Java tutorial
/** * Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies * * Please see distribution for license. */ package com.opengamma.analytics.financial.interestrate.future.method; import static org.testng.AssertJUnit.assertEquals; import com.opengamma.analytics.financial.instrument.bond.BondFixedSecurityDefinition; import com.opengamma.analytics.financial.interestrate.InstrumentDerivative; import com.opengamma.analytics.financial.interestrate.InterestRateCurveSensitivity; import com.opengamma.analytics.financial.interestrate.PresentValueCalculator; import com.opengamma.analytics.financial.interestrate.TestsDataSetsSABR; import com.opengamma.analytics.financial.interestrate.YieldCurveBundle; import com.opengamma.analytics.financial.interestrate.bond.definition.BondFixedSecurity; import com.opengamma.analytics.financial.interestrate.bond.method.BondSecurityDiscountingMethod; import com.opengamma.analytics.financial.interestrate.future.calculator.PresentValueFromFuturePriceCalculator; import com.opengamma.analytics.financial.interestrate.future.calculator.PriceCurveSensitivityDiscountingCalculator; import com.opengamma.analytics.financial.interestrate.future.calculator.PriceFromCurvesDiscountingCalculator; import com.opengamma.analytics.financial.interestrate.future.derivative.BondFuture; import com.opengamma.analytics.financial.interestrate.future.method.BondFutureDiscountingMethod; import com.opengamma.analytics.financial.schedule.ScheduleCalculator; import com.opengamma.financial.convention.businessday.BusinessDayConvention; import com.opengamma.financial.convention.businessday.BusinessDayConventionFactory; import com.opengamma.financial.convention.calendar.Calendar; import com.opengamma.financial.convention.calendar.MondayToFridayCalendar; import com.opengamma.financial.convention.daycount.DayCount; import com.opengamma.financial.convention.daycount.DayCountFactory; import com.opengamma.financial.convention.yield.YieldConvention; import com.opengamma.financial.convention.yield.YieldConventionFactory; import com.opengamma.util.money.Currency; import com.opengamma.util.money.CurrencyAmount; import com.opengamma.util.time.DateUtils; import javax.time.calendar.Period; import javax.time.calendar.ZonedDateTime; import org.apache.commons.math.stat.descriptive.rank.Min; import org.testng.annotations.Test; /** * Tests related to the bond future figures computed by discounting. */ public class BondFutureSecurityDiscountingMethodTest { // 5-Year U.S. Treasury Note Futures: FVU1 private static final Currency CUR = Currency.USD; private static final Period PAYMENT_TENOR = Period.ofMonths(6); private static final Calendar CALENDAR = new MondayToFridayCalendar("A"); private static final DayCount DAY_COUNT = DayCountFactory.INSTANCE.getDayCount("Actual/Actual ICMA"); private static final BusinessDayConvention BUSINESS_DAY = BusinessDayConventionFactory.INSTANCE .getBusinessDayConvention("Following"); private static final boolean IS_EOM = false; private static final int SETTLEMENT_DAYS = 1; private static final YieldConvention YIELD_CONVENTION = YieldConventionFactory.INSTANCE .getYieldConvention("STREET CONVENTION"); private static final int NB_BOND = 7; private static final Period[] BOND_TENOR = new Period[] { Period.ofYears(5), Period.ofYears(5), Period.ofYears(5), Period.ofYears(8), Period.ofYears(5), Period.ofYears(5), Period.ofYears(5) }; private static final ZonedDateTime[] START_ACCRUAL_DATE = new ZonedDateTime[] { DateUtils.getUTCDate(2010, 11, 30), DateUtils.getUTCDate(2010, 12, 31), DateUtils.getUTCDate(2011, 1, 31), DateUtils.getUTCDate(2008, 2, 29), DateUtils.getUTCDate(2011, 3, 31), DateUtils.getUTCDate(2011, 4, 30), DateUtils.getUTCDate(2011, 5, 31) }; private static final double[] RATE = new double[] { 0.01375, 0.02125, 0.0200, 0.02125, 0.0225, 0.0200, 0.0175 }; private static final double[] CONVERSION_FACTOR = new double[] { .8317, .8565, .8493, .8516, .8540, .8417, .8292 }; private static final