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.provider; import static org.testng.AssertJUnit.assertEquals; import org.apache.commons.math.stat.descriptive.rank.Min; import org.testng.annotations.Test; import org.threeten.bp.Period; import org.threeten.bp.ZonedDateTime; import com.opengamma.analytics.financial.instrument.bond.BondFixedSecurityDefinition; import com.opengamma.analytics.financial.interestrate.bond.definition.BondFixedSecurity; import com.opengamma.analytics.financial.interestrate.bond.provider.BondSecurityDiscountingMethod; import com.opengamma.analytics.financial.interestrate.future.derivative.BondFuturesSecurity; import com.opengamma.analytics.financial.provider.description.IssuerProviderDiscountDataSets; import com.opengamma.analytics.financial.provider.description.interestrate.IssuerProviderDiscount; import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MulticurveSensitivity; import com.opengamma.analytics.financial.schedule.ScheduleCalculator; import com.opengamma.analytics.financial.util.AssertSensivityObjects; import com.opengamma.analytics.util.time.TimeCalculator; 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.time.DateUtils; /** * Tests related to the bond future figures computed by discounting. */ public class BondFuturesSecurityDiscountingMethodTest { private final static IssuerProviderDiscount ISSUER_MULTICURVES = IssuerProviderDiscountDataSets .createIssuerProvider(); private final static String[] ISSUER_NAMES = IssuerProviderDiscountDataSets.getIssuerNames(); // 5-Year U.S. Treasury Note Futures: FVU1 private static final Currency USD = Currency.USD; private static final Period PAYMENT_TENOR = Period.ofMonths(6); private static final Calendar CALENDAR = new MondayToFridayCalendar("A"); private static final String US_GOVT = ISSUER_NAMES[0]; 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(USD, MATURITY_DATE[loopbasket], START_ACCRUAL_DATE[loopbasket], PAYMENT_TENOR, RATE[loopbasket], SETTLEMENT_DAYS, CALENDAR, DAY_COUNT, BUSINESS_DAY, YIELD_CONVENTION, IS_EOM, US_GOVT); } } 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 ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 6, 20); private static final double LAST_TRADING_TIME = TimeCalculator.getTimeBetween(REFERENCE_DATE, LAST_TRADING_DATE); private static final double FIRST_NOTICE_TIME = TimeCalculator.getTimeBetween(REFERENCE_DATE, FIRST_NOTICE_DATE); private static final double LAST_NOTICE_TIME = TimeCalculator.getTimeBetween(REFERENCE_DATE, LAST_NOTICE_DATE); private static final double FIRST_DELIVERY_TIME = TimeCalculator.getTimeBetween(REFERENCE_DATE, FIRST_DELIVERY_DATE); private static final double LAST_DELIVERY_TIME = TimeCalculator.getTimeBetween(REFERENCE_DATE, LAST_DELIVERY_DATE); 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); STANDARD[loopbasket] = BASKET_DEFINITION[loopbasket].toDerivative(REFERENCE_DATE); } } private static final BondFuturesSecurity BOND_FUTURE = new BondFuturesSecurity(LAST_TRADING_TIME, FIRST_NOTICE_TIME, LAST_NOTICE_TIME, FIRST_DELIVERY_TIME, LAST_DELIVERY_TIME, NOTIONAL, BASKET, CONVERSION_FACTOR); private static final BondFuturesSecurityDiscountingMethod METHOD_FUT_SEC_DSC = BondFuturesSecurityDiscountingMethod .getInstance(); private static final BondSecurityDiscountingMethod METHOD_BOND_SEC = BondSecurityDiscountingMethod .getInstance(); private static final Min MIN_FUNCTION = new Min(); private static final double TOLERANCE_PRICE = 1.0E-8; private static final double TOLERANCE_PRICE_DELTA = 1.0E-6; @Test public void price() { final double priceComputed = METHOD_FUT_SEC_DSC.price(BOND_FUTURE, ISSUER_MULTICURVES); 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_SEC.cleanPriceFromCurves(BASKET[loopbasket], ISSUER_MULTICURVES); bondForwardPriceAdjusted[loopbasket] = bondForwardPrice[loopbasket] / CONVERSION_FACTOR[loopbasket]; priceExpected = Math.min(priceExpected, bondForwardPriceAdjusted[loopbasket]); } assertEquals("Bond future security Discounting Method: price from curves", priceExpected, priceComputed, TOLERANCE_PRICE); } @Test /** * Tests the computation of the price curve sensitivity. */ public void priceCurveSensitivity() { MulticurveSensitivity sensiFuture = METHOD_FUT_SEC_DSC.priceCurveSensitivity(BOND_FUTURE, ISSUER_MULTICURVES); 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_SEC.dirtyPriceFromCurves(BASKET[loopbasket], ISSUER_MULTICURVES); 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; } } MulticurveSensitivity sensiBond = METHOD_BOND_SEC.dirtyPriceCurveSensitivity(BASKET[minIndex], ISSUER_MULTICURVES); sensiBond = sensiBond.multipliedBy(1.0 / CONVERSION_FACTOR[minIndex]); sensiFuture = sensiFuture.cleaned(); sensiBond = sensiBond.cleaned(); AssertSensivityObjects.assertEquals("BondFutureSecurityDiscountingMethod: priceCurveSensitivity", sensiBond, sensiFuture, TOLERANCE_PRICE_DELTA); } @Test /** * Tests the net basis of all bonds computed from the curves. */ public void netBasisAllBonds() { //final double priceFuture = 1.0320; final double priceFuture = METHOD_FUT_SEC_DSC.price(BOND_FUTURE, ISSUER_MULTICURVES); final double[] netBasisComputed = METHOD_FUT_SEC_DSC.netBasisAllBonds(BOND_FUTURE, ISSUER_MULTICURVES, priceFuture); final double[] netBasisExpected = new double[NB_BOND]; for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) { final double bondPriceForward = METHOD_BOND_SEC .dirtyPriceFromCurves(BOND_FUTURE.getDeliveryBasket()[loopbasket], ISSUER_MULTICURVES); netBasisExpected[loopbasket] = bondPriceForward - (priceFuture * CONVERSION_FACTOR[loopbasket] + BOND_FUTURE.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_FUT_SEC_DSC.priceFromNetBasis(BOND_FUTURE, ISSUER_MULTICURVES, netBasisMin); assertEquals("Bond future security Discounting Method: netBasis", priceFuture, priceFutureFromNetBasis, 1.0E-10); } @Test /** * Tests the net basis of the cheapest to deliver computed from the curves. */ public void netBasisCheapest() { final double netBasisInput = 0.0001; final double priceFuture = METHOD_FUT_SEC_DSC.price(BOND_FUTURE, ISSUER_MULTICURVES) + netBasisInput; final double netBasisCheapest = METHOD_FUT_SEC_DSC.netBasisCheapest(BOND_FUTURE, ISSUER_MULTICURVES, priceFuture); final double[] netBasisAll = METHOD_FUT_SEC_DSC.netBasisAllBonds(BOND_FUTURE, ISSUER_MULTICURVES, priceFuture); assertEquals("Bond future security Discounting Method: netBasis", MIN_FUNCTION.evaluate(netBasisAll), netBasisCheapest, TOLERANCE_PRICE); } @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_SEC.modifiedDurationFromYield(STANDARD[loopbasket], yieldTest); yieldCTD[loopbasket] = METHOD_BOND_SEC.yieldFromCleanPrice(STANDARD[loopbasket], priceTest); } final double[] grossBasis = METHOD_FUT_SEC_DSC.grossBasisFromPrices(BOND_FUTURE, 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_SEC .cleanPriceFromCurves(BOND_FUTURE.getDeliveryBasket()[loopbasket], ISSUER_MULTICURVES); } final double[] basisComputedTest = METHOD_FUT_SEC_DSC.grossBasisFromPrices(BOND_FUTURE, pricesTest, futurePriceTest); final double[] basisComputedCurves = METHOD_FUT_SEC_DSC.grossBasisFromPrices(BOND_FUTURE, 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); } } }