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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2003, 2004 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 "swap.hpp"
#include "utilities.hpp"
#include <ql/Instruments/vanillaswap.hpp>
#include <ql/TermStructures/flatforward.hpp>
#include <ql/Calendars/nullcalendar.hpp>
#include <ql/DayCounters/thirty360.hpp>
#include <ql/DayCounters/actual365fixed.hpp>
#include <ql/DayCounters/simpledaycounter.hpp>
#include <ql/Indexes/euribor.hpp>
#include <ql/CashFlows/inarrearindexedcoupon.hpp>
#include <ql/CashFlows/cashflowvectors.hpp>
#include <ql/CashFlows/indexedcashflowvectors.hpp>
#include <ql/Volatilities/capletconstantvol.hpp>
#include <ql/Utilities/dataformatters.hpp>
using namespace QuantLib;
using namespace boost::unit_test_framework;
QL_BEGIN_TEST_LOCALS(SwapTest)
// global data
Date today_, settlement_;
bool payFixed_;
Real nominal_;
Calendar calendar_;
BusinessDayConvention fixedConvention_, floatingConvention_;
Frequency fixedFrequency_, floatingFrequency_;
DayCounter fixedDayCount_;
boost::shared_ptr<Xibor> index_;
Integer settlementDays_, fixingDays_;
Handle<YieldTermStructure> termStructure_;
// utilities
boost::shared_ptr<VanillaSwap> makeSwap(Integer length, Rate fixedRate,
Spread floatingSpread) {
Date maturity = calendar_.advance(settlement_,length,Years,
floatingConvention_);
Schedule fixedSchedule(calendar_,settlement_,maturity,
fixedFrequency_,fixedConvention_);
Schedule floatSchedule(calendar_,settlement_,maturity,
floatingFrequency_,floatingConvention_);
return boost::shared_ptr<VanillaSwap>(
new VanillaSwap(payFixed_,nominal_,
fixedSchedule,fixedRate,fixedDayCount_,
floatSchedule,index_,fixingDays_,floatingSpread,
index_->dayCounter(),termStructure_));
}
void setup() {
payFixed_ = true;
settlementDays_ = 2;
fixingDays_ = 2;
nominal_ = 100.0;
fixedConvention_ = Unadjusted;
floatingConvention_ = ModifiedFollowing;
fixedFrequency_ = Annual;
floatingFrequency_ = Semiannual;
fixedDayCount_ = Thirty360();
index_ = boost::shared_ptr<Xibor>(new Euribor(Period(12/floatingFrequency_,
Months),
termStructure_));
calendar_ = index_->calendar();
today_ = calendar_.adjust(Date::todaysDate());
Settings::instance().evaluationDate() = today_;
settlement_ = calendar_.advance(today_,settlementDays_,Days);
termStructure_.linkTo(flatRate(settlement_,0.05,Actual365Fixed()));
}
void teardown() {
Settings::instance().evaluationDate() = Date();
}
QL_END_TEST_LOCALS(SwapTest)
void SwapTest::testFairRate() {
BOOST_MESSAGE("Testing simple swap calculation of fair fixed rate...");
QL_TEST_BEGIN
QL_TEST_SETUP
Integer lengths[] = { 1, 2, 5, 10, 20 };
Spread spreads[] = { -0.001, -0.01, 0.0, 0.01, 0.001 };