ZonedDateTime[] MATURITY_DATE = new ZonedDateTime[NB_BOND]; private static final BondFixedSecurityDefinition[] BASKET_DEFINITION = new BondFixedSecurityDefinition[NB_BOND]; static { for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) { MATURITY_DATE[loopbasket] = START_ACCRUAL_DATE[loopbasket].plus(BOND_TENOR[loopbasket]); BASKET_DEFINITION[loopbasket] = BondFixedSecurityDefinition.from(CUR, MATURITY_DATE[loopbasket], START_ACCRUAL_DATE[loopbasket], PAYMENT_TENOR, RATE[loopbasket], SETTLEMENT_DAYS, CALENDAR, DAY_COUNT, BUSINESS_DAY, YIELD_CONVENTION, IS_EOM); } } private static final ZonedDateTime LAST_TRADING_DATE = DateUtils.getUTCDate(2011, 9, 30); private static final ZonedDateTime FIRST_NOTICE_DATE = DateUtils.getUTCDate(2011, 8, 31); private static final ZonedDateTime LAST_NOTICE_DATE = DateUtils.getUTCDate(2011, 10, 4); private static final ZonedDateTime FIRST_DELIVERY_DATE = ScheduleCalculator.getAdjustedDate(FIRST_NOTICE_DATE, SETTLEMENT_DAYS, CALENDAR); private static final ZonedDateTime LAST_DELIVERY_DATE = ScheduleCalculator.getAdjustedDate(LAST_NOTICE_DATE, SETTLEMENT_DAYS, CALENDAR); private static final double NOTIONAL = 100000; private static final double REF_PRICE = 0.0; private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 6, 20); private static final DayCount ACT_ACT = DayCountFactory.INSTANCE.getDayCount("Actual/Actual ISDA"); private static final double LAST_TRADING_TIME = ACT_ACT.getDayCountFraction(REFERENCE_DATE, LAST_TRADING_DATE); private static final double FIRST_NOTICE_TIME = ACT_ACT.getDayCountFraction(REFERENCE_DATE, FIRST_NOTICE_DATE); private static final double LAST_NOTICE_TIME = ACT_ACT.getDayCountFraction(REFERENCE_DATE, LAST_NOTICE_DATE); private static final double FIRST_DELIVERY_TIME = ACT_ACT.getDayCountFraction(REFERENCE_DATE, FIRST_DELIVERY_DATE); private static final double LAST_DELIVERY_TIME = ACT_ACT.getDayCountFraction(REFERENCE_DATE, LAST_DELIVERY_DATE); private static final String CREDIT_CURVE_NAME = "Credit"; private static final String REPO_CURVE_NAME = "Repo"; private static final String[] CURVES_NAME = { CREDIT_CURVE_NAME, REPO_CURVE_NAME }; private static final YieldCurveBundle CURVES = TestsDataSetsSABR.createCurvesBond1(); private static final BondFixedSecurity[] BASKET = new BondFixedSecurity[NB_BOND]; private static final BondFixedSecurity[] STANDARD = new BondFixedSecurity[NB_BOND]; static { for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) { BASKET[loopbasket] = BASKET_DEFINITION[loopbasket].toDerivative(REFERENCE_DATE, LAST_DELIVERY_DATE, CURVES_NAME); STANDARD[loopbasket] = BASKET_DEFINITION[loopbasket].toDerivative(REFERENCE_DATE, CURVES_NAME); } } private static final BondFuture BOND_FUTURE_DERIV = new BondFuture(LAST_TRADING_TIME, FIRST_NOTICE_TIME, LAST_NOTICE_TIME, FIRST_DELIVERY_TIME, LAST_DELIVERY_TIME, NOTIONAL, BASKET, CONVERSION_FACTOR, REF_PRICE); private static final BondFutureDiscountingMethod METHOD = BondFutureDiscountingMethod.getInstance(); private static final BondSecurityDiscountingMethod METHOD_BOND = BondSecurityDiscountingMethod.getInstance(); private static final PriceFromCurvesDiscountingCalculator PRICE_CALCULATOR = PriceFromCurvesDiscountingCalculator .getInstance(); private static final PriceCurveSensitivityDiscountingCalculator PRICE_SENSI_CALCULATOR = PriceCurveSensitivityDiscountingCalculator .getInstance(); @Test public void price() { final double priceComputed = METHOD.price(BOND_FUTURE_DERIV, CURVES); final double[] bondForwardPrice = new double[NB_BOND]; final double[] bondForwardPriceAdjusted = new double[NB_BOND]; double priceExpected = 2.0; for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) { bondForwardPrice[loopbasket] = METHOD_BOND.cleanPriceFromCurves(BASKET[loopbasket], CURVES); bondForwardPriceAdjusted[loopbasket] = bondForwardPrice[loopbasket] / CONVERSION_FACTOR[loopbasket]; priceExpected = Math.min(priceExpected, bondForwardPriceAdjusted[loopbasket]); } assertEquals("Bond future security Discounting