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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2021 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 "toplevelfixture.hpp"
#include "utilities.hpp"
#include <ql/instruments/zerocouponswap.hpp>
#include <ql/cashflows/multipleresetscoupon.hpp>
#include <ql/pricingengines/swap/discountingswapengine.hpp>
#include <ql/indexes/ibor/euribor.hpp>
#include <ql/time/calendars/target.hpp>
using namespace QuantLib;
using namespace boost::unit_test_framework;
BOOST_FIXTURE_TEST_SUITE(QuantLibTests, TopLevelFixture)
BOOST_AUTO_TEST_SUITE(ZeroCouponSwapTests)
struct CommonVars {
Date today, settlement;
Calendar calendar;
Natural settlementDays, paymentDelay;
DayCounter dayCount;
BusinessDayConvention businessConvention;
Real baseNominal, finalPayment;
ext::shared_ptr<IborIndex> euribor;
RelinkableHandle<YieldTermStructure> euriborHandle;
ext::shared_ptr<PricingEngine> discountEngine;
// utilities
CommonVars() {
settlementDays = 2;
paymentDelay = 1;
calendar = TARGET();
dayCount = Actual365Fixed();
businessConvention = ModifiedFollowing;
baseNominal = 1.0e6;
finalPayment = 1.2e6;
euribor = ext::shared_ptr<IborIndex>(new Euribor6M(euriborHandle));
euribor->addFixing(Date(10, February, 2021), 0.0085);
today = calendar.adjust(Date(15, March, 2021));
Settings::instance().evaluationDate() = today;
settlement = calendar.advance(today, settlementDays, Days);
euriborHandle.linkTo(flatRate(settlement, 0.007, dayCount));
discountEngine =
ext::shared_ptr<PricingEngine>(new DiscountingSwapEngine(euriborHandle));
}
ext::shared_ptr<CashFlow> createMultipleResetsCoupon(const Date& start, const Date& end) const {
Date paymentDate = calendar.advance(end, paymentDelay * Days, businessConvention);
Schedule schedule = MakeSchedule()
.from(start).to(end)
.withTenor(euribor->tenor())
.withCalendar(euribor->fixingCalendar());
auto cpn = ext::make_shared<MultipleResetsCoupon>(
paymentDate, baseNominal, schedule, settlementDays, euribor);
cpn->setPricer(ext::make_shared<CompoundingMultipleResetsPricer>());
return cpn;
}
ext::shared_ptr<ZeroCouponSwap> createZCSwap(Swap::Type type,
const Date& start,
const Date& end,
Real baseNominal,
Real finalPayment) {
auto swap = ext::make_shared<ZeroCouponSwap>(type, baseNominal, start, end, finalPayment,
euribor, calendar, businessConvention,
paymentDelay);
swap->setPricingEngine(discountEngine);
return swap;
}
ext::shared_ptr<ZeroCouponSwap> createZCSwap(Swap::Type type,
const Date& start,
const Date& end,
Real finalPayment) {
return createZCSwap(type, start, end, baseNominal, finalPayment);
}
ext::shared_ptr<ZeroCouponSwap> createZCSwap(Swap::Type type,
const Date& start,
const Date& end) {
return createZCSwap(type, start, end, finalPayment);
}
ext::shared_ptr<ZeroCouponSwap> createZCSwap(const Date& start,
const Date& end,
Rate fixedRate) {
auto swap = ext::make_shared<ZeroCouponSwap>(Swap::Receiver, baseNominal,
start, end, fixedRate, dayCount, euribor,
calendar, businessConvention, paymentDelay);
swap->setPricingEngine(discountEngine);
return swap;
}
};
void checkReplicationOfZeroCouponSwapNPV(const Date& start,
const Date& end,
Swap::Type type = Swap::Receiver) {
CommonVars vars;
