/** Test present value sensitivity for ISDA */
public void test_presentValueSensitivity_ISDA() {
RateObservationFn<RateObservation> mockObs = mock(RateObservationFn.class);
DiscountFactors mockDf = mock(DiscountFactors.class);
SimpleRatesProvider simpleProv = new SimpleRatesProvider(VAL_DATE, mockDf);
ExpandedFra fraExp = FRA.expand();
double forwardRate = 0.05;
double discountRate = 0.015;
double paymentTime = 0.3;
double discountFactor = Math.exp(-discountRate * paymentTime);
LocalDate fixingDate = FRA.getStartDate();
PointSensitivityBuilder sens = IborRateSensitivity.of(FRA.getIndex(), fixingDate, 1d);
when(mockDf.discountFactor(fraExp.getPaymentDate())).thenReturn(discountFactor);
when(mockDf.zeroRatePointSensitivity(fraExp.getPaymentDate()))
.thenReturn(
ZeroRateSensitivity.of(
fraExp.getCurrency(), fraExp.getPaymentDate(), -discountFactor * paymentTime));
when(mockObs.rateSensitivity(
fraExp.getFloatingRate(), fraExp.getStartDate(), fraExp.getEndDate(), simpleProv))
.thenReturn(sens);
when(mockObs.rate(fraExp.getFloatingRate(), FRA.getStartDate(), FRA.getEndDate(), simpleProv))
.thenReturn(forwardRate);
DiscountingFraProductPricer test = new DiscountingFraProductPricer(mockObs);
PointSensitivities sensitivity = test.presentValueSensitivity(fraExp, simpleProv);
double eps = 1.e-7;
double fdDscSense = dscSensitivity(FRA, forwardRate, discountFactor, paymentTime, eps);
double fdSense = presentValueFwdSensitivity(FRA, forwardRate, discountFactor, eps);
ImmutableList<PointSensitivity> sensitivities = sensitivity.getSensitivities();
assertEquals(sensitivities.size(), 2);
IborRateSensitivity sensitivity0 = (IborRateSensitivity) sensitivities.get(0);
assertEquals(sensitivity0.getIndex(), FRA.getIndex());
assertEquals(sensitivity0.getFixingDate(), fixingDate);
assertEquals(sensitivity0.getSensitivity(), fdSense, FRA.getNotional() * eps);
ZeroRateSensitivity sensitivity1 = (ZeroRateSensitivity) sensitivities.get(1);
assertEquals(sensitivity1.getCurrency(), FRA.getCurrency());
assertEquals(sensitivity1.getDate(), fraExp.getPaymentDate());
assertEquals(sensitivity1.getSensitivity(), fdDscSense, FRA.getNotional() * eps);
// test via FraTrade
DiscountingFraTradePricer testTrade = new DiscountingFraTradePricer(test);
assertEquals(
testTrade.presentValueSensitivity(FRA_TRADE, simpleProv),
test.presentValueSensitivity(fraExp, simpleProv));
}
private double dscSensitivity(
Fra fra, double forwardRate, double discountFactor, double paymentTime, double eps) {
RatesProvider provNew = mock(RatesProvider.class);
when(provNew.getValuationDate()).thenReturn(VAL_DATE);
RateObservationFn<RateObservation> obsFuncNew = mock(RateObservationFn.class);
ExpandedFra fraExp = fra.expand();
when(obsFuncNew.rate(fraExp.getFloatingRate(), fra.getStartDate(), fra.getEndDate(), provNew))
.thenReturn(forwardRate);
when(provNew.discountFactor(fra.getCurrency(), fraExp.getPaymentDate()))
.thenReturn(discountFactor * Math.exp(-eps * paymentTime));
CurrencyAmount upDscValue =
new DiscountingFraProductPricer(obsFuncNew).presentValue(fraExp, provNew);
when(provNew.discountFactor(fra.getCurrency(), fraExp.getPaymentDate()))
.thenReturn(discountFactor * Math.exp(eps * paymentTime));
CurrencyAmount downDscValue =
new DiscountingFraProductPricer(obsFuncNew).presentValue(fraExp, provNew);
return upDscValue.minus(downDscValue).multipliedBy(0.5 / eps).getAmount();
}
// -------------------------------------------------------------------------
// creates a simple provider
private SimpleRatesProvider createProvider(ExpandedFra fraExp) {
DiscountFactors mockDf = mock(DiscountFactors.class);
IborIndexRates mockIbor = mock(IborIndexRates.class);
SimpleRatesProvider prov = new SimpleRatesProvider(VAL_DATE, mockDf);
prov.setIborRates(mockIbor);
IborRateObservation obs = (IborRateObservation) fraExp.getFloatingRate();
IborRateSensitivity sens = IborRateSensitivity.of(obs.getIndex(), obs.getFixingDate(), 1d);