Method: price from curves", priceExpected, priceComputed, 1.0E-10); } @Test /** * Tests the computation of the price curve sensitivity. */ public void priceCurveSensitivity() { InterestRateCurveSensitivity sensiFuture = METHOD.priceCurveSensitivity(BOND_FUTURE_DERIV, CURVES); final double[] bondForwardPrice = new double[NB_BOND]; final double[] bondFuturePrice = new double[NB_BOND]; double minPrice = 100.0; int minIndex = 0; for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) { bondForwardPrice[loopbasket] = METHOD_BOND.dirtyPriceFromCurves(BASKET[loopbasket], CURVES); bondFuturePrice[loopbasket] = (bondForwardPrice[loopbasket] - BASKET[loopbasket].getAccruedInterest()) / CONVERSION_FACTOR[loopbasket]; if (bondFuturePrice[loopbasket] < minPrice) { minPrice = (bondForwardPrice[loopbasket] - BASKET[loopbasket].getAccruedInterest()) / CONVERSION_FACTOR[loopbasket]; minIndex = loopbasket; } } InterestRateCurveSensitivity sensiBond = METHOD_BOND.dirtyPriceCurveSensitivity(BASKET[minIndex], CURVES); sensiBond = sensiBond.multiply(1.0 / CONVERSION_FACTOR[minIndex]); sensiFuture = sensiFuture.cleaned(); sensiBond = sensiBond.cleaned(); for (int loopsensi = 0; loopsensi < sensiFuture.getSensitivities().get(CREDIT_CURVE_NAME) .size(); loopsensi++) { assertEquals("Bond future security Discounting Method: curve sensitivity " + loopsensi, sensiBond.getSensitivities().get(CREDIT_CURVE_NAME).get(loopsensi).first, sensiFuture.getSensitivities().get(CREDIT_CURVE_NAME).get(loopsensi).first, 1.0E-10); assertEquals("Bond future security Discounting Method: curve sensitivity " + loopsensi, sensiBond.getSensitivities().get(CREDIT_CURVE_NAME).get(loopsensi).second, sensiFuture.getSensitivities().get(CREDIT_CURVE_NAME).get(loopsensi).second, 1.0E-10); } } @Test /** * Tests the computation of the price curve sensitivity. */ public void priceCurveSensitivityMethodVsCalculator() { final InterestRateCurveSensitivity sensiMethod = METHOD.priceCurveSensitivity(BOND_FUTURE_DERIV, CURVES); final InterestRateCurveSensitivity sensiCalculator = PRICE_SENSI_CALCULATOR.visit(BOND_FUTURE_DERIV, CURVES); assertEquals("Bond future security Discounting Method: curve sensitivity Method versus Calculator", sensiMethod, sensiCalculator); } @Test /** * Tests the method versus the calculator for the price. */ public void priceMethodVsCalculator() { final double priceMethod = METHOD.price(BOND_FUTURE_DERIV, CURVES); final double priceCalculator = PRICE_CALCULATOR.visit(BOND_FUTURE_DERIV, CURVES); assertEquals("Bond future security Discounting: Method vs calculator", priceMethod, priceCalculator, 1.0E-10); } @Test /** * Tests the net basis computed from the curves. */ public void netBasis() { //final double priceFuture = 1.0320; final double priceFuture = METHOD.price(BOND_FUTURE_DERIV, CURVES); final double[] netBasisComputed = METHOD.netBasisFromCurves(BOND_FUTURE_DERIV, CURVES, priceFuture); final double[] netBasisExpected = new double[NB_BOND]; for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) { final double bondPriceForward = METHOD_BOND .dirtyPriceFromCurves(BOND_FUTURE_DERIV.getDeliveryBasket()[loopbasket], CURVES); netBasisExpected[loopbasket] = bondPriceForward - (priceFuture * CONVERSION_FACTOR[loopbasket] + BOND_FUTURE_DERIV.getDeliveryBasket()[loopbasket].getAccruedInterest()); assertEquals("Bond future security Discounting Method: netBasis", netBasisExpected[loopbasket], netBasisComputed[loopbasket], 1.0E-10); } final Min minFunction = new Min(); final double netBasisMin = minFunction.evaluate(netBasisComputed); final double priceFutureFromNetBasis = METHOD.priceNetBasis(BOND_FUTURE_DERIV, CURVES, netBasisMin); assertEquals("Bond future security Discounting Method: netBasis", priceFuture, priceFutureFromNetBasis, 1.0E-10); } @Test /** * Tests the cheapest to deliver figures: yield, modified duration and gross basis. */ public void cheapestToDeliver() { final double yieldTest = 0.01345; final double priceTest = 1.03414063; final double