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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2005, 2007 StatPro Italia srl
Copyright (C) 2016 Klaus Spanderen
Copyright (C) 2021, 2022 Ralf Konrad Eckel
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 "preconditions.hpp"
#include "toplevelfixture.hpp"
#include "utilities.hpp"
#include <ql/cashflows/coupon.hpp>
#include <ql/cashflows/iborcoupon.hpp>
#include <ql/indexes/ibor/euribor.hpp>
#include <ql/instruments/makevanillaswap.hpp>
#include <ql/instruments/swaption.hpp>
#include <ql/models/shortrate/onefactormodels/hullwhite.hpp>
#include <ql/models/shortrate/twofactormodels/g2.hpp>
#include <ql/pricingengines/swap/discountingswapengine.hpp>
#include <ql/pricingengines/swaption/fdg2swaptionengine.hpp>
#include <ql/pricingengines/swaption/fdhullwhiteswaptionengine.hpp>
#include <ql/pricingengines/swaption/treeswaptionengine.hpp>
#include <ql/termstructures/yield/flatforward.hpp>
#include <ql/time/daycounters/thirty360.hpp>
#include <ql/time/schedule.hpp>
using namespace QuantLib;
using namespace boost::unit_test_framework;
BOOST_FIXTURE_TEST_SUITE(QuantLibTests, TopLevelFixture)
BOOST_AUTO_TEST_SUITE(BermudanSwaptionTests)
struct CommonVars {
// global data
Date today, settlement;
Calendar calendar;
// underlying swap parameters
Integer startYears, length;
Swap::Type type;
Real nominal;
BusinessDayConvention fixedConvention, floatingConvention;
Frequency fixedFrequency, floatingFrequency;
DayCounter fixedDayCount;
ext::shared_ptr<IborIndex> index;
Natural settlementDays;
RelinkableHandle<YieldTermStructure> termStructure;
// setup
CommonVars() {
startYears = 1;
length = 5;
type = Swap::Payer;
nominal = 1000.0;
settlementDays = 2;
fixedConvention = Unadjusted;
floatingConvention = ModifiedFollowing;
fixedFrequency = Annual;
floatingFrequency = Semiannual;
fixedDayCount = Thirty360(Thirty360::BondBasis);
index = ext::shared_ptr<IborIndex>(new Euribor6M(termStructure));
calendar = index->fixingCalendar();
today = calendar.adjust(Date::todaysDate());
settlement = calendar.advance(today,settlementDays,Days);
}
// utilities
ext::shared_ptr<VanillaSwap> makeSwap(Rate fixedRate) const {
Date start = calendar.advance(settlement, startYears, Years);
Date maturity = calendar.advance(start, length, Years);
Schedule fixedSchedule(start, maturity,
Period(fixedFrequency),
calendar,
fixedConvention,
fixedConvention,
DateGeneration::Forward, false);
Schedule floatSchedule(start, maturity,
Period(floatingFrequency),
calendar,
floatingConvention,
floatingConvention,
DateGeneration::Forward, false);
ext::shared_ptr<VanillaSwap> swap(
new VanillaSwap(type, nominal,
fixedSchedule, fixedRate, fixedDayCount,
floatSchedule, index, 0.0,
index->dayCounter()));
swap->setPricingEngine(ext::shared_ptr<PricingEngine>(
new DiscountingSwapEngine(termStructure)));
return swap;
}
};
BOOST_AUTO_TEST_CASE(testCachedValues) {
BOOST_TEST_MESSAGE(
"Testing Bermudan swaption with HW model against cached values...");