const Real tolerance = 1.0e-8;
auto zcSwap = vars.createZCSwap(type, start, end);
Real actualNPV = zcSwap->NPV();
Real actualFixedLegNPV = zcSwap->fixedLegNPV();
Real actualFloatLegNPV = zcSwap->floatingLegNPV();
Date paymentDate =
vars.calendar.advance(end, vars.paymentDelay * Days, vars.businessConvention);
Real discountAtPayment =
paymentDate < vars.settlement ? 0.0 : vars.euriborHandle->discount(paymentDate);
Real expectedFixedLegNPV = -type * discountAtPayment * vars.finalPayment;
auto subPeriodCpn = vars.createMultipleResetsCoupon(start, end);
Real expectedFloatLegNPV =
paymentDate < vars.settlement ? 0.0 : Real(Integer(type) * discountAtPayment * subPeriodCpn->amount());
Real expectedNPV = expectedFloatLegNPV + expectedFixedLegNPV;
if ((std::fabs(actualNPV - expectedNPV) > tolerance) ||
(std::fabs(actualFixedLegNPV - expectedFixedLegNPV) > tolerance) ||
(std::fabs(actualFloatLegNPV - expectedFloatLegNPV) > tolerance))
BOOST_ERROR("unable to replicate NPVs of zero coupon swap and its legs\n"
<< " actual NPV: " << actualNPV << "\n"
<< " expected NPV: " << expectedNPV << "\n"
<< " actual fixed leg NPV: " << actualFixedLegNPV << "\n"
<< " expected fixed leg NPV: " << expectedFixedLegNPV << "\n"
<< " actual float leg NPV: " << actualFloatLegNPV << "\n"
<< " expected float leg NPV: " << expectedFloatLegNPV << "\n"
<< " start: " << start << "\n"
<< " end: " << end << "\n"
<< " type: " << type << "\n");
}
void checkFairFixedPayment(const Date& start,
const Date& end,
Swap::Type type) {
CommonVars vars;
const Real tolerance = 1.0e-8;
auto zcSwap = vars.createZCSwap(type, start, end);
Real fairFixedPayment = zcSwap->fairFixedPayment();
auto parZCSwap = vars.createZCSwap(type, start, end, fairFixedPayment);
Real parZCSwapNPV = parZCSwap->NPV();
if ((std::fabs(parZCSwapNPV) > tolerance))
BOOST_ERROR("unable to replicate fair fixed payment\n"
<< " actual NPV: " << parZCSwapNPV << "\n"
<< " expected NPV: 0.0\n"
<< " fair fixed payment: " << fairFixedPayment << "\n"
<< " start: " << start << "\n"
<< " end: " << end << "\n"
<< " type: " << type << "\n");
}
void checkFairFixedRate(const Date& start, const Date& end, Swap::Type type) {
CommonVars vars;
const Real tolerance = 1.0e-8;
auto zcSwap = vars.createZCSwap(type, start, end);
Rate fairFixedRate = zcSwap->fairFixedRate(vars.dayCount);
auto parZCSwap = vars.createZCSwap(start, end, fairFixedRate);
Real parZCSwapNPV = parZCSwap->NPV();
if ((std::fabs(parZCSwapNPV) > tolerance))
BOOST_ERROR("unable to replicate fair fixed rate\n"
<< " actual NPV: " << parZCSwapNPV << "\n"
<< " expected NPV: 0.0\n"
<< " fair fixed rate: " << fairFixedRate << "\n"
<< " start: " << start << "\n"
<< " end: " << end << "\n"
<< " type: " << type << "\n");
}
BOOST_AUTO_TEST_CASE(testInstrumentValuation) {
BOOST_TEST_MESSAGE("Testing zero coupon swap valuation...");
// Ongoing instrument
checkReplicationOfZeroCouponSwapNPV(Date(12, February, 2021), Date(12, February, 2041),
Swap::Receiver);
// Forward starting instrument
checkReplicationOfZeroCouponSwapNPV(Date(15, April, 2021), Date(12, February, 2041),
Swap::Payer);
// Expired instrument
checkReplicationOfZeroCouponSwapNPV(Date(12, February, 2000), Date(12, February, 2020));
}