when(mockIbor.ratePointSensitivity(obs.getFixingDate())).thenReturn(sens);
when(mockIbor.rate(obs.getFixingDate())).thenReturn(FORWARD_RATE);
when(mockDf.discountFactor(fraExp.getPaymentDate())).thenReturn(DISCOUNT_FACTOR);
return prov;
}
/** Test explain. */
public void test_explainPresentValue_ISDA() {
ExpandedFra fraExp = FRA.expand();
SimpleRatesProvider prov = createProvider(fraExp);
DiscountingFraProductPricer test = DiscountingFraProductPricer.DEFAULT;
CurrencyAmount fvExpected = test.forecastValue(fraExp, prov);
CurrencyAmount pvExpected = test.presentValue(fraExp, prov);
ExplainMap explain = test.explainPresentValue(fraExp, prov);
Currency currency = fraExp.getCurrency();
int daysBetween = (int) DAYS.between(fraExp.getStartDate(), fraExp.getEndDate());
assertEquals(explain.get(ExplainKey.ENTRY_TYPE).get(), "FRA");
assertEquals(explain.get(ExplainKey.PAYMENT_DATE).get(), fraExp.getPaymentDate());
assertEquals(explain.get(ExplainKey.START_DATE).get(), fraExp.getStartDate());
assertEquals(explain.get(ExplainKey.END_DATE).get(), fraExp.getEndDate());
assertEquals(explain.get(ExplainKey.ACCRUAL_YEAR_FRACTION).get(), fraExp.getYearFraction());
assertEquals(explain.get(ExplainKey.ACCRUAL_DAYS).get(), (Integer) (int) daysBetween);
assertEquals(explain.get(ExplainKey.PAYMENT_CURRENCY).get(), currency);
assertEquals(
explain.get(ExplainKey.NOTIONAL).get().getAmount(), fraExp.getNotional(), TOLERANCE);
assertEquals(
explain.get(ExplainKey.TRADE_NOTIONAL).get().getAmount(), fraExp.getNotional(), TOLERANCE);
assertEquals(explain.get(ExplainKey.OBSERVATIONS).get().size(), 1);
ExplainMap explainObs = explain.get(ExplainKey.OBSERVATIONS).get().get(0);
IborRateObservation floatingRate = (IborRateObservation) fraExp.getFloatingRate();
assertEquals(explainObs.get(ExplainKey.INDEX).get(), floatingRate.getIndex());
assertEquals(explainObs.get(ExplainKey.FIXING_DATE).get(), floatingRate.getFixingDate());
assertEquals(explainObs.get(ExplainKey.INDEX_VALUE).get(), FORWARD_RATE, TOLERANCE);
assertEquals(explain.get(ExplainKey.DISCOUNT_FACTOR).get(), DISCOUNT_FACTOR, TOLERANCE);
assertEquals(explain.get(ExplainKey.FIXED_RATE).get(), fraExp.getFixedRate(), TOLERANCE);
assertEquals(explain.get(ExplainKey.PAY_OFF_RATE).get(), FORWARD_RATE, TOLERANCE);
assertEquals(explain.get(ExplainKey.COMBINED_RATE).get(), FORWARD_RATE, TOLERANCE);
assertEquals(
explain.get(ExplainKey.UNIT_AMOUNT).get(),
fvExpected.getAmount() / fraExp.getNotional(),
TOLERANCE);
assertEquals(explain.get(ExplainKey.FORECAST_VALUE).get().getCurrency(), currency);
assertEquals(
explain.get(ExplainKey.FORECAST_VALUE).get().getAmount(),
fvExpected.getAmount(),
TOLERANCE);
assertEquals(explain.get(ExplainKey.PRESENT_VALUE).get().getCurrency(), currency);
assertEquals(
explain.get(ExplainKey.PRESENT_VALUE).get().getAmount(), pvExpected.getAmount(), TOLERANCE);
}
/** Test cash flow for ISDA FRA Discounting method. */
public void test_cashFlows_ISDA() {
ExpandedFra fraExp = FRA.expand();
SimpleRatesProvider prov = createProvider(fraExp);
double fixedRate = FRA.getFixedRate();
double yearFraction = fraExp.getYearFraction();
double notional = fraExp.getNotional();
double expected =
notional * yearFraction * (FORWARD_RATE - fixedRate) / (1.0 + yearFraction * FORWARD_RATE);
DiscountingFraProductPricer test = DiscountingFraProductPricer.DEFAULT;
CashFlows computed = test.cashFlows(fraExp, prov);
assertEquals(computed.getCashFlows().size(), 1);
assertEquals(computed.getCashFlows().size(), 1);
assertEquals(computed.getCashFlows().get(0).getPaymentDate(), fraExp.getPaymentDate());
assertEquals(
computed.getCashFlows().get(0).getForecastValue().getCurrency(), fraExp.getCurrency());
assertEquals(
computed.getCashFlows().get(0).getForecastValue().getAmount(), expected, TOLERANCE);
// test via FraTrade
DiscountingFraTradePricer testTrade = new DiscountingFraTradePricer(test);
assertEquals(testTrade.cashFlows(FRA_TRADE, prov), test.cashFlows(fraExp, prov));
}