@Test
/** Tests the present value: Method vs Calculator. */
public void presentValueMethodVsCalculator() {
CurrencyAmount pvMethod = METHOD.presentValue(ZERO_COUPON_1, MARKET);
CurrencyAmount pvCalculator = PVIC.visit(ZERO_COUPON_1, MARKET);
assertEquals("Zero-coupon inflation: Present value", pvMethod, pvCalculator);
}
/**
* Tests the present value and its sensitivities for zero-coupon with reference index interpolated
* between months.
*/
public class CouponInflationZeroCouponInterpolationDiscountingMethodTest {
private static final MarketBundle MARKET = MarketDataSets.createMarket1();
private static final IndexPrice[] PRICE_INDEXES = MarketDataSets.getPriceIndexes();
private static final IndexPrice PRICE_INDEX_EUR = PRICE_INDEXES[0];
// private static final PriceIndex PRICE_INDEX_UK = PRICE_INDEXES[1];
private static final IndexPrice PRICE_INDEX_US = PRICE_INDEXES[2];
private static final IborIndex[] IBOR_INDEXES = MarketDataSets.getIborIndexes();
private static final IborIndex EURIBOR3M = IBOR_INDEXES[0];
// private static final IborIndex EURIBOR6M = IBOR_INDEXES[1];
private static final IborIndex USDLIBOR3M = IBOR_INDEXES[2];
private static final Calendar CALENDAR_EUR = EURIBOR3M.getCalendar();
private static final Calendar CALENDAR_USD = USDLIBOR3M.getCalendar();
private static final BusinessDayConvention BUSINESS_DAY =
BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Modified Following");
private static final ZonedDateTime START_DATE = DateUtils.getUTCDate(2008, 8, 18);
private static final Period COUPON_TENOR = Period.ofYears(10);
private static final ZonedDateTime PAYMENT_DATE =
ScheduleCalculator.getAdjustedDate(START_DATE, COUPON_TENOR, BUSINESS_DAY, CALENDAR_EUR);
private static final double NOTIONAL = 98765432;
private static final int MONTH_LAG = 3;
private static final double INDEX_MAY_2008_INT =
108.4548387; // May index: 108.23 - June Index = 108.64
private static final CouponInflationZeroCouponInterpolationDefinition ZERO_COUPON_1_DEFINITION =
CouponInflationZeroCouponInterpolationDefinition.from(
START_DATE,
PAYMENT_DATE,
NOTIONAL,
PRICE_INDEX_EUR,
INDEX_MAY_2008_INT,
MONTH_LAG,
false);
private static final ZonedDateTime PRICING_DATE = DateUtils.getUTCDate(2011, 8, 3);
private static final CouponInflationZeroCouponInterpolation ZERO_COUPON_1 =
ZERO_COUPON_1_DEFINITION.toDerivative(PRICING_DATE, "not used");
private static final CouponInflationZeroCouponInterpolationDiscountingMethod METHOD =
new CouponInflationZeroCouponInterpolationDiscountingMethod();
private static final PresentValueInflationCalculator PVIC =
PresentValueInflationCalculator.getInstance();
@Test
/** Tests the present value. */
public void presentValue() {
CurrencyAmount pv = METHOD.presentValue(ZERO_COUPON_1, MARKET);
double df =
MARKET
.getCurve(ZERO_COUPON_1.getCurrency())
.getDiscountFactor(ZERO_COUPON_1.getPaymentTime());
double indexMonth0 =
MARKET.getCurve(PRICE_INDEX_EUR).getPriceIndex(ZERO_COUPON_1.getReferenceEndTime()[0]);
double indexMonth1 =
MARKET.getCurve(PRICE_INDEX_EUR).getPriceIndex(ZERO_COUPON_1.getReferenceEndTime()[1]);
double finalIndex =
ZERO_COUPON_1_DEFINITION.getWeight() * indexMonth0
+ (1 - ZERO_COUPON_1_DEFINITION.getWeight()) * indexMonth1;
double pvExpected = (finalIndex / INDEX_MAY_2008_INT - 1) * df * NOTIONAL;
assertEquals("Zero-coupon inflation: Present value", pvExpected, pv.getAmount(), 1.0E-2);
}
@Test
/** Tests the present value: Method vs Calculator. */
public void presentValueMethodVsCalculator() {
CurrencyAmount pvMethod = METHOD.presentValue(ZERO_COUPON_1, MARKET);
CurrencyAmount pvCalculator = PVIC.visit(ZERO_COUPON_1, MARKET);
assertEquals("Zero-coupon inflation: Present value", pvMethod, pvCalculator);
}
@Test
/** Test the present value curves sensitivity. */
public void presentValueCurveSensitivity() {
final PresentValueCurveSensitivityMarket pvs =
METHOD.presentValueCurveSensitivity(ZERO_COUPON_1, MARKET);
pvs.clean();
final double deltaTolerancePrice = 1.0E+1;
// Testing note: Sensitivity is for a movement of 1. 1E+2 = 1 cent for a 1 bp move. Tolerance
// increased to cope with numerical imprecision of finite difference.
