/** Tests on the construction of interest rate future option with up-front payment. */
public class InterestRateFutureOptionMarginSecurityTest {
// EURIBOR 3M Index
private static final Period TENOR = Period.ofMonths(3);
private static final int SETTLEMENT_DAYS = 2;
private static final Calendar CALENDAR = new MondayToFridayCalendar("A");
private static final DayCount DAY_COUNT_INDEX =
DayCountFactory.INSTANCE.getDayCount("Actual/360");
private static final BusinessDayConvention BUSINESS_DAY =
BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Modified Following");
private static final boolean IS_EOM = true;
private static final Currency CUR = Currency.EUR;
private static final IborIndex IBOR_INDEX =
new IborIndex(CUR, TENOR, SETTLEMENT_DAYS, DAY_COUNT_INDEX, BUSINESS_DAY, IS_EOM);
// Future
private static final ZonedDateTime SPOT_LAST_TRADING_DATE = DateUtils.getUTCDate(2012, 9, 19);
private static final ZonedDateTime LAST_TRADING_DATE =
ScheduleCalculator.getAdjustedDate(SPOT_LAST_TRADING_DATE, -SETTLEMENT_DAYS, CALENDAR);
private static final double NOTIONAL = 1000000.0; // 1m
private static final double FUTURE_FACTOR = 0.25;
private static final String NAME = "EDU2";
private static final double STRIKE = 0.9850;
private static final InterestRateFutureSecurityDefinition EDU2_DEFINITION =
new InterestRateFutureSecurityDefinition(
LAST_TRADING_DATE, IBOR_INDEX, NOTIONAL, FUTURE_FACTOR, NAME, CALENDAR);
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2010, 8, 18);
private static final String DISCOUNTING_CURVE_NAME = "Funding";
private static final String FORWARD_CURVE_NAME = "Forward";
private static final String[] CURVES = {DISCOUNTING_CURVE_NAME, FORWARD_CURVE_NAME};
private static final InterestRateFutureSecurity EDU2 =
EDU2_DEFINITION.toDerivative(REFERENCE_DATE, CURVES);
// Option
private static final ZonedDateTime EXPIRATION_DATE = DateUtils.getUTCDate(2011, 9, 16);
private static final DayCount ACT_ACT =
DayCountFactory.INSTANCE.getDayCount("Actual/Actual ISDA");
private static final double EXPIRATION_TIME =
ACT_ACT.getDayCountFraction(REFERENCE_DATE, EXPIRATION_DATE);
private static final boolean IS_CALL = true;
private static final InterestRateFutureOptionPremiumSecurity OPTION_EDU2 =
new InterestRateFutureOptionPremiumSecurity(EDU2, EXPIRATION_TIME, STRIKE, IS_CALL);
@Test(expectedExceptions = IllegalArgumentException.class)
public void testNullUnderlying() {
new InterestRateFutureOptionPremiumSecurity(null, EXPIRATION_TIME, STRIKE, IS_CALL);
}
@Test
public void getter() {
assertEquals(EDU2, OPTION_EDU2.getUnderlyingFuture());
assertEquals(EXPIRATION_TIME, OPTION_EDU2.getExpirationTime());
assertEquals(STRIKE, OPTION_EDU2.getStrike());
assertEquals(IS_CALL, OPTION_EDU2.isCall());
assertEquals(DISCOUNTING_CURVE_NAME, OPTION_EDU2.getDiscountingCurveName());
assertEquals(FORWARD_CURVE_NAME, OPTION_EDU2.getForwardCurveName());
}
@Test
/** Tests the equal and hash code methods. */
public void equalHash() {
final InterestRateFutureOptionPremiumSecurity newOption =
new InterestRateFutureOptionPremiumSecurity(EDU2, EXPIRATION_TIME, STRIKE, IS_CALL);
assertTrue(OPTION_EDU2.equals(newOption));
assertEquals(OPTION_EDU2.hashCode(), newOption.hashCode());
InterestRateFutureOptionPremiumSecurity modifiedOption;
modifiedOption =
new InterestRateFutureOptionPremiumSecurity(EDU2, EXPIRATION_TIME - 0.01, STRIKE, IS_CALL);
assertFalse(OPTION_EDU2.equals(modifiedOption));
modifiedOption =
new InterestRateFutureOptionPremiumSecurity(EDU2, EXPIRATION_TIME, STRIKE + 0.01, IS_CALL);
assertFalse(OPTION_EDU2.equals(modifiedOption));
modifiedOption =
new InterestRateFutureOptionPremiumSecurity(EDU2, EXPIRATION_TIME, STRIKE, !IS_CALL);
assertFalse(OPTION_EDU2.equals(modifiedOption));
}
}
/**
* Tests for the methods related to interest rate securities pricing with Hull-White model convexity
* adjustment.