for (Size i=0; i<LENGTH(lengths); i++) {
for (Size j=0; j<LENGTH(spreads); j++) {
boost::shared_ptr<VanillaSwap> swap =
makeSwap(lengths[i],0.0,spreads[j]);
swap = makeSwap(lengths[i],swap->fairRate(),spreads[j]);
if (std::fabs(swap->NPV()) > 1.0e-10) {
BOOST_ERROR("recalculating with implied rate:\n"
<< std::setprecision(2)
<< " length: " << lengths[i] << " years\n"
<< " floating spread: "
<< io::rate(spreads[j]) << "\n"
<< " swap value: " << swap->NPV());
}
}
}
QL_TEST_TEARDOWN
}
void SwapTest::testFairSpread() {
BOOST_MESSAGE("Testing simple swap calculation of "
"fair floating spread...");
QL_TEST_BEGIN
QL_TEST_SETUP
Integer lengths[] = { 1, 2, 5, 10, 20 };
Rate rates[] = { 0.04, 0.05, 0.06, 0.07 };
for (Size i=0; i<LENGTH(lengths); i++) {
for (Size j=0; j<LENGTH(rates); j++) {
boost::shared_ptr<VanillaSwap> swap =
makeSwap(lengths[i],rates[j],0.0);
swap = makeSwap(lengths[i],rates[j],swap->fairSpread());
if (std::fabs(swap->NPV()) > 1.0e-10) {
BOOST_ERROR("recalculating with implied spread:\n"
<< std::setprecision(2)
<< " length: " << lengths[i] << " years\n"
<< " fixed rate: " << io::rate(rates[j]) << "\n"
<< " swap value: " << swap->NPV());
}
}
}
QL_TEST_TEARDOWN
}
void SwapTest::testRateDependency() {
BOOST_MESSAGE("Testing simple swap dependency on fixed rate...");
QL_TEST_BEGIN
QL_TEST_SETUP
Integer lengths[] = { 1, 2, 5, 10, 20 };
Spread spreads[] = { -0.001, -0.01, 0.0, 0.01, 0.001 };
Rate rates[] = { 0.03, 0.04, 0.05, 0.06, 0.07 };
for (Size i=0; i<LENGTH(lengths); i++) {
for (Size j=0; j<LENGTH(spreads); j++) {
// store the results for different rates...
std::vector<Real> swap_values;
for (Size k=0; k<LENGTH(rates); k++) {
boost::shared_ptr<VanillaSwap> swap =
makeSwap(lengths[i],rates[k],spreads[j]);
swap_values.push_back(swap->NPV());
}
// and check that they go the right way
std::vector<Real>::iterator it =
std::adjacent_find(swap_values.begin(),swap_values.end(),
std::less<Real>());
if (it != swap_values.end()) {
Size n = it - swap_values.begin();
BOOST_ERROR(
"NPV is increasing with the fixed rate in a swap: \n"
<< " length: " << lengths[i] << " years\n"
<< " value: " << swap_values[n]
<< " paying fixed rate: " << io::rate(rates[n]) << "\n"
<< " value: " << swap_values[n+1]
<< " paying fixed rate: " << io::rate(rates[n+1]));
}
}
}
QL_TEST_TEARDOWN
}
void SwapTest::testSpreadDependency() {
BOOST_MESSAGE("Testing simple swap dependency on floating spread...");
QL_TEST_BEGIN
QL_TEST_SETUP
Integer lengths[] = { 1, 2, 5, 10, 20 };
Rate rates[] = { 0.04, 0.05, 0.06, 0.07 };
Spread spreads[] = { -0.01, -0.002, -0.001, 0.0, 0.001, 0.002, 0.01 };
for (Size i=0; i<LENGTH(lengths); i++) {
for (Size j=0; j<LENGTH(rates); j++) {
// store the results for different spreads...
