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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2005 StatPro Italia 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
<quantlib-dev@lists.sf.net>. The license is also available online at
<http://quantlib.org/reference/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.
*/
#include "shortratemodels.hpp"
#include "utilities.hpp"
#include <ql/ShortRateModels/OneFactorModels/hullwhite.hpp>
#include <ql/ShortRateModels/CalibrationHelpers/swaptionhelper.hpp>
#include <ql/PricingEngines/Swaption/all.hpp>
#include <ql/Indexes/euribor.hpp>
#include <ql/Indexes/indexmanager.hpp>
#include <ql/DayCounters/all.hpp>
#include <ql/Optimization/simplex.hpp>
#include <ql/TermStructures/discountcurve.hpp>
using namespace QuantLib;
using namespace boost::unit_test_framework;
QL_BEGIN_TEST_LOCALS(ShortRateModelTest)
struct CalibrationData {
Integer start;
Integer length;
Volatility volatility;
};
void teardown() {
Settings::instance().evaluationDate() = Date();
IndexManager::instance().clearHistories();
}
QL_END_TEST_LOCALS(ShortRateModelTest)
void ShortRateModelTest::testCachedHullWhite() {
#if !defined(QL_PATCH_BORLAND)
BOOST_MESSAGE("Testing Hull-White calibration against cached values...");
QL_TEST_BEGIN
Date today(15, February, 2002);
Date settlement(19, February, 2002);
Settings::instance().evaluationDate() = today;
Handle<YieldTermStructure> termStructure;
termStructure.linkTo(flatRate(settlement,0.04875825,
Actual365Fixed()));
boost::shared_ptr<HullWhite> model(new HullWhite(termStructure));
CalibrationData data[] = {{ 1, 5, 0.1148 },
{ 2, 4, 0.1108 },
{ 3, 3, 0.1070 },
{ 4, 2, 0.1021 },
{ 5, 1, 0.1000 }};
boost::shared_ptr<Xibor> index(new Euribor6M(termStructure));
std::vector<boost::shared_ptr<CalibrationHelper> > swaptions;
for (Size i=0; i<LENGTH(data); i++) {
boost::shared_ptr<Quote> vol(new SimpleQuote(data[i].volatility));
boost::shared_ptr<CalibrationHelper> helper(
new SwaptionHelper(Period(data[i].start, Years),
Period(data[i].length, Years),
Handle<Quote>(vol),
index,
Annual, Thirty360(),
Actual360(), termStructure));
helper->setPricingEngine(boost::shared_ptr<PricingEngine>(
new JamshidianSwaptionEngine(model)));
swaptions.push_back(helper);
}
Real lambda = 0.5;
Simplex simplex(lambda, 1e-9);
simplex.setEndCriteria(EndCriteria(10000, 1e-7));
model->calibrate(swaptions, simplex);
#if defined(QL_USE_INDEXED_COUPON)
Real cachedA = 0.0484921, cachedSigma = 0.00591608;
#else
Real cachedA = 0.0458489, cachedSigma = 0.00582708;
#endif
Real tolerance = 1.0e-6;
if (std::fabs(model->params()[0]-cachedA) > tolerance
|| std::fabs(model->params()[1]-cachedSigma) > tolerance) {
BOOST_ERROR("Failed to reproduce cached calibration results:\n"
<< "calculated: a = " << model->params()[0] << ", "
<< "sigma = " << model->params()[1] << "\n"
<< "expected: a = " << cachedA << ", "
<< "sigma = " << cachedSigma);
}
QL_TEST_TEARDOWN
#endif
}
void ShortRateModelTest::testSwaps() {
#if !defined(QL_PATCH_BORLAND)
BOOST_MESSAGE("Testing Hull-White swap pricing against known values...");
QL_TEST_BEGIN
Date today = Settings::instance().evaluationDate();
Calendar calendar = TARGET();
today = calendar.adjust(today);
Settings::instance().evaluationDate() = today;
Date settlement = calendar.advance(today,2,Days);
Date dates[] = {
settlement,
calendar.advance(settlement,1,Weeks),
calendar.advance(settlement,1,Months),
calendar.advance(settlement,3,Months),
calendar.advance(settlement,6,Months),
calendar.advance(settlement,9,Months),
calendar.advance(settlement,1,Years),
calendar.advance(settlement,2,Years),
calendar.advance(settlement,3,Years),
calendar.advance(settlement,5,Years),
calendar.advance(settlement,10,Years),
calendar.advance(settlement,15,Years)
};
DiscountFactor discounts[] = {
1.0,
0.999258,
0.996704,
0.990809,
0.981798,
0.972570,
0.963430,
0.929532,
0.889267,
0.803693,
0.596903,
0.433022
};
Handle<YieldTermStructure> termStructure;
termStructure.linkTo(boost::shared_ptr<YieldTermStructure>(
new DiscountCurve(
std::vector<Date>(dates,dates+LENGTH(dates)),
std::vector<DiscountFactor>(discounts,discounts+LENGTH(discounts)),
Actual365Fixed())));
boost::shared_ptr<HullWhite> model(new HullWhite(termStructure));
Integer start[] = { -3, 0, 3 };
Integer length[] = { 2, 5, 10 };
Rate rates[] = { 0.02, 0.04, 0.06 };
boost::shared_ptr<Xibor> euribor(new Euribor6M(termStructure));
boost::shared_ptr<PricingEngine> engine(
new TreeVanillaSwapEngine(model,120));
#if defined(QL_USE_INDEXED_COUPON)
Real tolerance = 3.0e-3;
#else
Real tolerance = 1.0e-8;
#endif
for (Size i=0; i<LENGTH(start); i++) {
Date startDate = calendar.advance(settlement,start[i],Months);
if (startDate < today) {
Date fixingDate = calendar.advance(startDate,-2,Days);
TimeSeries<Real> pastFixings;
pastFixings[fixingDate] = 0.03;
IndexManager::instance().setHistory(euribor->name(),
pastFixings);
}
for (Size j=0; j<LENGTH(length); j++) {
Date maturity = calendar.advance(startDate,length[i],Years);
Schedule fixedSchedule(calendar,startDate,maturity,
Annual,Unadjusted);
Schedule floatSchedule(calendar,startDate,maturity,
Semiannual,Following);
for (Size k=0; k<LENGTH(rates); k++) {
VanillaSwap swap(true, 1000000.0,
fixedSchedule, rates[k], Thirty360(),
floatSchedule, euribor, 2, 0.0,
Actual360(), termStructure);
Real expected = swap.NPV();
swap.setPricingEngine(engine);
Real calculated = swap.NPV();
Real error = std::fabs((expected-calculated)/expected);
if (error > tolerance) {
BOOST_ERROR("Failed to reproduce swap NPV:"
<< QL_FIXED << std::setprecision(9)
<< "\n calculated: " << calculated
<< "\n expected: " << expected
<< QL_SCIENTIFIC
<< "\n rel. error: " << error);
}
}
}
}
QL_TEST_TEARDOWN
#endif
}
test_suite* ShortRateModelTest::suite() {
test_suite* suite = BOOST_TEST_SUITE("Short-rate model tests");
#if !defined(QL_PATCH_BORLAND)
suite->add(BOOST_TEST_CASE(&ShortRateModelTest::testCachedHullWhite));
suite->add(BOOST_TEST_CASE(&ShortRateModelTest::testSwaps));
#endif
return suite;
}
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