*/
@Test(groups = TestGroup.UNIT)
public class InterestRateFutureSecurityHullWhiteMethodTest {
private static final MulticurveProviderDiscount MULTICURVES =
MulticurveProviderDiscountDataSets.createMulticurveEurUsd();
private static final IborIndex[] INDEX_LIST =
MulticurveProviderDiscountDataSets.getIndexesIborMulticurveEurUsd();
private static final IborIndex EURIBOR3M = INDEX_LIST[0];
private static final Currency EUR = EURIBOR3M.getCurrency();
private static final Calendar CALENDAR = MulticurveProviderDiscountDataSets.getEURCalendar();
// Future
private static final ZonedDateTime SPOT_LAST_TRADING_DATE = DateUtils.getUTCDate(2012, 9, 19);
private static final ZonedDateTime LAST_TRADING_DATE =
ScheduleCalculator.getAdjustedDate(SPOT_LAST_TRADING_DATE, -EURIBOR3M.getSpotLag(), CALENDAR);
private static final double NOTIONAL = 1000000.0; // 1m
private static final double FUTURE_FACTOR = 0.25;
private static final String NAME = "ERU2";
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 5, 12);
private static final InterestRateFutureSecurityDefinition ERU2_DEFINITION =
new InterestRateFutureSecurityDefinition(
LAST_TRADING_DATE, EURIBOR3M, NOTIONAL, FUTURE_FACTOR, NAME, CALENDAR);
private static final InterestRateFutureSecurity ERU2 =
ERU2_DEFINITION.toDerivative(REFERENCE_DATE);
private static final double MEAN_REVERSION = 0.01;
private static final double[] VOLATILITY = new double[] {0.01, 0.011, 0.012, 0.013, 0.014};
private static final double[] VOLATILITY_TIME = new double[] {0.5, 1.0, 2.0, 5.0};
private static final HullWhiteOneFactorPiecewiseConstantParameters MODEL_PARAMETERS =
new HullWhiteOneFactorPiecewiseConstantParameters(
MEAN_REVERSION, VOLATILITY, VOLATILITY_TIME);
private static final HullWhiteOneFactorProviderDiscount HW_MULTICURVES =
new HullWhiteOneFactorProviderDiscount(MULTICURVES, MODEL_PARAMETERS, EUR);
private static final HullWhiteOneFactorPiecewiseConstantInterestRateModel MODEL =
new HullWhiteOneFactorPiecewiseConstantInterestRateModel();
private static final InterestRateFutureSecurityHullWhiteMethod METHOD_IRFUT_HW =
InterestRateFutureSecurityHullWhiteMethod.getInstance();
private static final MarketQuoteHullWhiteCalculator MQHWC =
MarketQuoteHullWhiteCalculator.getInstance();
private static final MarketQuoteCurveSensitivityHullWhiteCalculator MQCSHWC =
MarketQuoteCurveSensitivityHullWhiteCalculator.getInstance();
private static final ConvexityAdjustmentHullWhiteCalculator CAHWC =
ConvexityAdjustmentHullWhiteCalculator.getInstance();
private static final ParRateHullWhiteCalculator PRHWC = ParRateHullWhiteCalculator.getInstance();
private static final double SHIFT_FD = 1.0E-6;
private static final SimpleParameterSensitivityParameterCalculator<
HullWhiteOneFactorProviderInterface>
SPSHWC = new SimpleParameterSensitivityParameterCalculator<>(MQCSHWC);
private static final SimpleParameterSensitivityHullWhiteDiscountInterpolatedFDCalculator
SPSHWC_FD =
new SimpleParameterSensitivityHullWhiteDiscountInterpolatedFDCalculator(MQHWC, SHIFT_FD);
private static final double TOLERANCE_PRICE = 1.0E-10;
private static final double TOLERANCE_PRICE_DELTA = 1.0E-8;
@Test
