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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2023 Marcin Rybacki
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
<https://www.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/cashflows/equitycashflow.hpp>
#include <ql/cashflows/iborcoupon.hpp>
#include <ql/cashflows/overnightindexedcoupon.hpp>
#include <ql/indexes/equityindex.hpp>
#include <ql/instruments/equitytotalreturnswap.hpp>
#include <utility>
namespace QuantLib {
namespace {
ext::shared_ptr<CashFlow>
createEquityCashFlow(const Schedule& schedule,
const ext::shared_ptr<EquityIndex>& equityIndex,
Real nominal,
const Calendar& paymentCalendar,
BusinessDayConvention paymentConvention,
Natural paymentDelay) {
Date startDate = schedule.startDate();
Date endDate = schedule.endDate();
Calendar cal = paymentCalendar;
if (cal.empty()) {
QL_REQUIRE(!schedule.calendar().empty(), "Calendar in schedule cannot be empty");
cal = schedule.calendar();
}
Date paymentDate =
cal.advance(endDate, paymentDelay, Days, paymentConvention, schedule.endOfMonth());
return ext::make_shared<EquityCashFlow>(nominal, equityIndex, startDate, endDate,
paymentDate);
}
template <typename IndexType, typename LegType>
Leg createInterestLeg(Schedule schedule,
const ext::shared_ptr<IndexType>& interestRateIndex,
Real nominal,
const DayCounter& dayCounter,
Rate margin,
Real gearing,
const Calendar& paymentCalendar,
BusinessDayConvention paymentConvention,
Natural paymentDelay) {
return LegType(std::move(schedule), interestRateIndex)
.withNotionals(nominal)
.withPaymentDayCounter(dayCounter)
.withSpreads(margin)
.withGearings(gearing)
.withPaymentCalendar(paymentCalendar)
.withPaymentAdjustment(paymentConvention)
.withPaymentLag(paymentDelay);
}
}
EquityTotalReturnSwap::EquityTotalReturnSwap(
ext::shared_ptr<EquityIndex> equityIndex,
ext::shared_ptr<InterestRateIndex> interestRateIndex,
Type type,
Real nominal,
Schedule schedule,
DayCounter dayCounter,
Rate margin,
Real gearing,
Calendar paymentCalendar,
BusinessDayConvention paymentConvention,
Natural paymentDelay)
: Swap(2), equityIndex_(std::move(equityIndex)),
interestRateIndex_(std::move(interestRateIndex)), type_(type), nominal_(nominal),
schedule_(std::move(schedule)), dayCounter_(std::move(dayCounter)), margin_(margin),
gearing_(gearing), paymentCalendar_(std::move(paymentCalendar)),
paymentConvention_(paymentConvention), paymentDelay_(paymentDelay) {
QL_REQUIRE(!(nominal_ < 0.0), "Nominal cannot be negative");
legs_[0].push_back(createEquityCashFlow(schedule_, equityIndex_, nominal_, paymentCalendar_,
paymentConvention_, paymentDelay_));
for (auto i = legs_[0].begin(); i < legs_[0].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 equity total return swap type");
}
}
EquityTotalReturnSwap::EquityTotalReturnSwap(Type type,
Real nominal,
Schedule schedule,
ext::shared_ptr<EquityIndex> equityIndex,
const ext::shared_ptr<IborIndex>& interestRateIndex,
DayCounter dayCounter,
Rate margin,
Real gearing,
Calendar paymentCalendar,
BusinessDayConvention paymentConvention,
Natural paymentDelay)
: EquityTotalReturnSwap(std::move(equityIndex),
interestRateIndex,
type,
nominal,
std::move(schedule),
std::move(dayCounter),
margin,
gearing,
std::move(paymentCalendar),
paymentConvention,
paymentDelay) {
legs_[1] = createInterestLeg<IborIndex, IborLeg>(
schedule_, interestRateIndex, nominal_, dayCounter_, margin_, gearing_,
paymentCalendar_, paymentConvention_, paymentDelay_);
for (auto i = legs_[1].begin(); i < legs_[1].end(); ++i)
registerWith(*i);
}
EquityTotalReturnSwap::EquityTotalReturnSwap(Type type,
Real nominal,
Schedule schedule,
ext::shared_ptr<EquityIndex> equityIndex,
const ext::shared_ptr<OvernightIndex>& interestRateIndex,
DayCounter dayCounter,
Rate margin,
Real gearing,
Calendar paymentCalendar,
BusinessDayConvention paymentConvention,
Natural paymentDelay)
: EquityTotalReturnSwap(std::move(equityIndex),
interestRateIndex,
type,
nominal,
std::move(schedule),
std::move(dayCounter),
margin,
gearing,
std::move(paymentCalendar),
paymentConvention,
paymentDelay) {
legs_[1] = createInterestLeg<OvernightIndex, OvernightLeg>(
schedule_, interestRateIndex, nominal_, dayCounter_, margin_, gearing_,
paymentCalendar_, paymentConvention_, paymentDelay_);
for (auto i = legs_[1].begin(); i < legs_[1].end(); ++i)
registerWith(*i);
}
const Leg& EquityTotalReturnSwap::equityLeg() const {
return leg(0);
}
const Leg& EquityTotalReturnSwap::interestRateLeg() const {
return leg(1);
}
Real EquityTotalReturnSwap::equityLegNPV() const {
return legNPV(0);
}
Real EquityTotalReturnSwap::interestRateLegNPV() const {
return legNPV(1);
}
Real EquityTotalReturnSwap::fairMargin() const {
// Knowing that for the fair margin NPV = 0.0, where:
// NPV = NPV Equity Leg + [NPV Floating Leg + margin * BPS / 10000]
// hence,
// fair margin = - [NPV Equity Leg + NPV Floating Leg] / BPS * 10000
const Spread basisPoint = 1.0e-4;
Real interestLegBps = legBPS(1) / basisPoint;
Real exMarginInterestLegNpv = interestRateLegNPV() - margin() * interestLegBps;
return -(equityLegNPV() + exMarginInterestLegNpv) / interestLegBps;
}
}
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