bool usingAtParCoupons = IborCoupon::Settings::instance().usingAtParCoupons();
CommonVars vars;
vars.today = Date(15, February, 2002);
Settings::instance().evaluationDate() = vars.today;
vars.settlement = Date(19, February, 2002);
// flat yield term structure impling 1x5 swap at 5%
vars.termStructure.linkTo(flatRate(vars.settlement,
0.04875825,
Actual365Fixed()));
Rate atmRate = vars.makeSwap(0.0)->fairRate();
ext::shared_ptr<VanillaSwap> itmSwap = vars.makeSwap(0.8*atmRate);
ext::shared_ptr<VanillaSwap> atmSwap = vars.makeSwap(atmRate);
ext::shared_ptr<VanillaSwap> otmSwap = vars.makeSwap(1.2*atmRate);
Real a = 0.048696, sigma = 0.0058904;
ext::shared_ptr<HullWhite> model(new HullWhite(vars.termStructure,
a, sigma));
std::vector<Date> exerciseDates;
const Leg& leg = atmSwap->fixedLeg();
for (const auto& i : leg) {
ext::shared_ptr<Coupon> coupon = ext::dynamic_pointer_cast<Coupon>(i);
exerciseDates.push_back(coupon->accrualStartDate());
}
ext::shared_ptr<Exercise> exercise(new BermudanExercise(exerciseDates));
ext::shared_ptr<PricingEngine> treeEngine(
new TreeSwaptionEngine(model, 50));
ext::shared_ptr<PricingEngine> fdmEngine(
new FdHullWhiteSwaptionEngine(model));
Real itmValue, atmValue, otmValue;
Real itmValueFdm, atmValueFdm, otmValueFdm;
if (!usingAtParCoupons) {
itmValue = 42.2402, atmValue = 12.9032, otmValue = 2.49758;
itmValueFdm = 42.2111, atmValueFdm = 12.8879, otmValueFdm = 2.44443;
} else {
itmValue = 42.2460, atmValue = 12.9069, otmValue = 2.4985;
itmValueFdm = 42.2091, atmValueFdm = 12.8864, otmValueFdm = 2.4437;
}
Real tolerance = 1.0e-4;
Swaption swaption(itmSwap, exercise);
swaption.setPricingEngine(treeEngine);
if (std::fabs(swaption.NPV()-itmValue) > tolerance)
BOOST_ERROR("failed to reproduce cached in-the-money swaption value:\n"
<< "calculated: " << swaption.NPV() << "\n"
<< "expected: " << itmValue);
swaption.setPricingEngine(fdmEngine);
if (std::fabs(swaption.NPV()-itmValueFdm) > tolerance)
BOOST_ERROR("failed to reproduce cached in-the-money swaption value:\n"
<< "calculated: " << swaption.NPV() << "\n"
<< "expected: " << itmValueFdm);
swaption = Swaption(atmSwap, exercise);
swaption.setPricingEngine(treeEngine);
if (std::fabs(swaption.NPV()-atmValue) > tolerance)
BOOST_ERROR("failed to reproduce cached at-the-money swaption value:\n"
<< "calculated: " << swaption.NPV() << "\n"
<< "expected: " << atmValue);
swaption.setPricingEngine(fdmEngine);
if (std::fabs(swaption.NPV()-atmValueFdm) > tolerance)
BOOST_ERROR("failed to reproduce cached at-the-money swaption value:\n"
<< "calculated: " << swaption.NPV() << "\n"
<< "expected: " << atmValueFdm);
swaption = Swaption(otmSwap, exercise);
swaption.setPricingEngine(treeEngine);
if (std::fabs(swaption.NPV()-otmValue) > tolerance)
BOOST_ERROR("failed to reproduce cached out-of-the-money "
<< "swaption value:\n"
<< "calculated: " << swaption.NPV() << "\n"
<< "expected: " << otmValue);
swaption.setPricingEngine(fdmEngine);
if (std::fabs(swaption.NPV()-otmValueFdm) > tolerance)
BOOST_ERROR("failed to reproduce cached out-of-the-money "
