Repo.cpp

This example values a fixed-coupon bond repurchase (repo). The repurchase agreement example is set up to use the repo rate to do all discounting (including the underlying bond income). Forward delivery price is also obtained using this repo rate. All this is done by supplying the FixedCouponBondForward constructor with a flat repo YieldTermStructure.

/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
 
/* a Repo calculation done using the FixedRateBondForward class
   cf. aaBondFwd() repo example at
   http://www.fincad.com/support/developerFunc/mathref/BFWD.htm
 
   This repo is set up to use the repo rate to do all discounting
   (including the underlying bond income). Forward delivery price is
   also obtained using this repo rate. All this is done by supplying
   the FixedRateBondForward constructor with a flat repo
   YieldTermStructure.
*/
 
#include <ql/qldefines.hpp>
#ifdef BOOST_MSVC
#  include <ql/auto_link.hpp>
#endif
#include <ql/instruments/fixedratebondforward.hpp>
#include <ql/pricingengines/bond/discountingbondengine.hpp>
#include <ql/termstructures/yield/flatforward.hpp>
#include <ql/time/schedule.hpp>
#include <ql/time/calendars/nullcalendar.hpp>
#include <ql/time/daycounters/actual360.hpp>
#include <ql/time/daycounters/thirty360.hpp>
 
#include <iostream>
#include <iomanip>
 
using namespace std;
using namespace QuantLib;
 
#if defined(QL_ENABLE_SESSIONS)
namespace QuantLib {
 
    ThreadKey sessionId() { return 0; }
 
}
#endif
 
int main(int, char* []) {
 
    try {
 
        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(ext::shared_ptr<YieldTermStructure>(
                                       new FlatForward(repoSettlementDate,
                                                       .01, // dummy rate
                                                       bondDayCountConvention,
                                                       Compounded,
                                                       bondCouponFrequency)));
 
        /*
        ext::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);
        ext::shared_ptr<FixedRateBond> bond(
                       new FixedRateBond(bondSettlementDays,
                                         faceAmount,
                                         bondSchedule,
                                         std::vector<Rate>(1,bondCoupon),
                                         bondDayCountConvention,
                                         bondBusinessDayConvention,
                                         bondRedemption,
                                         bondIssueDate));
        bond->setPricingEngine(ext::shared_ptr<PricingEngine>(
                                       new DiscountingBondEngine(bondCurve)));
 
        bondCurve.linkTo(ext::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(ext::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;
 
 
        return 0;
 
    } catch (exception& e) {
        cerr << e.what() << endl;
        return 1;
    } catch (...) {
        cerr << "unknown error" << endl;
        return 1;
    }
}