final double deltaShift = 1.0E-6;
// 2. Discounting curve sensitivity
final double[] nodeTimesDisc = new double[] {ZERO_COUPON_1.getPaymentTime()};
final double[] sensiDisc =
SensitivityFiniteDifferenceMarket.curveSensitivity(
ZERO_COUPON_1,
MARKET,
ZERO_COUPON_1.getCurrency(),
nodeTimesDisc,
deltaShift,
METHOD,
FiniteDifferenceType.CENTRAL);
assertEquals("Sensitivity finite difference method: number of node", 1, sensiDisc.length);
final List<DoublesPair> sensiPvDisc =
pvs.getYieldCurveSensitivities()
.get(MARKET.getCurve(ZERO_COUPON_1.getCurrency()).getName());
for (int loopnode = 0; loopnode < sensiDisc.length; loopnode++) {
final DoublesPair pairPv = sensiPvDisc.get(loopnode);
assertEquals(
"Sensitivity coupon pv to forward curve: Node " + loopnode,
nodeTimesDisc[loopnode],
pairPv.getFirst(),
1E-8);
assertEquals(
"Sensitivity finite difference method: node sensitivity",
pairPv.second,
sensiDisc[loopnode],
deltaTolerancePrice);
}
// 3. Price index curve sensitivity
final double[] nodeTimesPrice = ZERO_COUPON_1.getReferenceEndTime();
final double[] sensiPrice =
SensitivityFiniteDifferenceMarket.curveSensitivity(
ZERO_COUPON_1,
MARKET,
ZERO_COUPON_1.getPriceIndex(),
nodeTimesPrice,
deltaShift,
METHOD,
FiniteDifferenceType.CENTRAL);
assertEquals("Sensitivity finite difference method: number of node", 2, sensiPrice.length);
final List<DoublesPair> sensiPvPrice =
pvs.getPriceCurveSensitivities()
.get(MARKET.getCurve(ZERO_COUPON_1.getPriceIndex()).getCurve().getName());
for (int loopnode = 0; loopnode < sensiPrice.length; loopnode++) {
final DoublesPair pairPv = sensiPvPrice.get(loopnode);
assertEquals(
"Sensitivity coupon pv to forward curve: Node " + loopnode,
nodeTimesPrice[loopnode],
pairPv.getFirst(),
1E-8);
assertEquals(
"Sensitivity finite difference method: node sensitivity",
pairPv.second,
sensiPrice[loopnode],
deltaTolerancePrice);
}
}
@Test
/** Tests the present value for curves with seasonal adjustment. */
public void presentValueSeasonality() {
MarketBundle marketSeason = MarketDataSets.createMarket2(PRICING_DATE);
int tenorYear = 5;
double notional = 100000000;
ZonedDateTime settleDate =
ScheduleCalculator.getAdjustedDate(PRICING_DATE, USDLIBOR3M.getSpotLag(), CALENDAR_USD);
ZonedDateTime paymentDate =
ScheduleCalculator.getAdjustedDate(
settleDate,
Period.ofYears(tenorYear),
BUSINESS_DAY,
CALENDAR_USD,
USDLIBOR3M.isEndOfMonth());
double weightSettle =
1.0
- (settleDate.getDayOfMonth() - 1.0)
/ settleDate.getMonthOfYear().getLastDayOfMonth(settleDate.isLeapYear());
double indexStart = weightSettle * 225.964 + (1 - weightSettle) * 225.722;
CouponInflationZeroCouponInterpolationDefinition zeroCouponUsdDefinition =
CouponInflationZeroCouponInterpolationDefinition.from(
settleDate, paymentDate, notional, PRICE_INDEX_US, indexStart, MONTH_LAG, false);
CouponInflationZeroCouponInterpolation zeroCouponUsd =
zeroCouponUsdDefinition.toDerivative(PRICING_DATE, "not used");
CurrencyAmount pvInflation = METHOD.presentValue(zeroCouponUsd, marketSeason);
double df =
MARKET
.getCurve(zeroCouponUsd.getCurrency())
.getDiscountFactor(zeroCouponUsd.getPaymentTime());
double indexMonth0 =
marketSeason.getCurve(PRICE_INDEX_US).getPriceIndex(zeroCouponUsd.getReferenceEndTime()[0]);
double indexMonth1 =
marketSeason.getCurve(PRICE_INDEX_US).getPriceIndex(zeroCouponUsd.getReferenceEndTime()[1]);
double finalIndex =
zeroCouponUsdDefinition.getWeight() * indexMonth0
+ (1 - zeroCouponUsdDefinition.getWeight()) * indexMonth1;
double pvExpected = (finalIndex / indexStart - 1) * df * notional;
assertEquals(
"PV in market with seasonal adjustment", pvExpected, pvInflation.getAmount(), 1E-2);
}
}