<< "swaption value:\n"
<< "calculated: " << swaption.NPV() << "\n"
<< "expected: " << otmValueFdm);
for (auto& exerciseDate : exerciseDates)
exerciseDate = vars.calendar.adjust(exerciseDate - 10);
exercise =
ext::shared_ptr<Exercise>(new BermudanExercise(exerciseDates));
if (!usingAtParCoupons) {
itmValue = 42.1791; atmValue = 12.7699; otmValue = 2.4368;
} else {
itmValue = 42.1849; atmValue = 12.7736; otmValue = 2.4379;
}
swaption = Swaption(itmSwap, exercise);
swaption.setPricingEngine(treeEngine);
if (std::fabs(swaption.NPV()-itmValue) > tolerance)
BOOST_ERROR("failed to reproduce cached in-the-money swaption value:\n"
<< "calculated: " << swaption.NPV() << "\n"
<< "expected: " << itmValue);
swaption = Swaption(atmSwap, exercise);
swaption.setPricingEngine(treeEngine);
if (std::fabs(swaption.NPV()-atmValue) > tolerance)
BOOST_ERROR("failed to reproduce cached at-the-money swaption value:\n"
<< "calculated: " << swaption.NPV() << "\n"
<< "expected: " << atmValue);
swaption = Swaption(otmSwap, exercise);
swaption.setPricingEngine(treeEngine);
if (std::fabs(swaption.NPV()-otmValue) > tolerance)
BOOST_ERROR("failed to reproduce cached out-of-the-money "
<< "swaption value:\n"
<< "calculated: " << swaption.NPV() << "\n"
<< "expected: " << otmValue);
}
BOOST_AUTO_TEST_CASE(testCachedG2Values, *precondition(if_speed(Fast))) {
BOOST_TEST_MESSAGE(
"Testing Bermudan swaption with G2 model against cached values...");
bool usingAtParCoupons = IborCoupon::Settings::instance().usingAtParCoupons();
CommonVars vars;
vars.today = Date(15, September, 2016);
Settings::instance().evaluationDate() = vars.today;
vars.settlement = Date(19, September, 2016);
// flat yield term structure impling 1x5 swap at 5%
vars.termStructure.linkTo(flatRate(vars.settlement,
0.04875825,
Actual365Fixed()));
const Rate atmRate = vars.makeSwap(0.0)->fairRate();
std::vector<ext::shared_ptr<Swaption> > swaptions;
for (Real s=0.5; s<1.51; s+=0.25) {
const ext::shared_ptr<VanillaSwap> swap(vars.makeSwap(s*atmRate));
std::vector<Date> exerciseDates;
for (const auto& i : swap->fixedLeg()) {
exerciseDates.push_back(ext::dynamic_pointer_cast<Coupon>(i)->accrualStartDate());
}
swaptions.push_back(ext::make_shared<Swaption>(swap,
ext::make_shared<BermudanExercise>(exerciseDates)));
}
const Real a=0.1, sigma=0.01, b=0.2, eta=0.013, rho=-0.5;
const ext::shared_ptr<G2> g2Model(ext::make_shared<G2>(
vars.termStructure, a, sigma, b, eta, rho));
const ext::shared_ptr<PricingEngine> fdmEngine(
ext::make_shared<FdG2SwaptionEngine>(g2Model, 50, 75, 75, 0, 1e-3));
const ext::shared_ptr<PricingEngine> treeEngine(
ext::make_shared<TreeSwaptionEngine>(g2Model, 50));
Real expectedFdm[5], expectedTree[5];
if (!usingAtParCoupons) {
Real tmpExpectedFdm[] = { 103.231, 54.6519, 20.0475, 5.26941, 1.07097 };
Real tmpExpectedTree[] = { 103.245, 54.6685, 20.1656, 5.43999, 1.12702 };
std::copy(tmpExpectedFdm, tmpExpectedFdm + 5, expectedFdm);
std::copy(tmpExpectedTree, tmpExpectedTree + 5, expectedTree);
} else {