BOOST_AUTO_TEST_CASE(testFairFixedPayment) {
BOOST_TEST_MESSAGE("Testing fair fixed payment...");
// Ongoing instrument
checkFairFixedPayment(Date(12, February, 2021), Date(12, February, 2041),
Swap::Receiver);
// Spot starting instrument
checkFairFixedPayment(Date(17, March, 2021), Date(12, February, 2041),
Swap::Payer);
}
BOOST_AUTO_TEST_CASE(testFairFixedRate) {
BOOST_TEST_MESSAGE("Testing fair fixed rate...");
// Ongoing instrument
checkFairFixedRate(Date(12, February, 2021), Date(12, February, 2041),
Swap::Receiver);
// Spot starting instrument
checkFairFixedRate(Date(17, March, 2021), Date(12, February, 2041), Swap::Payer);
}
BOOST_AUTO_TEST_CASE(testFixedPaymentFromRate) {
BOOST_TEST_MESSAGE("Testing fixed payment calculation from rate...");
CommonVars vars;
const Real tolerance = 1.0e-8;
const Rate fixedRate = 0.01;
Date start(12, February, 2021);
Date end(12, February, 2041);
auto zcSwap = vars.createZCSwap(start, end, fixedRate);
Real actualFxdPmt = zcSwap->fixedPayment();
Time T = vars.dayCount.yearFraction(start, end);
Real expectedFxdPmt = zcSwap->baseNominal() * (std::pow(1.0 + fixedRate, T) - 1.0);
if ((std::fabs(actualFxdPmt - expectedFxdPmt) > tolerance))
BOOST_ERROR("unable to replicate fixed payment from rate\n"
<< " actual fixed payment: " << actualFxdPmt << "\n"
<< " expected fixed payment: " << expectedFxdPmt << "\n"
<< " start: " << start << "\n"
<< " end: " << end << "\n");
}
BOOST_AUTO_TEST_CASE(testArgumentsValidation) {
BOOST_TEST_MESSAGE("Testing arguments validation...");
CommonVars vars;
Date start(12, February, 2021);
Date end(12, February, 2041);
// Negative base nominal
BOOST_CHECK_THROW(vars.createZCSwap(Swap::Payer, start, end, -1.0e6, 1.0e6),
Error);
// Start date after end date
BOOST_CHECK_THROW(vars.createZCSwap(end, start, 0.01), Error);
}
BOOST_AUTO_TEST_CASE(testExpectedCashFlowsInLegs) {
BOOST_TEST_MESSAGE("Testing expected cash flows in legs...");
CommonVars vars;
const Real tolerance = 1.0e-8;
Date start(12, February, 2021);
Date end(12, February, 2041);
auto zcSwap = vars.createZCSwap(start, end, 0.01);
auto fixedCashFlow = zcSwap->fixedLeg()[0];
auto floatingCashFlow = zcSwap->floatingLeg()[0];
Date paymentDate =
vars.calendar.advance(end, vars.paymentDelay * Days, vars.businessConvention);
auto subPeriodCpn = vars.createMultipleResetsCoupon(start, end);
if ((std::fabs(fixedCashFlow->amount() - zcSwap->fixedPayment()) > tolerance) ||
(fixedCashFlow->date() != paymentDate))
BOOST_ERROR("unable to replicate fixed leg\n"
<< " actual amount: " << fixedCashFlow->amount() << "\n"
<< " expected amount: " << zcSwap->fixedPayment() << "\n"
<< " actual payment date: " << fixedCashFlow->date() << "\n"
<< " expected payment date: " << paymentDate << "\n");
if ((std::fabs(floatingCashFlow->amount() - subPeriodCpn->amount()) > tolerance) ||
(floatingCashFlow->date() != paymentDate))
BOOST_ERROR("unable to replicate floating leg\n"
<< " actual amount: " << floatingCashFlow->amount() << "\n"
<< " expected amount: " << subPeriodCpn->amount() << "\n"
<< " actual payment date: " << floatingCashFlow->date() << "\n"
<< " expected payment date: " << paymentDate << "\n");
}
BOOST_AUTO_TEST_SUITE_END()
BOOST_AUTO_TEST_SUITE_END()
|