std::vector<Real> swap_values;
for (Size k=0; k<LENGTH(spreads); k++) {
boost::shared_ptr<VanillaSwap> swap =
makeSwap(lengths[i],rates[j],spreads[k]);
swap_values.push_back(swap->NPV());
}
// and check that they go the right way
std::vector<Real>::iterator it =
std::adjacent_find(swap_values.begin(),swap_values.end(),
std::greater<Real>());
if (it != swap_values.end()) {
Size n = it - swap_values.begin();
BOOST_ERROR(
"NPV is decreasing with the floating spread in a swap: \n"
<< " length: " << lengths[i] << " years\n"
<< " value: " << swap_values[n]
<< " receiving spread: " << io::rate(spreads[n]) << "\n"
<< " value: " << swap_values[n+1]
<< " receiving spread: " << io::rate(spreads[n+1]));
}
}
}
QL_TEST_TEARDOWN
}
void SwapTest::testInArrears() {
BOOST_MESSAGE("Testing in-arrears swap calculation...");
QL_TEST_BEGIN
QL_TEST_SETUP
/* See Hull, 4th ed., page 550
Note: the calculation in the book is wrong (work out the
adjustment and you'll get 0.05 + 0.000115 T1)
*/
Date maturity = today_ + 5*Years;
Calendar calendar = NullCalendar();
Schedule schedule(calendar, today_, maturity, Annual, Following);
DayCounter dayCounter = SimpleDayCounter();
std::vector<Real> nominals(1, 100000000.0);
boost::shared_ptr<Xibor> index(new Xibor("dummy", 1*Years, 0,
EURCurrency(), calendar,
Following, dayCounter,
termStructure_));
Rate oneYear = 0.05;
Rate r = std::log(1.0+oneYear);
termStructure_.linkTo(flatRate(today_,r,dayCounter));
std::vector<Rate> coupons(1, oneYear);
std::vector<boost::shared_ptr<CashFlow> > fixedLeg =
FixedRateCouponVector(schedule, Following, nominals,
coupons, dayCounter);
std::vector<Real> gearings;
std::vector<Rate> spreads;
Integer fixingDays = 0;
std::vector<boost::shared_ptr<CashFlow> > floatingLeg =
IndexedCouponVector<InArrearIndexedCoupon>(schedule, Following,
nominals,
fixingDays, index,
gearings, spreads,
dayCounter);
Swap swap(termStructure_,floatingLeg,fixedLeg);
if (std::fabs(swap.NPV()) > 1.0e-4)
BOOST_ERROR("While setting up test:\n"
<< " expected swap NPV: 0.0\n"
<< " calculated: " << swap.NPV());
Volatility capletVolatility = 0.22;
Handle<CapletVolatilityStructure> vol(
boost::shared_ptr<CapletVolatilityStructure>(
new CapletConstantVolatility(today_,capletVolatility,
dayCounter)));
for (Size i=0; i<floatingLeg.size(); i++) {
boost::dynamic_pointer_cast<InArrearIndexedCoupon>(floatingLeg[i])
->setCapletVolatility(vol);
}
Decimal storedValue = -144813.0;
Real tolerance = 1.0;
if (std::fabs(swap.NPV()-storedValue) > tolerance)
BOOST_ERROR("Wrong NPV calculation:\n"
<< " expected: " << storedValue << "\n"
<< " calculated: " << swap.NPV());
QL_TEST_TEARDOWN
}
void SwapTest::testCachedValue() {
BOOST_MESSAGE("Testing simple swap calculation against cached value...");
QL_TEST_BEGIN
QL_TEST_SETUP
today_ = Date(17,June,2002);
Settings::instance().evaluationDate() = today_;
settlement_ = calendar_.advance(today_,settlementDays_,Days);
termStructure_.linkTo(flatRate(settlement_,0.05,Actual365Fixed()));
boost::shared_ptr<VanillaSwap> swap = makeSwap(10, 0.06, 0.001);
#ifndef QL_USE_INDEXED_COUPON
Real cachedNPV = -5.872863313209;
#else
Real cachedNPV = -5.872342992212;
#endif
if (std::fabs(swap->NPV()-cachedNPV) > 1.0e-11)
BOOST_ERROR("failed to reproduce cached swap value:\n"
<< QL_FIXED << std::setprecision(12)
<< " calculated: " << swap->NPV() << "\n"
<< " expected: " << cachedNPV);
QL_TEST_TEARDOWN
}
test_suite* SwapTest::suite() {
test_suite* suite = BOOST_TEST_SUITE("Swap tests");
suite->add(BOOST_TEST_CASE(&SwapTest::testFairRate));
suite->add(BOOST_TEST_CASE(&SwapTest::testFairSpread));
suite->add(BOOST_TEST_CASE(&SwapTest::testRateDependency));
suite->add(BOOST_TEST_CASE(&SwapTest::testSpreadDependency));
suite->add(BOOST_TEST_CASE(&SwapTest::testInArrears));
suite->add(BOOST_TEST_CASE(&SwapTest::testCachedValue));
return suite;
}
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