/**
* Test for the case where publication lag=1, effective offset=0 (USD conventions) and cutoff=2
* (FedFund swaps).
*/
public void rateFedFund() {
OvernightIndexRates mockRates = mock(OvernightIndexRates.class);
when(mockRates.getIndex()).thenReturn(USD_FED_FUND);
SimpleRatesProvider simpleProv = new SimpleRatesProvider(mockRates);
for (int i = 0; i < FIXING_DATES.length; i++) {
when(mockRates.rate(FIXING_DATES[i])).thenReturn(FIXING_RATES[i]);
}
OvernightAveragedRateObservation ro =
OvernightAveragedRateObservation.of(USD_FED_FUND, FIXING_START_DATE, FIXING_END_DATE, 2);
ForwardOvernightAveragedRateObservationFn obsFn =
ForwardOvernightAveragedRateObservationFn.DEFAULT;
double accrualFactorTotal = 0.0d;
double accruedRate = 0.0d;
int indexLast =
5; // Fixing in the observation period are from 1 to 5 (inclusive), but last is modified by
// cut-off
for (int i = 1; i <= indexLast - 1; i++) {
LocalDate endDate = USD_FED_FUND.calculateMaturityFromEffective(FIXING_DATES[i]);
double af = USD_FED_FUND.getDayCount().yearFraction(FIXING_DATES[i], endDate);
accrualFactorTotal += af;
accruedRate += FIXING_RATES[i] * af;
}
// CutOff
LocalDate endDate = USD_FED_FUND.calculateMaturityFromEffective(FIXING_DATES[indexLast]);
double af = USD_FED_FUND.getDayCount().yearFraction(FIXING_DATES[indexLast], endDate);
accrualFactorTotal += af;
accruedRate += FIXING_RATES[indexLast - 1] * af;
double rateExpected = accruedRate / accrualFactorTotal;
double rateComputed =
obsFn.rate(ro, DUMMY_ACCRUAL_START_DATE, DUMMY_ACCRUAL_END_DATE, simpleProv);
assertEquals(rateExpected, rateComputed, TOLERANCE_RATE);
}
/**
* Test against FD approximation for the case where publication lag=1, effective offset=0 (USD
* conventions) and cutoff=2 (FedFund swaps). Note that all the rates are bumped here, i.e., all
* the rates are treated as forward rates.
*/
public void rateFedFundSensitivity() {
OvernightIndexRates mockRates = mock(OvernightIndexRates.class);
when(mockRates.getIndex()).thenReturn(USD_FED_FUND);
SimpleRatesProvider simpleProv = new SimpleRatesProvider(mockRates);
for (int i = 0; i < FIXING_DATES.length; i++) {
when(mockRates.rate(FIXING_DATES[i])).thenReturn(FIXING_RATES[i]);
LocalDate fixingStartDate = USD_FED_FUND.calculateEffectiveFromFixing(FIXING_DATES[i]);
LocalDate fixingEndDate = USD_FED_FUND.calculateMaturityFromEffective(fixingStartDate);
OvernightRateSensitivity sensitivity =
OvernightRateSensitivity.of(
USD_FED_FUND, FIXING_DATES[i], fixingEndDate, USD_FED_FUND.getCurrency(), 1d);
when(mockRates.ratePointSensitivity(FIXING_DATES[i])).thenReturn(sensitivity);
}
OvernightAveragedRateObservation ro =
OvernightAveragedRateObservation.of(USD_FED_FUND, FIXING_START_DATE, FIXING_END_DATE, 2);
ForwardOvernightAveragedRateObservationFn obsFn =
ForwardOvernightAveragedRateObservationFn.DEFAULT;
PointSensitivityBuilder sensitivityBuilderComputed =
obsFn.rateSensitivity(ro, DUMMY_ACCRUAL_START_DATE, DUMMY_ACCRUAL_END_DATE, simpleProv);
PointSensitivities sensitivityComputed = sensitivityBuilderComputed.build().normalized();
Double[] sensitivityExpected = computedSensitivityFD(ro, USD_FED_FUND);
assertEquals(sensitivityComputed.getSensitivities().size(), sensitivityExpected.length);
for (int i = 0; i < sensitivityExpected.length; ++i) {
assertEquals(
sensitivityComputed.getSensitivities().get(i).getSensitivity(),
sensitivityExpected[i],
EPS_FD);
}
}
/**
* Test for the case where publication lag=1, effective offset=0 (USD conventions) and no cutoff
* period.
*/
public void rateFedFundNoCutOff() {
OvernightIndexRates mockRates = mock(OvernightIndexRates.class);
when(mockRates.getIndex()).thenReturn(USD_FED_FUND);
SimpleRatesProvider simpleProv = new SimpleRatesProvider(mockRates);
for (int i = 0; i < FIXING_DATES.length; i++) {
when(mockRates.rate(FIXING_DATES[i])).thenReturn(FIXING_RATES[i]);
}
OvernightAveragedRateObservation ro =
OvernightAveragedRateObservation.of(USD_FED_FUND, FIXING_START_DATE, FIXING_END_DATE, 0);
// Accrual dates = fixing dates
ForwardOvernightAveragedRateObservationFn obsFn =
ForwardOvernightAveragedRateObservationFn.DEFAULT;
double accrualFactorTotal = 0.0d;
double accruedRate = 0.0d;
int indexLast = 5; // Fixing in the observation period are from 1 to 5 (inclusive)
for (int i = 1; i <= indexLast; i++) {
LocalDate endDate = USD_FED_FUND.calculateMaturityFromEffective(FIXING_DATES[i]);
double af = USD_FED_FUND.getDayCount().yearFraction(FIXING_DATES[i], endDate);
accrualFactorTotal += af;
accruedRate += FIXING_RATES[i] * af;
}
double rateExpected = accruedRate / accrualFactorTotal;
double rateComputed =
obsFn.rate(ro, DUMMY_ACCRUAL_START_DATE, DUMMY_ACCRUAL_END_DATE, simpleProv);
assertEquals(rateExpected, rateComputed, TOLERANCE_RATE);
// explain
ExplainMapBuilder builder = ExplainMap.builder();
double explainedRate =
obsFn.explainRate(
ro, DUMMY_ACCRUAL_START_DATE, DUMMY_ACCRUAL_END_DATE, simpleProv, builder);
assertEquals(explainedRate, rateExpected, TOLERANCE_RATE);
ExplainMap built = builder.build();
assertEquals(built.get(ExplainKey.OBSERVATIONS).isPresent(), false);
assertEquals(
built.get(ExplainKey.COMBINED_RATE).get().doubleValue(), rateExpected, TOLERANCE_RATE);
}