private ISDACompliantYieldCurve bumpYieldCurve(
final ISDACompliantYieldCurve curve, final double bumpAmount) {
final int n = curve.getR().length;
final double[] bumped = new double[n];
System.arraycopy(curve.getR(), 0, bumped, 0, n);
for (int i = 0; i < n; i++) {
bumped[i] += bumpAmount;
}
return curve.withRates(bumped);
}
/**
* The bucketed IR01 (Interest-Rate 01) is by definition the vector of changes in the price of a
* CDS when the points on the yield curve are bumped.
*
* <p>Note, this bumps the yield curve not the underlying instrument market data. See methods
* which take a {@code ISDACompliantYieldCurveBuild} for bumping of the underlying instruments.
*
* @param cds analytic description of a CDS traded at a certain time
* @param coupon The cds's coupon (as a fraction)
* @param creditCurve the credit (or survival) curve
* @param yieldCurve yield curve
* @return the bucketed IR01
*/
public double[] bucketedIR01(
final CDSAnalytic cds,
final double coupon,
final ISDACompliantCreditCurve creditCurve,
final ISDACompliantYieldCurve yieldCurve) {
ArgumentChecker.notNull(cds, "cds");
ArgumentChecker.notNull(creditCurve, "creditCurve");
ArgumentChecker.notNull(yieldCurve, "yieldCurve");
final ISDACompliantYieldCurve baseYC = yieldCurve;
final int n = yieldCurve.getNumberOfKnots();
final ISDACompliantYieldCurve[] bumpedYC = new ISDACompliantYieldCurve[n];
for (int i = 0; i < n; i++) {
bumpedYC[i] = bumpYieldCurve(yieldCurve, ONE_BPS, i);
}
return priceDiff(cds, creditCurve, coupon, bumpedYC, baseYC);
}
@Override
protected void toString(StringBuilder buf) {
super.toString(buf);
buf.append("baseDate")
.append('=')
.append(JodaBeanUtils.toString(getBaseDate()))
.append(',')
.append(' ');
buf.append("dates")
.append('=')
.append(JodaBeanUtils.toString(getDates()))
.append(',')
.append(' ');
buf.append("dayCount")
.append('=')
.append(JodaBeanUtils.toString(getDayCount()))
.append(',')
.append(' ');
}
/** iTraxx Europe Series 20 Version 1 5Y */
@Test
public void test2() {
final double coupon = 0.01;
final CDSAnalyticFactory factory = new CDSAnalyticFactory();
final LocalDate tradeDate = LocalDate.of(2014, 1, 15);
final LocalDate ycSpotDate = LocalDate.of(2014, 1, 17);
final String[] yieldCurvePoints =
new String[] {
"1M", "2M", "3M", "6M", "9M", "1Y", "2Y", "3Y", "4Y", "5Y", "6Y", "7Y", "8Y", "9Y", "10Y",
"12Y", "15Y", "20Y", "30Y"
};
final String[] yieldCurveInstruments =
new String[] {
"M", "M", "M", "M", "M", "M", "S", "S", "S", "S", "S", "S", "S", "S", "S", "S", "S", "S",
"S"
};
final double[] rates =
new double[] {
0.00208, 0.00247, 0.00282, 0.0039, 0.00482, 0.00557, 0.00522, 0.00705, 0.00942, 0.01182,
0.01405, 0.01607, 0.01788, 0.01948, 0.02088, 0.02315, 0.02537, 0.02686, 0.02724
};
final ISDACompliantYieldCurve yieldCurve =
makeYieldCurve(
tradeDate,
ycSpotDate,
yieldCurvePoints,
yieldCurveInstruments,
rates,
ACT360,
D30360,
Period.ofYears(1));
// TODO have explicit index methods in CDSAnalyticFactory [PLAT-5564]
final CDSAnalytic cds =
factory.makeIMMCDS(tradeDate, Period.of(4, 9, 0)); // Index maturity is 20-Dec-2018
final int mAccDays = 27;
final double mAccAmount = 7.5e-4;
assertEquals(mAccDays, cds.getAccuredDays());
assertEquals(mAccAmount, cds.getAccruedPremium(coupon));
final double df = yieldCurve.getDiscountFactor(cds.getCashSettleTime());
// these are Markit 'user' values (calculated from constant hazard rate)
ISDACompliantCreditCurve cc = CREDIT_CURVE_BUILDER.calibrateCreditCurve(cds, 0.012, yieldCurve);
double marketValue = PRICER.pv(cds, yieldCurve, cc, coupon, PriceType.DIRTY, 0.0);
double cashSettlement = marketValue / df;
double mMarketValue = 0.008568684437956;
double mCashSettlement = 0.008568931959138;
assertEquals(mMarketValue, marketValue, 1e-15);
assertEquals(mCashSettlement, cashSettlement, 1e-15);
// now use clear price of 99.07% (note index quoted as 1-puf)
final double puf = 0.0093;
cc = CREDIT_CURVE_BUILDER.calibrateCreditCurve(cds, coupon, yieldCurve, puf);
marketValue = PRICER.pv(cds, yieldCurve, cc, coupon, PriceType.DIRTY, 0.0);
cashSettlement = marketValue / df;
mMarketValue = 0.008549753025685;
mCashSettlement = 0.00855;
assertEquals(mMarketValue, marketValue, 1e-15);
assertEquals(mCashSettlement, cashSettlement, 1e-15);
}
private ISDACompliantYieldCurve bumpYieldCurve(
final ISDACompliantYieldCurve curve, final double bumpAmount, final int index) {
return curve.withRate(curve.getR()[index] + bumpAmount, index);
}
