/**
* Builder from the expiry date, the underlying swap and the long/short flqg.
*
* @param expiryDate The expiry date.
* @param underlyingSwap The underlying swap.
* @param isLong The long (true) / short (false) flag.
* @return The swaption.
*/
public static SwaptionCashFixedIborDefinition from(
final ZonedDateTime expiryDate,
final SwapFixedIborDefinition underlyingSwap,
final boolean isLong) {
Validate.notNull(expiryDate, "expiry date");
Validate.notNull(underlyingSwap, "underlying swap");
final double strike = underlyingSwap.getFixedLeg().getNthPayment(0).getRate();
// Implementation note: cash-settle swaptions underlying have the same rate on all coupons and
// standard conventions.
return new SwaptionCashFixedIborDefinition(
expiryDate, strike, underlyingSwap, underlyingSwap.getFixedLeg().isPayer(), isLong);
}
/**
* Constructor from the expiry date, the underlying swap and the long/short flag.
*
* @param expiryDate The expiry date.
* @param strike The strike
* @param underlyingSwap The underlying swap.
* @param isCall Call.
* @param isLong The long (true) / short (false) flag.
*/
private SwaptionCashFixedIborDefinition(
final ZonedDateTime expiryDate,
final double strike,
final SwapFixedIborDefinition underlyingSwap,
final boolean isCall,
final boolean isLong) {
Validate.notNull(expiryDate, "expiry date");
Validate.notNull(underlyingSwap, "underlying swap");
Validate.isTrue(
isCall == underlyingSwap.getFixedLeg().isPayer(), "Call flag not in line with underlying");
// TODO do we need to check that the swaption expiry is consistent with the underlying swap?
_underlyingSwap = underlyingSwap;
_isLong = isLong;
_settlementDate = underlyingSwap.getFixedLeg().getNthPayment(0).getAccrualStartDate();
_expiry = new Expiry(expiryDate);
}
/** Tests related to the construction of CapFloorCMSSpread. */
public class CapFloorCMSSpreadTest {
// Swaps
private static final Currency CUR = Currency.USD;
private static final Calendar CALENDAR = new MondayToFridayCalendar("A");
private static final BusinessDayConvention BUSINESS_DAY =
BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Modified Following");
private static final boolean IS_EOM = true;
private static final ZonedDateTime SETTLEMENT_DATE = DateUtils.getUTCDate(2011, 3, 17);
private static final Period FIXED_PAYMENT_PERIOD = Period.ofMonths(6);
private static final DayCount FIXED_DAY_COUNT = DayCountFactory.INSTANCE.getDayCount("30/360");
private static final boolean FIXED_IS_PAYER = true; // Irrelevant for the underlying
private static final double RATE = 0.0; // Irrelevant for the underlying
private static final Period INDEX_TENOR = Period.ofMonths(3);
private static final int SETTLEMENT_DAYS = 2;
private static final DayCount DAY_COUNT = DayCountFactory.INSTANCE.getDayCount("Actual/360");
private static final IborIndex IBOR_INDEX =
new IborIndex(CUR, INDEX_TENOR, SETTLEMENT_DAYS, CALENDAR, DAY_COUNT, BUSINESS_DAY, IS_EOM);
// Swap 10Y
private static final Period ANNUITY_TENOR_1 = Period.ofYears(10);
private static final IndexSwap CMS_INDEX_1 =
new IndexSwap(FIXED_PAYMENT_PERIOD, FIXED_DAY_COUNT, IBOR_INDEX, ANNUITY_TENOR_1);
private static final SwapFixedIborDefinition SWAP_DEFINITION_1 =
SwapFixedIborDefinition.from(SETTLEMENT_DATE, CMS_INDEX_1, 1.0, RATE, FIXED_IS_PAYER);
// Swap 2Y
private static final Period ANNUITY_TENOR_2 = Period.ofYears(2);
private static final IndexSwap CMS_INDEX_2 =
new IndexSwap(FIXED_PAYMENT_PERIOD, FIXED_DAY_COUNT, IBOR_INDEX, ANNUITY_TENOR_2);
private static final SwapFixedIborDefinition SWAP_DEFINITION_2 =
SwapFixedIborDefinition.from(SETTLEMENT_DATE, CMS_INDEX_2, 1.0, RATE, FIXED_IS_PAYER);
// CMS spread coupon
private static final double NOTIONAL = 10000000;
private static final ZonedDateTime PAYMENT_DATE = DateUtils.getUTCDate(2011, 4, 6);
private static final ZonedDateTime FIXING_DATE = DateUtils.getUTCDate(2010, 12, 30);
private static final ZonedDateTime ACCRUAL_START_DATE = DateUtils.getUTCDate(2011, 1, 5);
private static final ZonedDateTime ACCRUAL_END_DATE = DateUtils.getUTCDate(2011, 4, 5);
private static final DayCount PAYMENT_DAY_COUNT =
DayCountFactory.INSTANCE.getDayCount("Actual/360");
private static final double PAYMENT_ACCRUAL_FACTOR =
PAYMENT_DAY_COUNT.getDayCountFraction(ACCRUAL_START_DATE, ACCRUAL_END_DATE);
private static final double STRIKE = 0.0050; // 50 bps
