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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2021 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/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.
*/
#include "toplevelfixture.hpp"
#include "utilities.hpp"
#include <ql/experimental/termstructures/basisswapratehelpers.hpp>
#include <ql/indexes/ibor/sofr.hpp>
#include <ql/indexes/ibor/usdlibor.hpp>
#include <ql/cashflows/iborcoupon.hpp>
#include <ql/cashflows/overnightindexedcoupon.hpp>
#include <ql/instruments/swap.hpp>
#include <ql/pricingengines/swap/discountingswapengine.hpp>
#include <ql/termstructures/yield/piecewiseyieldcurve.hpp>
#include <ql/time/calendars/unitedstates.hpp>
using namespace QuantLib;
using namespace boost::unit_test_framework;
BOOST_FIXTURE_TEST_SUITE(QuantLibTests, TopLevelFixture)
BOOST_AUTO_TEST_SUITE(BasisSwapRateHelpersTests)
struct BasisSwapQuote {
Integer n;
TimeUnit units;
Spread basis;
};
void testIborIborBootstrap(bool bootstrapBaseCurve) {
std::vector<BasisSwapQuote> quotes = {
{ 1, Years, 0.0010 },
{ 2, Years, 0.0012 },
{ 3, Years, 0.0015 },
{ 5, Years, 0.0015 },
{ 8, Years, 0.0018 },
{ 10, Years, 0.0020 },
{ 15, Years, 0.0021 },
{ 20, Years, 0.0021 },
};
auto settlementDays = 2;
auto calendar = UnitedStates(UnitedStates::GovernmentBond);
auto convention = Following;
auto endOfMonth = false;
Handle<YieldTermStructure> knownForecastCurve(flatRate(0.01, Actual365Fixed()));
Handle<YieldTermStructure> discountCurve(flatRate(0.005, Actual365Fixed()));
ext::shared_ptr<IborIndex> baseIndex, otherIndex;
if (bootstrapBaseCurve) {
baseIndex = ext::make_shared<USDLibor>(3 * Months);
otherIndex = ext::make_shared<USDLibor>(6 * Months, knownForecastCurve);
} else {
baseIndex = ext::make_shared<USDLibor>(3 * Months, knownForecastCurve);
otherIndex = ext::make_shared<USDLibor>(6 * Months);
}
std::vector<ext::shared_ptr<RateHelper>> helpers;
for (auto q : quotes) {
auto h = ext::make_shared<IborIborBasisSwapRateHelper>(
Handle<Quote>(ext::make_shared<SimpleQuote>(q.basis)),
Period(q.n, q.units), settlementDays, calendar, convention, endOfMonth,
baseIndex, otherIndex, discountCurve, bootstrapBaseCurve);
helpers.push_back(h);
}
auto bootstrappedCurve = ext::make_shared<PiecewiseYieldCurve<ZeroYield, Linear>>
(0, calendar, helpers, Actual365Fixed());
Date today = Settings::instance().evaluationDate();
Date spot = calendar.advance(today, settlementDays, Days);
if (bootstrapBaseCurve) {
baseIndex = ext::make_shared<USDLibor>(3 * Months, Handle<YieldTermStructure>(bootstrappedCurve));
otherIndex = ext::make_shared<USDLibor>(6 * Months, knownForecastCurve);
} else {
baseIndex = ext::make_shared<USDLibor>(3 * Months, knownForecastCurve);
otherIndex = ext::make_shared<USDLibor>(6 * Months, Handle<YieldTermStructure>(bootstrappedCurve));
}
for (auto q : quotes) {
// create swaps and check they're fair
Date maturity = calendar.advance(spot, q.n, q.units, convention);
Schedule s1 =
MakeSchedule()
.from(spot).to(maturity)
.withTenor(baseIndex->tenor())
.withCalendar(calendar)
.withConvention(convention)
.withRule(DateGeneration::Forward);
Leg leg1 = IborLeg(s1, baseIndex)
.withSpreads(q.basis)
.withNotionals(100.0);
Schedule s2 =
MakeSchedule()
.from(spot).to(maturity)
.withTenor(otherIndex->tenor())
.withCalendar(calendar)
.withConvention(convention)
.withRule(DateGeneration::Forward);
Leg leg2 = IborLeg(s2, otherIndex)
.withNotionals(100.0);