mdTest = 4.271; final double grossBasisTest = 20.718; // Quoted in 32ds of % final double futurePriceTest = 1.19984375; final double[] priceCTD = new double[NB_BOND]; final double[] mdCTD = new double[NB_BOND]; final double[] yieldCTD = new double[NB_BOND]; for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) { priceCTD[loopbasket] = priceTest; mdCTD[loopbasket] = METHOD_BOND.modifiedDurationFromYield(STANDARD[loopbasket], yieldTest); yieldCTD[loopbasket] = METHOD_BOND.yieldFromCleanPrice(STANDARD[loopbasket], priceTest); } final double[] grossBasis = METHOD.grossBasisFromPrices(BOND_FUTURE_DERIV, priceCTD, futurePriceTest); final int ctdIndex = 1; assertEquals("Bond future security: CTD - yield from price", yieldTest, yieldCTD[ctdIndex], 1.0E-4); assertEquals("Bond future security: CTD - modified duration from yield", mdTest, mdCTD[ctdIndex], 1.0E-3); assertEquals("Bond future security: CTD - gross basis from price", grossBasisTest / 100.0 / 32.0, grossBasis[ctdIndex], 1.0E-7); } @Test /** * Tests the gross basis computed from clean prices */ public void grossBasis() { final double futurePriceTest = 1.19984375; final double[] pricesTest = new double[] { 0.86, 0.885, 0.88, 0.8825, 0.885, 0.8725, 0.86 }; final double[] pricesCurves = new double[NB_BOND]; for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) { pricesCurves[loopbasket] = METHOD_BOND .cleanPriceFromCurves(BOND_FUTURE_DERIV.getDeliveryBasket()[loopbasket], CURVES); } final double[] basisComputedTest = METHOD.grossBasisFromPrices(BOND_FUTURE_DERIV, pricesTest, futurePriceTest); final double[] basisComputedCurves = METHOD.grossBasisFromPrices(BOND_FUTURE_DERIV, pricesCurves, futurePriceTest); final double[] basisExpectedTest = new double[NB_BOND]; final double[] basisExpectedCurves = new double[NB_BOND]; for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) { basisExpectedTest[loopbasket] = (pricesTest[loopbasket] - futurePriceTest * CONVERSION_FACTOR[loopbasket]); basisExpectedCurves[loopbasket] = (pricesCurves[loopbasket] - futurePriceTest * CONVERSION_FACTOR[loopbasket]); assertEquals("Gross basis from prices", basisExpectedTest[loopbasket], basisComputedTest[loopbasket], 1.0E-10); assertEquals("Gross basis from curves", basisExpectedCurves[loopbasket], basisComputedCurves[loopbasket], 1.0E-10); } } @Test /** * Tests the present value method for bond futures. */ public void presentValueFromPrice() { final double quotedPrice = 1.05; final double presentValueMethod = METHOD.presentValueFromPrice(BOND_FUTURE_DERIV, quotedPrice); assertEquals("Bond future Method: present value from price", (quotedPrice - REF_PRICE) * NOTIONAL, presentValueMethod); final PresentValueFromFuturePriceCalculator calculator = PresentValueFromFuturePriceCalculator .getInstance(); final double presentValueCalculator = calculator.visit(BOND_FUTURE_DERIV, quotedPrice); assertEquals("Bond future Method: present value from price", presentValueMethod, presentValueCalculator); } @Test /** * Tests the present value method for bond futures. */ public void presentValue() { final CurrencyAmount pvComputed = METHOD.presentValue(BOND_FUTURE_DERIV, CURVES); final double priceFuture = METHOD.price(BOND_FUTURE_DERIV, CURVES); final double pvExpected = (priceFuture - REF_PRICE) * NOTIONAL; assertEquals("Bond future Discounting Method: present value currency", CUR, pvComputed.getCurrency()); assertEquals("Bond future Discounting Method: present value amount", pvExpected, pvComputed.getAmount(), 1.0E-2); final InstrumentDerivative derivative = BOND_FUTURE_DERIV; final CurrencyAmount pvComputed2 = METHOD.presentValue(derivative, CURVES); assertEquals("Bond future Discounting Method: present value", pvComputed, pvComputed2); final PresentValueCalculator calculator = PresentValueCalculator.getInstance(); final double presentValueCalculator = calculator.visit(BOND_FUTURE_DERIV, CURVES); assertEquals("IR future Method: present value from price", pvComputed.getAmount(), presentValueCalculator); } }