private static final boolean IS_CAP = true;
// to derivatives
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2010, 8, 18);
private static final String FUNDING_CURVE_NAME = "Funding";
private static final String FORWARD_CURVE_1_NAME = "Forward 1";
// private static final String FORWARD_CURVE_2_NAME = "Forward 2";
private static final String[] CURVES_2_NAME = {FUNDING_CURVE_NAME, FORWARD_CURVE_1_NAME};
// private static final String[] CURVES_3_NAME = {FUNDING_CURVE_NAME, FORWARD_CURVE_1_NAME,
// FORWARD_CURVE_2_NAME};
private static final FixedCouponSwap<? extends Payment> SWAP_1 =
SWAP_DEFINITION_1.toDerivative(REFERENCE_DATE, CURVES_2_NAME);
private static final FixedCouponSwap<? extends Payment> SWAP_2 =
SWAP_DEFINITION_2.toDerivative(REFERENCE_DATE, CURVES_2_NAME);
private static final DayCount ACT_ACT =
DayCountFactory.INSTANCE.getDayCount("Actual/Actual ISDA");
private static final ZonedDateTime REFERENCE_DATE_ZONED =
ZonedDateTime.of(LocalDateTime.ofMidnight(REFERENCE_DATE), TimeZone.UTC);
private static final double PAYMENT_TIME =
ACT_ACT.getDayCountFraction(REFERENCE_DATE_ZONED, PAYMENT_DATE);
private static final double FIXING_TIME =
ACT_ACT.getDayCountFraction(REFERENCE_DATE_ZONED, FIXING_DATE);
private static final double SETTLEMENT_TIME =
ACT_ACT.getDayCountFraction(
REFERENCE_DATE_ZONED,
SWAP_DEFINITION_1.getFixedLeg().getNthPayment(0).getAccrualStartDate());
private static final CapFloorCMSSpread CMS_SPREAD =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME,
SWAP_1,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
@Test
public void testGetter() {
assertEquals(SWAP_1, CMS_SPREAD.getUnderlyingSwap1());
assertEquals(CMS_INDEX_1, CMS_SPREAD.getCmsIndex1());
assertEquals(SWAP_2, CMS_SPREAD.getUnderlyingSwap2());
assertEquals(CMS_INDEX_2, CMS_SPREAD.getCmsIndex2());
assertEquals(STRIKE, CMS_SPREAD.getStrike(), 1E-10);
assertEquals(IS_CAP, CMS_SPREAD.isCap());
}
@Test
public void testEqualHash() {
final CapFloorCMSSpread newCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME,
SWAP_1,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(newCMSSpread.equals(CMS_SPREAD), true);
assertEquals(newCMSSpread.hashCode() == CMS_SPREAD.hashCode(), true);
final Currency newCur = Currency.EUR;
CapFloorCMSSpread modifiedCMSSpread;
modifiedCMSSpread =
new CapFloorCMSSpread(
newCur,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME,
SWAP_1,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
modifiedCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME + 1.0,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME,
SWAP_1,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
modifiedCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR + 1.0,
NOTIONAL,
FIXING_TIME,
SWAP_1,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
modifiedCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL + 1.0,
FIXING_TIME,
SWAP_1,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
modifiedCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME + 1.0,
SWAP_1,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
modifiedCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME,
SWAP_1,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME + 1.0,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
modifiedCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME,
SWAP_1,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE + 1.0,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
modifiedCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME,
SWAP_1,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE,
!IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
modifiedCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME,
SWAP_2,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
modifiedCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME,
SWAP_1,
CMS_INDEX_2,
SWAP_2,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
modifiedCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME,
SWAP_1,
CMS_INDEX_1,
SWAP_1,
CMS_INDEX_2,
SETTLEMENT_TIME,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
modifiedCMSSpread =
new CapFloorCMSSpread(
CUR,
PAYMENT_TIME,
PAYMENT_ACCRUAL_FACTOR,
NOTIONAL,
FIXING_TIME,
SWAP_1,
CMS_INDEX_1,
SWAP_2,
CMS_INDEX_1,
SETTLEMENT_TIME,
STRIKE,
IS_CAP,
FUNDING_CURVE_NAME);
assertEquals(modifiedCMSSpread.equals(CMS_SPREAD), false);
}
}
