#!/usr/bin/python """ Copyright (C) 2000, 2001, 2002 RiskMap srl This file is part of QuantLib, a free-software/open-source library for financial quantitative analysts and developers - http://quantlib.org/ QuantLib is free software: you can redistribute it and/or modify it under the terms of the QuantLib license. You should have received a copy of the license along with this program; if not, please email ferdinando@ametrano.net The license is also available online at http://quantlib.org/html/license.html This program is distributed in the hope that it will be useful, but WITHOUT ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE. See the license for more details. """ __version__ = "$Revision: 1.1 $" # $Source: /cvsroot/quantlib/QuantLib-Python/QuantLib/test/capfloor.py,v $ from QuantLib import * import unittest class CapFloorTest(unittest.TestCase): def setUp(self): import time gmt = time.gmtime(time.time()) self.today = Date(gmt[2],gmt[1],gmt[0]) self.termStructure = TermStructureHandle() self.nominals = [100.0] self.rollingConvention = 'modifiedFollowing' self.frequency = 2 self.index = Euribor(12/self.frequency,'Months', self.termStructure) self.calendar = self.index.calendar() self.settlementDays = 2 self.fixingDays = 2 self.termStructure.linkTo(FlatForward('EUR',DayCounter('Act/365'), self.today,self.calendar, self.settlementDays,0.05)) self.settlement = self.termStructure.settlementDate() def makeLeg(self,startDate,length): endDate = self.calendar.advance(startDate,length,"years", self.rollingConvention) return FloatingRateCouponVector(self.nominals,startDate,endDate, self.frequency,self.calendar, self.rollingConvention, self.termStructure, self.index, self.fixingDays) def makeCapFloor(self,kind,leg,strike,volatility): return kind(leg,[strike], self.termStructure, self.makeEngine(volatility)) def makeEngine(self,volatility): return BlackCapFloorEngine( BlackModel( MarketElementHandle( SimpleMarketElement(volatility)), self.termStructure)) # check 1 def testStrikeDependency(self): "Testing cap/floor dependency on strike" cases = [ (length,vol,kind) for length in [1, 2, 3, 5, 7, 10, 15, 20] for vol in [0.01, 0.05, 0.10, 0.15, 0.20] for kind in [Cap,Floor] ] startDate = self.termStructure.settlementDate() for (length,vol,kind) in cases: strikes = [0.03, 0.04, 0.05, 0.06, 0.07] values = [] for s in strikes: leg = self.makeLeg(startDate,length) instrument = self.makeCapFloor(kind,leg,s,vol) values.append(instrument.NPV()) if kind == Cap: # NPV must decrease with strike for i in range(1,len(values)): if values[i] > values[i-1]: self.fail(""" NPV is increasing with the strike in a cap: length: %d years volatility: %8.4f value: %8.4f at strike: %8.4f value: %8.4f at strike: %8.4f """ % (length,vol, values[i-1],strikes[i-1]*100, values[i], strikes[i]*100)) else: # NPV must increase with strike for i in range(1,len(values)): if values[i] < values[i-1]: self.fail(""" NPV is decreasing with the strike in a floor: length: %d years volatility: %8.4f value: %8.4f at strike: %8.4f value: %8.4f at strike: %8.4f """ % (length,vol, values[i-1],strikes[i-1]*100, values[i], strikes[i]*100)) # check 2 def testConsistency(self): "Testing consistency between cap, floor and collar" cases = [ (length,capRate,floorRate,vol) for length in [1, 2, 3, 5, 7, 10, 15, 20] for capRate in [0.03, 0.04, 0.05, 0.06, 0.07] for floorRate in [0.03, 0.04, 0.05, 0.06, 0.07] for vol in [0.01, 0.05, 0.10, 0.15, 0.20] ] startDate = self.termStructure.settlementDate() for (length,capRate,floorRate,vol) in cases: leg = self.makeLeg(startDate,length) cap = self.makeCapFloor(Cap,leg,capRate,vol) floor = self.makeCapFloor(Floor,leg,floorRate,vol) collar = Collar(leg,[capRate],[floorRate], self.termStructure, self.makeEngine(vol)) if abs((cap.NPV()-floor.NPV()) - collar.NPV()) > 1.0e-10: self.fail(""" inconsistency between cap, floor and collar: length : %d years volatility : %8.4f cap value : %8.4f at strike: %8.4f floor value : %8.4f at strike: %8.4f collar value: %8.4f """ % (length,vol, cap.NPV(),capRate*100, floor.NPV(),floorRate*100), collar.NPV()) # check 3 def testParity(self): "Testing put/call parity for cap and floor" cases = [ (length,strike,vol) for length in [1, 2, 3, 5, 7, 10, 15, 20] for strike in [0.03, 0.04, 0.05, 0.06, 0.07] for vol in [0.01, 0.05, 0.10, 0.15, 0.20] ] startDate = self.termStructure.settlementDate() for (length,strike,vol) in cases: leg = self.makeLeg(startDate,length) cap = self.makeCapFloor(Cap,leg,strike,vol) floor = self.makeCapFloor(Floor,leg,strike,vol) swap = SimpleSwap(1,startDate,length,"years",self.calendar, self.rollingConvention,self.nominals[0], self.frequency,strike,self.index.isAdjusted(), self.index.dayCounter(),self.frequency, self.index,self.fixingDays,0.0, self.termStructure) if abs((cap.NPV()-floor.NPV()) - swap.NPV()) > 1.0e-10: self.fail(""" put/call parity violated: length : %d years volatility : %8.4f strike : %8.4f cap value : %8.4f floor value: %8.4f swap value : %8.4f """ % (length,vol, strike*100,cap.NPV(), floor.NPV(),swap.NPV())) # check 4 def testCachedValue(self): "Testing cap/floor value against cached values" cachedToday = Date(14,3,2002) self.termStructure.linkTo(FlatForward('EUR',DayCounter('Act/365'), cachedToday,self.calendar, self.settlementDays,0.05)) startDate = self.termStructure.settlementDate() leg = self.makeLeg(startDate,20) cap = self.makeCapFloor(Cap,leg,0.07,0.20) floor = self.makeCapFloor(Floor,leg,0.03,0.20) cachedCapNPV = 6.641800823931 cachedFloorNPV = 2.765308424403 if abs(cap.NPV()-cachedCapNPV) > 1.0e-10: self.fail(""" failed to reproduce cached cap value: calculated: %18.12f expected: %8.4f """ % (cap.NPV(),cachedCapNPV)) if abs(floor.NPV()-cachedFloorNPV) > 1.0e-10: self.fail(""" failed to reproduce cached floor value: calculated: %18.12f expected: %8.4f """ % (floor.NPV(),cachedFloorNPV)) if __name__ == '__main__': import QuantLib print 'testing QuantLib', QuantLib.__version__, QuantLib.QuantLibc.__file__, QuantLib.__file__ import sys suite = unittest.TestSuite() suite.addTest(unittest.makeSuite(CapFloorTest,'test')) if sys.hexversion >= 0x020100f0: unittest.TextTestRunner(verbosity=2).run(suite) else: unittest.TextTestRunner().run(suite) raw_input('press any key to continue')