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/*
Copyright (C) 2008 Allen Kuo
Copyright (C) 2014 Wondersys Srl
Copyright (C) 2017 BN Algorithms Ltd
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
<quantlib-dev@lists.sf.net>. The license is also available online at
<http://quantlib.org/license.shtml>.
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.
*/
package examples;
import org.quantlib.CallableFixedRateBond;
import org.quantlib.Date;
import org.quantlib.Period;
import org.quantlib.Settings;
import org.quantlib.DayCounter;
import org.quantlib.ActualActual;
import org.quantlib.Compounding;
import org.quantlib.Frequency;
import org.quantlib.FlatForward;
import org.quantlib.QuoteHandle;
import org.quantlib.Quote;
import org.quantlib.SimpleQuote;
import org.quantlib.YieldTermStructure;
import org.quantlib.YieldTermStructureHandle;
import org.quantlib.InterestRate;
import org.quantlib.Month;
import org.quantlib.Date;
import org.quantlib.CallabilitySchedule;
import org.quantlib.Schedule;
import org.quantlib.NullCalendar;
import org.quantlib.UnitedStates;
import org.quantlib.Calendar;
import org.quantlib.Callability;
import org.quantlib.CallabilityPrice;
import org.quantlib.TimeUnit;
import org.quantlib.BusinessDayConvention;
import org.quantlib.DateGeneration;
import org.quantlib.ShortRateModel;
import org.quantlib.HullWhite;
import org.quantlib.PricingEngine;
import org.quantlib.TreeCallableFixedRateBondEngine;
import org.quantlib.DoubleVector;
public class CallableBonds {
public static YieldTermStructure flatRate(Date today,
Quote forward,
DayCounter dc,
Compounding compounding,
Frequency frequency)
{
return new FlatForward(today,
new QuoteHandle(forward),
dc,
compounding,
frequency);
}
public static void priceCallable(double sigma,
YieldTermStructureHandle termStructure,
CallableFixedRateBond callableBond,
Frequency frequency,
DayCounter bondDayCounter)
{
long maxIterations = 1000;
double accuracy = 1e-8;
long gridIntervals = 40;
double reversionParameter = .03;
ShortRateModel hw0 =
new HullWhite(termStructure,
reversionParameter,
sigma);
PricingEngine engine0 =
new TreeCallableFixedRateBondEngine(hw0,
gridIntervals);
callableBond.setPricingEngine(engine0);
System.out.printf("sigma/vol (%%) = %6.2f \n",
100.*sigma);
System.out.printf("QuantLib price/yld (%%) %10.2f / %10.2f \n",
callableBond.cleanPrice(),
100.0 * callableBond.yield(bondDayCounter,
Compounding.Compounded,
frequency,
accuracy,
maxIterations));
System.out.printf("QuantLib OAS from model clean price (bp) %10.2f \n",
10000.0 * callableBond.OAS(callableBond.cleanPrice(),
termStructure,
bondDayCounter,
Compounding.Compounded,
frequency));
double cp=callableBond.cleanPriceOAS(10*1e-4,
termStructure,
bondDayCounter,
Compounding.Compounded,
frequency);
System.out.printf("QuantLib spreaded clean price with 10bp OAS %f \n",
cp);
System.out.printf("QuantLib OAS from spreaded clean price (bp) %10.2f \n",
10000.0 * callableBond.OAS(cp,
termStructure,
bondDayCounter,
Compounding.Compounded,
frequency));
System.out.printf("QuantLib effectiveDuration / convexity for 10bp OAS %f / %f \n",
callableBond.effectiveDuration(10*1e-4,
termStructure,
bondDayCounter,
Compounding.Compounded,
frequency),
callableBond.effectiveConvexity(10*1e-4,
termStructure,
bondDayCounter,
Compounding.Compounded,
frequency));
}
public static void main(String[] args) throws Exception {
System.out.println("Callable Bonds example:");
Date today = new Date(16, Month.October, 2007);
Settings.instance().setEvaluationDate(today);
double bbCurveRate = 0.055;
DayCounter bbDayCounter =
new ActualActual(ActualActual.Convention.Bond);
InterestRate bbIR =
new InterestRate(bbCurveRate,
bbDayCounter,
Compounding.Compounded,
Frequency.Semiannual);
YieldTermStructureHandle termStructure =
new YieldTermStructureHandle(flatRate(today,
new SimpleQuote(bbIR.rate()),
bbIR.dayCounter(),
bbIR.compounding(),
bbIR.frequency()));
// set up the call schedule
CallabilitySchedule callSchedule =
new CallabilitySchedule();
double callPrice = 100.;
long numberOfCallDates = 24;
Date callDate =
new Date(15, Month.September, 2006);
Calendar nullCalendar = new NullCalendar();
for (long i=0; i< numberOfCallDates; ++i) {
CallabilityPrice myPrice=
new CallabilityPrice(callPrice,
CallabilityPrice.Type.Clean);
callSchedule.add(new Callability(myPrice,
Callability.Call,
callDate));
callDate = nullCalendar.advance(callDate, 3, TimeUnit.Months);
}
// set up the callable bond
Date dated =
new Date(16, Month.September, 2004);
Date issue = dated;
Date maturity = new Date(15, Month.September, 2012);
int settlementDays = 3; // Bloomberg OAS1 settle is Oct 19, 2007
Calendar bondCalendar = new
UnitedStates(UnitedStates.Market.GovernmentBond);
double coupon = .0465;
Frequency frequency = Frequency.Quarterly;
double redemption = 100.0;
double faceAmount = 100.0;
/* The 30/360 day counter Bloomberg uses for this bond cannot
reproduce the US Bond/ISMA (constant) cashflows used in PFC1.
Therefore use ActAct(Bond)
*/
DayCounter bondDayCounter =
new ActualActual(ActualActual.Convention.Bond);
// PFC1 shows no indication dates are being adjusted
// for weekends/holidays for vanilla bonds
BusinessDayConvention accrualConvention = BusinessDayConvention.Unadjusted;
BusinessDayConvention paymentConvention = BusinessDayConvention.Unadjusted;
Schedule sch =
new Schedule(dated,
maturity,
new Period(frequency),
bondCalendar,
accrualConvention,
accrualConvention,
DateGeneration.Rule.Backward,
false);
DoubleVector couponsVector = new DoubleVector();
couponsVector.add(coupon);
CallableFixedRateBond callableBond =
new CallableFixedRateBond(settlementDays,
faceAmount,
sch,
couponsVector,
bondDayCounter,
paymentConvention,
redemption,
issue,
callSchedule);
priceCallable(1e-20,
termStructure,
callableBond,
frequency,
bondDayCounter);
System.out.printf("Bloomberg price/yld (%%) 96.50 / 5.47 \n");
priceCallable(0.01,
termStructure,
callableBond,
frequency,
bondDayCounter);
System.out.printf("Bloomberg price/yld (%%) 95.68 / 5.66 \n");
priceCallable(0.03,
termStructure,
callableBond,
frequency,
bondDayCounter);
System.out.printf("Bloomberg price/yld (%%) 92.34 / 6.49 \n");
priceCallable(0.06,
termStructure,
callableBond,
frequency,
bondDayCounter);
System.out.printf("Bloomberg price/yld (%%) 87.16 / 7.83 \n");
priceCallable(0.12,
termStructure,
callableBond,
frequency,
bondDayCounter);
System.out.printf("Bloomberg price/yld (%%) 77.31 / 10.65 \n");
System.out.println("Done");
}
}
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