinessDayConvention,
bondRedemption,
bondIssueDate));
bond->setPricingEngine(boost::shared_ptr<PricingEngine>(
new DiscountingBondEngine(bondCurve)));
bondCurve.linkTo(boost::shared_ptr<YieldTermStructure> (
new FlatForward(repoSettlementDate,
bond->yield(bondCleanPrice,
bondDayCountConvention,
Compounded,
bondCouponFrequency),
bondDayCountConvention,
Compounded,
bondCouponFrequency)));
Position::Type fwdType = Position::Long;
double dummyStrike = 91.5745;
RelinkableHandle<YieldTermStructure> repoCurve;
repoCurve.linkTo(boost::shared_ptr<YieldTermStructure> (
new FlatForward(repoSettlementDate,
repoRate,
repoDayCountConvention,
repoCompounding,
repoCompoundFreq)));
FixedRateBondForward bondFwd(repoSettlementDate,
repoDeliveryDate,
fwdType,
dummyStrike,
repoSettlementDays,
repoDayCountConvention,
bondCalendar,
bondBusinessDayConvention,
bond,
repoCurve,
repoCurve);
cout << "Underlying bond clean price: "
<< bond->cleanPrice()
<< endl;
cout << "Underlying bond dirty price: "
<< bond->dirtyPrice()
<< endl;
cout << "Underlying bond accrued at settlement: "
<< bond->accruedAmount(repoSettlementDate)
<< endl;
cout << "Underlying bond accrued at delivery: "
<< bond->accruedAmount(repoDeliveryDate)
<< endl;
cout << "Underlying bond spot income: "
<< bondFwd.spotIncome(repoCurve)
<< endl;
cout << "Underlying bond fwd income: "
<< bondFwd.spotIncome(repoCurve)/
repoCurve->discount(repoDeliveryDate)
<< endl;
cout << "Repo strike: "
<< dummyStrike
<< endl;
cout << "Repo NPV: "
<< bondFwd.NPV()
<< endl;
cout << "Repo clean forward price: "
<< bondFwd.cleanForwardPrice()
<< endl;
cout << "Repo dirty forward price: "
<< bondFwd.forwardPrice()
<< endl;
cout << "Repo implied yield: "
<< bondFwd.impliedYield(bond->dirtyPrice(),
dummyStrike,
repoSettlementDate,
repoCompounding,
repoDayCountConvention)
<< endl;
cout << "Market repo rate: "
<< repoCurve->zeroRate(repoDeliveryDate,
repoDayCountConvention,
repoCompounding,
repoCompoundFreq)
<< endl
<< endl;
cout << "Compare with example given at \n"
<< "http://www.fincad.com/support/developerFunc/mathref/BFWD.htm"
<< endl;
cout << "Clean forward price = 88.2408"
<< endl
<< endl;
cout << "In that example, it is unknown what bond calendar they are\n"
<< "using, as well as settlement Days. For that reason, I have\n"
<< "made the simplest possible assumptions here: NullCalendar\n"
<< "and 0 settlement days."
<< endl;
double seconds = timer.elapsed();
Integer hours = int(seconds/3600);
seconds -= hours * 3600;
Integer minutes = int(seconds/60);
seconds -= minutes * 60;
cout << " \nRun completed in ";
if (hours > 0)
cout << hours << " h ";
if (hours > 0 || minutes > 0)
cout << minutes << " m ";
cout << fixed << setprecision(0)
<< seconds << " s\n" << endl;
return 0;
} catch (exception& e) {
cerr << e.what() << endl;
return 1;
} catch (...) {
cerr << "unknown error" << endl;
return 1;
}
}