Real tmpExpectedFdm[] = { 103.227, 54.6502, 20.0469, 5.26924, 1.07093 };
Real tmpExpectedTree[] = { 103.248, 54.6726, 20.1685, 5.44118, 1.12737 };
std::copy(tmpExpectedFdm, tmpExpectedFdm + 5, expectedFdm);
std::copy(tmpExpectedTree, tmpExpectedTree + 5, expectedTree);
}
const Real tol = 0.005;
for (Size i=0; i < swaptions.size(); ++i) {
swaptions[i]->setPricingEngine(fdmEngine);
const Real calculatedFdm = swaptions[i]->NPV();
if (std::fabs(calculatedFdm - expectedFdm[i]) > tol) {
BOOST_ERROR("failed to reproduce cached G2 FDM swaption value:\n"
<< "calculated: " << calculatedFdm << "\n"
<< "expected: " << expectedFdm[i]);
}
swaptions[i]->setPricingEngine(treeEngine);
const Real calculatedTree = swaptions[i]->NPV();
if (std::fabs(calculatedTree - expectedTree[i]) > tol) {
BOOST_ERROR("failed to reproduce cached G2 Tree swaption value:\n"
<< "calculated: " << calculatedTree << "\n"
<< "expected: " << expectedTree[i]);
}
}
}
BOOST_AUTO_TEST_CASE(testTreeEngineTimeSnapping) {
BOOST_TEST_MESSAGE("Testing snap of exercise dates for discretized swaption...");
Date today = Date(8, Jul, 2021);
Settings::instance().evaluationDate() = today;
RelinkableHandle<YieldTermStructure> termStructure;
termStructure.linkTo(ext::make_shared<FlatForward>(today, 0.02, Actual365Fixed()));
auto index = ext::make_shared<Euribor3M>(termStructure);
auto makeBermudanSwaption = [&index](Date callDate) {
auto effectiveDate = Date(15, May, 2025);
ext::shared_ptr<VanillaSwap> swap = MakeVanillaSwap(Period(10, Years), index, 0.05)
.withEffectiveDate(effectiveDate)
.withNominal(10000.00)
.withType(Swap::Type::Payer);
std::vector<Date> exerciseDates{effectiveDate, callDate};
auto bermudanExercise = ext::make_shared<BermudanExercise>(exerciseDates);
auto bermudanSwaption = ext::make_shared<Swaption>(swap, bermudanExercise);
return bermudanSwaption;
};
int intervalOfDaysToTest = 10;
for (int i = -intervalOfDaysToTest; i < intervalOfDaysToTest + 1; i++) {
static auto initialCallDate = Date(15, May, 2030);
static auto calendar = index->fixingCalendar();
auto callDate = initialCallDate + i * Days;
if (calendar.isBusinessDay(callDate)) {
auto bermudanSwaption = makeBermudanSwaption(callDate);
auto model = ext::make_shared<HullWhite>(termStructure);
bermudanSwaption->setPricingEngine(ext::make_shared<FdHullWhiteSwaptionEngine>(model));
auto npvFD = bermudanSwaption->NPV();
constexpr auto timesteps = 14 * 4 * 4;
bermudanSwaption->setPricingEngine(
ext::make_shared<TreeSwaptionEngine>(model, timesteps));
auto npvTree = bermudanSwaption->NPV();
auto npvDiff = npvTree - npvFD;
static auto tolerance = 1.0;
if (std::abs(npvTree - npvFD) > tolerance) {
BOOST_ERROR(std::fixed << std::setprecision(2) << std::setw(5) << "At "
<< io::iso_date(callDate)
<< ": The difference between the npv of the FD and the tree "
"engine is expected to be smaller than "
<< tolerance << " but was " << npvDiff << ". (FD: " << npvFD
<< ", tree: " << npvTree << ")");
}
}
}
}
BOOST_AUTO_TEST_SUITE_END()
BOOST_AUTO_TEST_SUITE_END()
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