def test_BondOptionZEROVOLConvergence():
# Build discount curve
settlement_date = Date(1, 9, 2019)
rate = 0.05
discount_curve = DiscountCurveFlat(settlement_date, rate,
FrequencyTypes.ANNUAL)
# Bond details
issue_date = Date(1, 9, 2014)
maturity_date = Date(1, 9, 2025)
coupon = 0.06
freq_type = FrequencyTypes.ANNUAL
accrual_type = DayCountTypes.ACT_ACT_ICMA
bond = Bond(issue_date, maturity_date, coupon, freq_type, accrual_type)
# Option Details
expiry_date = Date(1, 12, 2021)
face = 100.0
dfExpiry = discount_curve.df(expiry_date)
fwdCleanValue = bond.clean_price_from_discount_curve(
expiry_date, discount_curve)
# fwdFullValue = bond.full_price_from_discount_curve(expiry_date, discount_curve)
# print("BOND FwdCleanBondPx", fwdCleanValue)
# print("BOND FwdFullBondPx", fwdFullValue)
# print("BOND Accrued:", bond._accruedInterest)
spotCleanValue = bond.clean_price_from_discount_curve(
settlement_date, discount_curve)
testCases.header("STRIKE", "STEPS", "CALL_INT", "CALL_INT_PV", "CALL_EUR",
"CALL_AMER", "PUT_INT", "PUT_INT_PV", "PUT_EUR",
"PUT_AMER")
numTimeSteps = range(100, 1000, 100)
strikePrices = [90, 100, 110, 120]
for strikePrice in strikePrices:
callIntrinsic = max(spotCleanValue - strikePrice, 0)
putIntrinsic = max(strikePrice - spotCleanValue, 0)
callIntrinsicPV = max(fwdCleanValue - strikePrice, 0) * dfExpiry
putIntrinsicPV = max(strikePrice - fwdCleanValue, 0) * dfExpiry
for num_steps in numTimeSteps:
sigma = 0.0000001
a = 0.1
model = FinModelRatesHW(sigma, a, num_steps)
optionType = FinOptionTypes.EUROPEAN_CALL
bondOption1 = BondOption(bond, expiry_date, strikePrice, face,
optionType)
v1 = bondOption1.value(settlement_date, discount_curve, model)
optionType = FinOptionTypes.AMERICAN_CALL
bondOption2 = BondOption(bond, expiry_date, strikePrice, face,
optionType)
v2 = bondOption2.value(settlement_date, discount_curve, model)
optionType = FinOptionTypes.EUROPEAN_PUT
bondOption3 = BondOption(bond, expiry_date, strikePrice, face,
optionType)
v3 = bondOption3.value(settlement_date, discount_curve, model)
optionType = FinOptionTypes.AMERICAN_PUT
bondOption4 = BondOption(bond, expiry_date, strikePrice, face,
optionType)
v4 = bondOption4.value(settlement_date, discount_curve, model)
testCases.print(strikePrice, num_steps, callIntrinsic,
callIntrinsicPV, v1, v2, putIntrinsic,
putIntrinsicPV, v3, v4)
def test_HullWhiteCallableBond():
# Valuation of a European option on a coupon bearing bond
settlement_date = Date(1, 12, 2019)
issue_date = Date(1, 12, 2018)
maturity_date = settlement_date.addTenor("10Y")
coupon = 0.05
freq_type = FrequencyTypes.SEMI_ANNUAL
accrual_type = DayCountTypes.ACT_ACT_ICMA
bond = Bond(issue_date, maturity_date, coupon, freq_type, accrual_type)
coupon_times = []
coupon_flows = []
cpn = bond._coupon/bond._frequency
for flowDate in bond._flow_dates[1:]:
if flowDate > settlement_date:
flow_time = (flowDate - settlement_date) / gDaysInYear
coupon_times.append(flow_time)
coupon_flows.append(cpn)
coupon_times = np.array(coupon_times)
coupon_flows = np.array(coupon_flows)
###########################################################################
# Set up the call and put times and prices
###########################################################################
call_dates = []
call_prices = []
callPx = 120.0
call_dates.append(settlement_date.addTenor("2Y")); call_prices.append(callPx)
call_dates.append(settlement_date.addTenor("3Y")); call_prices.append(callPx)
call_dates.append(settlement_date.addTenor("4Y")); call_prices.append(callPx)
call_dates.append(settlement_date.addTenor("5Y")); call_prices.append(callPx)
call_dates.append(settlement_date.addTenor("6Y")); call_prices.append(callPx)
call_dates.append(settlement_date.addTenor("7Y")); call_prices.append(callPx)
call_dates.append(settlement_date.addTenor("8Y")); call_prices.append(callPx)
call_times = []
for dt in call_dates:
t = (dt - settlement_date) / gDaysInYear
call_times.append(t)
put_dates = []
put_prices = []
putPx = 98.0
put_dates.append(settlement_date.addTenor("2Y")); put_prices.append(putPx)
put_dates.append(settlement_date.addTenor("3Y")); put_prices.append(putPx)
put_dates.append(settlement_date.addTenor("4Y")); put_prices.append(putPx)
put_dates.append(settlement_date.addTenor("5Y")); put_prices.append(putPx)
put_dates.append(settlement_date.addTenor("6Y")); put_prices.append(putPx)
put_dates.append(settlement_date.addTenor("7Y")); put_prices.append(putPx)
put_dates.append(settlement_date.addTenor("8Y")); put_prices.append(putPx)
put_times = []
for dt in put_dates:
t = (dt - settlement_date) / gDaysInYear
put_times.append(t)
###########################################################################
tmat = (maturity_date - settlement_date) / gDaysInYear
curve = DiscountCurveFlat(settlement_date, 0.05, FrequencyTypes.CONTINUOUS)
dfs = []
times = []
for dt in bond._flow_dates:
if dt > settlement_date:
t = (dt - settlement_date) / gDaysInYear
df = curve.df(dt)
times.append(t)
dfs.append(df)
dfs = np.array(dfs)
times = np.array(times)
###########################################################################
v1 = bond.clean_price_from_discount_curve(settlement_date, curve)
sigma = 0.02 # basis point volatility
a = 0.01
# Test convergence
num_stepsList = [100, 200, 500, 1000]
tmat = (maturity_date - settlement_date)/gDaysInYear
testCases.header("NUMSTEPS", "TIME", "BOND_ONLY", "CALLABLE_BOND")
for numTimeSteps in num_stepsList:
start = time.time()
model = FinModelRatesHW(sigma, a, numTimeSteps)
model.buildTree(tmat, times, dfs)
v2 = model.callablePuttableBond_Tree(coupon_times, coupon_flows,
call_times, call_prices,
put_times, put_prices, 100.0)
end = time.time()
period = end-start
testCases.print(numTimeSteps, period, v1, v2)
