@Test
public void presentValueApproximation() {
CurrencyAmount pvNumericalIntegration = METHOD_NI.presentValue(CPN_CMS, BUNDLE_HW);
CurrencyAmount pvApproximation = METHOD_APP.presentValue(CPN_CMS, BUNDLE_HW);
assertEquals(
"Coupon CMS - Hull-White - present value - approximation",
pvApproximation.getAmount(),
pvNumericalIntegration.getAmount(),
TOLERANCE_PRICE_APP);
}
/**
* Tests related to the pricing of CMS coupons with Hull-White (extended Vasicek) model and
* different numerical methods.
*/
public class CouponCMSHullWhiteMethodsTest {
private static final Calendar TARGET = new MondayToFridayCalendar("TARGET");
private static final GeneratorSwapFixedIborMaster GENERATOR_SWAP_MASTER =
GeneratorSwapFixedIborMaster.getInstance();
private static final GeneratorSwapFixedIbor GENERATOR_EUR1YEURIBOR6M =
GENERATOR_SWAP_MASTER.getGenerator("EUR1YEURIBOR6M", TARGET);
private static final Period TENOR_SWAP = Period.ofYears(10);
private static final IndexSwap SWAP_EUR10Y = new IndexSwap(GENERATOR_EUR1YEURIBOR6M, TENOR_SWAP);
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2012, 1, 17);
// Coupon CMS: 6m fixing in advance (payment in arrears); ACT/360
private static final Period TENOR_COUPON = Period.ofMonths(6);
private static final Period TENOR_FIXING = Period.ofMonths(60);
private static final DayCount ACT360 = DayCountFactory.INSTANCE.getDayCount("Actual/360");
private static final ZonedDateTime FIXING_DATE =
ScheduleCalculator.getAdjustedDate(
REFERENCE_DATE,
TENOR_FIXING,
GENERATOR_EUR1YEURIBOR6M.getBusinessDayConvention(),
TARGET,
GENERATOR_EUR1YEURIBOR6M.isEndOfMonth());
private static final ZonedDateTime START_DATE =
ScheduleCalculator.getAdjustedDate(
FIXING_DATE, GENERATOR_EUR1YEURIBOR6M.getSpotLag(), TARGET);
private static final ZonedDateTime PAYMENT_DATE =
ScheduleCalculator.getAdjustedDate(
START_DATE,
TENOR_COUPON,
GENERATOR_EUR1YEURIBOR6M.getBusinessDayConvention(),
TARGET,
GENERATOR_EUR1YEURIBOR6M.isEndOfMonth());
private static final double NOTIONAL = 100000000; // 100m
private static final double ACCRUAL_FACTOR = ACT360.getDayCountFraction(START_DATE, PAYMENT_DATE);
private static final CouponCMSDefinition CPN_CMS_DEFINITION =
CouponCMSDefinition.from(
PAYMENT_DATE, START_DATE, PAYMENT_DATE, ACCRUAL_FACTOR, NOTIONAL, SWAP_EUR10Y);
private static final YieldCurveBundle CURVES = TestsDataSetsSABR.createCurves2();
private static final String[] CURVE_NAMES = TestsDataSetsSABR.curves2Names();
private static final HullWhiteOneFactorPiecewiseConstantParameters PARAMETERS_HW =
TestsDataSetHullWhite.createHullWhiteParameters();
private static final HullWhiteOneFactorPiecewiseConstantDataBundle BUNDLE_HW =
new HullWhiteOneFactorPiecewiseConstantDataBundle(PARAMETERS_HW, CURVES);
private static final CouponCMS CPN_CMS =
(CouponCMS)
CPN_CMS_DEFINITION.toDerivative(
REFERENCE_DATE, new String[] {CURVE_NAMES[0], CURVE_NAMES[2]});
private static final CouponCMSHullWhiteNumericalIntegrationMethod METHOD_NI =
CouponCMSHullWhiteNumericalIntegrationMethod.getInstance();
private static final CouponCMSHullWhiteApproximationMethod METHOD_APP =
CouponCMSHullWhiteApproximationMethod.getInstance();
private static final CouponCMSDiscountingMethod METHOD_DSC =
CouponCMSDiscountingMethod.getInstance();
private static final double TOLERANCE_PRICE = 1.0E-2;
private static final double TOLERANCE_PRICE_APP = 5.0E+0;
@Test
public void presentValueNumericalIntegration() {
CurrencyAmount pvNumericalIntegration = METHOD_NI.presentValue(CPN_CMS, BUNDLE_HW);
double pvPrevious = 1124760.482; // From previous run
assertEquals(
"Coupon CMS - Hull-White - present value - numerical integration",
pvPrevious,
pvNumericalIntegration.getAmount(),
TOLERANCE_PRICE);
// Comparison with non-adjusted figures: to have the right order of magnitude
CurrencyAmount pvDiscounting = METHOD_DSC.presentValue(CPN_CMS, BUNDLE_HW);
assertEquals(
"Coupon CMS - Hull-White - present value - numerical integration",
1.0,
pvDiscounting.getAmount() / pvNumericalIntegration.getAmount(),
0.20);
}
@Test
public void presentValueApproximation() {
CurrencyAmount pvNumericalIntegration = METHOD_NI.presentValue(CPN_CMS, BUNDLE_HW);
CurrencyAmount pvApproximation = METHOD_APP.presentValue(CPN_CMS, BUNDLE_HW);
assertEquals(
"Coupon CMS - Hull-White - present value - approximation",
pvApproximation.getAmount(),
pvNumericalIntegration.getAmount(),
TOLERANCE_PRICE_APP);
}
}