Swap swap(leg1, leg2);
swap.setPricingEngine(ext::make_shared<DiscountingSwapEngine>(discountCurve));
Real NPV = swap.NPV();
Real tolerance = 1e-8;
if (std::fabs(NPV) > tolerance) {
BOOST_ERROR("Failed to price fair " << q.n << "-year(s) swap:"
<< "\n calculated: " << NPV);
}
}
}
void testOvernightIborBootstrap(bool externalDiscountCurve) {
std::vector<BasisSwapQuote> quotes = {
{ 1, Years, 0.0010 },
{ 2, Years, 0.0012 },
{ 3, Years, 0.0015 },
{ 5, Years, 0.0015 },
{ 8, Years, 0.0018 },
{ 10, Years, 0.0020 },
{ 15, Years, 0.0021 },
{ 20, Years, 0.0021 },
};
auto settlementDays = 2;
auto calendar = UnitedStates(UnitedStates::GovernmentBond);
auto convention = Following;
auto endOfMonth = false;
Handle<YieldTermStructure> knownForecastCurve(flatRate(0.01, Actual365Fixed()));
RelinkableHandle<YieldTermStructure> discountCurve;
if (externalDiscountCurve)
discountCurve.linkTo(flatRate(0.005, Actual365Fixed()));
auto baseIndex = ext::make_shared<Sofr>(knownForecastCurve);
auto otherIndex = ext::make_shared<USDLibor>(6 * Months);
std::vector<ext::shared_ptr<RateHelper>> helpers;
for (auto q : quotes) {
auto h = ext::make_shared<OvernightIborBasisSwapRateHelper>(
Handle<Quote>(ext::make_shared<SimpleQuote>(q.basis)),
Period(q.n, q.units), settlementDays, calendar, convention, endOfMonth,
baseIndex, otherIndex, discountCurve);
helpers.push_back(h);
}
auto bootstrappedCurve = ext::make_shared<PiecewiseYieldCurve<ZeroYield, Linear>>
(0, calendar, helpers, Actual365Fixed());
Date today = Settings::instance().evaluationDate();
Date spot = calendar.advance(today, settlementDays, Days);
otherIndex = ext::make_shared<USDLibor>(6 * Months, Handle<YieldTermStructure>(bootstrappedCurve));
for (auto q : quotes) {
// create swaps and check they're fair
Date maturity = calendar.advance(spot, q.n, q.units, convention);
Schedule s =
MakeSchedule()
.from(spot).to(maturity)
.withTenor(otherIndex->tenor())
.withCalendar(calendar)
.withConvention(convention)
.withRule(DateGeneration::Forward);
Leg leg1 = OvernightLeg(s, baseIndex)
.withSpreads(q.basis)
.withNotionals(100.0);
Leg leg2 = IborLeg(s, otherIndex)
.withNotionals(100.0);
Swap swap(leg1, leg2);
if (externalDiscountCurve) {
swap.setPricingEngine(ext::make_shared<DiscountingSwapEngine>(discountCurve));
} else {
swap.setPricingEngine(ext::make_shared<DiscountingSwapEngine>(
Handle<YieldTermStructure>(bootstrappedCurve)));
}
Real NPV = swap.NPV();
Real tolerance = 1e-8;
if (std::fabs(NPV) > tolerance) {
BOOST_ERROR("Failed to price fair " << q.n << "-year(s) swap:"
<< "\n calculated: " << NPV);
}
}
}
BOOST_AUTO_TEST_CASE(testIborIborBaseCurveBootstrap) {
BOOST_TEST_MESSAGE("Testing IBOR-IBOR basis-swap rate helpers (base curve bootstrap)...");
testIborIborBootstrap(true);
}
BOOST_AUTO_TEST_CASE(testIborIborOtherCurveBootstrap) {
BOOST_TEST_MESSAGE("Testing IBOR-IBOR basis-swap rate helpers (other curve bootstrap)...");
testIborIborBootstrap(false);
}
BOOST_AUTO_TEST_CASE(testOvernightIborBootstrapWithoutDiscountCurve) {
BOOST_TEST_MESSAGE("Testing overnight-IBOR basis-swap rate helpers...");
testOvernightIborBootstrap(false);
}
BOOST_AUTO_TEST_CASE(testOvernightIborBootstrapWithDiscountCurve) {
BOOST_TEST_MESSAGE("Testing overnight-IBOR basis-swap rate helpers with external discount curve...");
testOvernightIborBootstrap(true);
}
BOOST_AUTO_TEST_SUITE_END()
BOOST_AUTO_TEST_SUITE_END()
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