/** Test the price computed from the curves and HW parameters. */
public void price() {
final double price = METHOD_IRFUT_HW.price(ERU2, HW_MULTICURVES);
final double forward =
MULTICURVES.getSimplyCompoundForwardRate(
EURIBOR3M,
ERU2.getFixingPeriodStartTime(),
ERU2.getFixingPeriodEndTime(),
ERU2.getFixingPeriodAccrualFactor());
final double factor =
MODEL.futuresConvexityFactor(
MODEL_PARAMETERS,
ERU2.getTradingLastTime(),
ERU2.getFixingPeriodStartTime(),
ERU2.getFixingPeriodEndTime());
final double expectedPrice =
1.0 - factor * forward + (1 - factor) / ERU2.getFixingPeriodAccrualFactor();
assertEquals(
"InterestRateFutureSecurityHullWhiteProviderMethod: price",
expectedPrice,
price,
TOLERANCE_PRICE);
}
@Test
/** Test the par rate computed from the curves and HW parameters. Par rate = 1-price. */
public void parRate() {
final double price = METHOD_IRFUT_HW.price(ERU2, HW_MULTICURVES);
final double parRateExpected = 1.0d - price;
final double parRateComputed = METHOD_IRFUT_HW.parRate(ERU2, HW_MULTICURVES);
assertEquals(
"InterestRateFutureSecurityHullWhiteProviderMethod: parRate",
parRateExpected,
parRateComputed,
TOLERANCE_PRICE);
}
@Test
/** Test the par rate computed from the method and the calculator. */
public void parRateMethodVsCalculator() {
final double parRateMethod = METHOD_IRFUT_HW.parRate(ERU2, HW_MULTICURVES);
final double parRateCalculator = ERU2.accept(PRHWC, HW_MULTICURVES);
assertEquals(
"InterestRateFutureSecurityHullWhiteProviderMethod: parRate",
parRateMethod,
parRateCalculator,
TOLERANCE_PRICE);
}
@Test
/** Test the price as "MarketQuote" */
public void marketQuote() {
final double priceMethod = METHOD_IRFUT_HW.price(ERU2, HW_MULTICURVES);
final double marketQuote = ERU2.accept(MQHWC, HW_MULTICURVES);
assertEquals(
"InterestRateFutureSecurityHullWhiteProviderMethod: price",
priceMethod,
marketQuote,
TOLERANCE_PRICE);
}
@Test
/** Test the convexity adjustment */
public void convexityAdjustment() {
final double price = METHOD_IRFUT_HW.price(ERU2, HW_MULTICURVES);
final double forward =
MULTICURVES.getSimplyCompoundForwardRate(
EURIBOR3M,
ERU2.getFixingPeriodStartTime(),
ERU2.getFixingPeriodEndTime(),
ERU2.getFixingPeriodAccrualFactor());
final double convexityAdjustment = METHOD_IRFUT_HW.convexityAdjustment(ERU2, HW_MULTICURVES);
assertEquals(
"InterestRateFutureSecurityHullWhiteProviderMethod: convexity adjustment",
price - (1.0d - forward),
convexityAdjustment,
TOLERANCE_PRICE);
final double caCalculator = ERU2.accept(CAHWC, HW_MULTICURVES);
assertEquals(
"DeliverableSwapFuturesSecurityDefinition: convexity adjustment",
caCalculator,
convexityAdjustment,
TOLERANCE_PRICE);
}
@Test
/** Test the price curve sensitivity versus a finite difference computation. */
public void priceCurveSensitivity() {
final SimpleParameterSensitivity pcsExact =
SPSHWC.calculateSensitivity(ERU2, HW_MULTICURVES, MULTICURVES.getAllNames());
final SimpleParameterSensitivity pcsFD = SPSHWC_FD.calculateSensitivity(ERU2, HW_MULTICURVES);
AssertSensitivityObjects.assertEquals(
"DeliverableSwapFuturesSecurityHullWhiteMethod: priceCurveSensitivity",
pcsExact,
pcsFD,
TOLERANCE_PRICE_DELTA);
}
}