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#!/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')
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