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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2007, 2009 Chris Kenyon
Copyright (C) 2009 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 <ql/instruments/zerocouponinflationswap.hpp>
#include <ql/indexes/inflationindex.hpp>
#include <ql/cashflows/simplecashflow.hpp>
#include <ql/cashflows/indexedcashflow.hpp>
namespace QuantLib {
/* Generally inflation indices are available with a lag of 1month
and then observed with a lag of 2-3 months depending whether
they use an interpolated fixing or not. Here, we make the
swap use the interpolation of the index to avoid incompatibilities.
*/
ZeroCouponInflationSwap::ZeroCouponInflationSwap(
Type type,
Real nominal,
const Date& startDate, // start date of contract (only)
const Date& maturity, // this is pre-adjustment!
const Calendar& fixCalendar,
BusinessDayConvention fixConvention,
const DayCounter& dayCounter,
Rate fixedRate,
const boost::shared_ptr<ZeroInflationIndex> &infIndex,
const Period& observationLag,
bool adjustInfObsDates,
Calendar infCalendar,
BusinessDayConvention infConvention)
: Swap(2), type_(type), nominal_(nominal),
startDate_(startDate), maturityDate_(maturity),
fixCalendar_(fixCalendar), fixConvention_(fixConvention),
fixedRate_(fixedRate), infIndex_(infIndex),
observationLag_(observationLag), adjustInfObsDates_(adjustInfObsDates),
infCalendar_(infCalendar), infConvention_(infConvention),
dayCounter_(dayCounter) {
// first check compatibility of index and swap definitions
if (infIndex_->interpolated()) {
Period pShift(infIndex_->frequency());
QL_REQUIRE(observationLag_ - pShift > infIndex_->availabilityLag(),
"inconsistency between swap observation of index " << observationLag_ <<
" index availability " << infIndex_->availabilityLag() <<
" interpolated index period " << pShift <<
" and index availability " << infIndex_->availabilityLag() <<
" need (obsLag-index period) > availLag");
} else {
QL_REQUIRE(infIndex_->availabilityLag() < observationLag_,
"index tries to observe inflation fixings that do not yet exist: "
<< " availability lag " << infIndex_->availabilityLag()
<< " versus obs lag = " << observationLag_);
}
if (infCalendar_==Calendar()) infCalendar_ = fixCalendar_;
if (infConvention_==BusinessDayConvention()) infConvention_ = fixConvention_;
if (adjustInfObsDates_) {
baseDate_ = infCalendar_.adjust(startDate - observationLag_, infConvention_);
obsDate_ = infCalendar_.adjust(maturity - observationLag_, infConvention_);
} else {
baseDate_ = startDate - observationLag_;
obsDate_ = maturity - observationLag_;
}
Date infPayDate = infCalendar_.adjust(maturity, infConvention_);
Date fixedPayDate = fixCalendar_.adjust(maturity, fixConvention_);
// At this point the index may not be able to forecast
// i.e. do not want to force the existence of an inflation
// term structure before allowing users to create instruments.
Real T = inflationYearFraction(infIndex_->frequency(), infIndex_->interpolated(),
dayCounter_, baseDate_, obsDate_);
// N.B. the -1.0 is because swaps only exchange growth, not notionals as well
Real fixedAmount = nominal * ( std::pow(1.0 + fixedRate, T) - 1.0 );
legs_[0].push_back(boost::shared_ptr<CashFlow>(
new SimpleCashFlow(fixedAmount, fixedPayDate)));
bool growthOnly = true;
legs_[1].push_back(boost::shared_ptr<CashFlow>(
new IndexedCashFlow(nominal,infIndex,baseDate_,obsDate_,infPayDate,growthOnly)));
for (Size j=0; j<2; ++j) {
for (Leg::iterator i = legs_[j].begin(); i!= legs_[j].end(); ++i)
registerWith(*i);
}
switch (type_) {
case Payer:
payer_[0] = +1.0;
payer_[1] = -1.0;
break;
case Receiver:
payer_[0] = -1.0;
payer_[1] = +1.0;
break;
default:
QL_FAIL("Unknown zero-inflation-swap type");
}
}
void ZeroCouponInflationSwap::setupArguments(PricingEngine::arguments* args) const {
Swap::setupArguments(args);
// you don't actually need to do anything else because it is so simple
}
void ZeroCouponInflationSwap::arguments::validate() const {
Swap::arguments::validate();
// you don't actually need to do anything else because it is so simple
}
void ZeroCouponInflationSwap::fetchResults(const PricingEngine::results* r) const {
Swap::fetchResults(r);
// you don't actually need to do anything else because it is so simple
}
Real ZeroCouponInflationSwap::fairRate() const {
// What does this mean before or after trade date?
// Always means that NPV is zero for _this_ instrument
// if it was created with _this_ rate
// _knowing_ the time from base to obs (etc).
boost::shared_ptr<IndexedCashFlow> icf =
boost::dynamic_pointer_cast<IndexedCashFlow>(legs_[1].at(0));
QL_REQUIRE(icf,"failed to downcast to IndexedCashFlow in ::fairRate()");
// +1 because the IndexedCashFlow has growthOnly=true
Real growth = icf->amount() / icf->notional() + 1.0;
Real T = inflationYearFraction(infIndex_->frequency(),
infIndex_->interpolated(),
dayCounter_, baseDate_, obsDate_);
return std::pow(growth,1.0/T) - 1.0;
// we cannot use this simple definition because
// it does not work for already-issued instruments
// return infIndex_->zeroInflationTermStructure()->zeroRate(
// maturityDate(), observationLag(), infIndex_->interpolated());
}
Real ZeroCouponInflationSwap::fixedLegNPV() const {
calculate();
QL_REQUIRE(legNPV_[0] != Null<Real>(), "result not available");
return legNPV_[0];
}
Real ZeroCouponInflationSwap::inflationLegNPV() const {
calculate();
QL_REQUIRE(legNPV_[1] != Null<Real>(), "result not available");
return legNPV_[1];
}
const Leg& ZeroCouponInflationSwap::fixedLeg() const {
return legs_[0];
}
const Leg& ZeroCouponInflationSwap::inflationLeg() const {
return legs_[1];
}
}
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