/**
* Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.future.provider;
import static org.testng.AssertJUnit.assertEquals;
import org.apache.commons.math.stat.descriptive.rank.Min;
import org.testng.annotations.Test;
import org.threeten.bp.Period;
import org.threeten.bp.ZonedDateTime;
import com.opengamma.analytics.financial.instrument.bond.BondFixedSecurityDefinition;
import com.opengamma.analytics.financial.interestrate.bond.definition.BondFixedSecurity;
import com.opengamma.analytics.financial.interestrate.bond.provider.BondSecurityDiscountingMethod;
import com.opengamma.analytics.financial.interestrate.future.derivative.BondFuturesSecurity;
import com.opengamma.analytics.financial.provider.description.IssuerProviderDiscountDataSets;
import com.opengamma.analytics.financial.provider.description.interestrate.IssuerProviderDiscount;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MulticurveSensitivity;
import com.opengamma.analytics.financial.schedule.ScheduleCalculator;
import com.opengamma.analytics.financial.util.AssertSensivityObjects;
import com.opengamma.analytics.util.time.TimeCalculator;
import com.opengamma.financial.convention.businessday.BusinessDayConvention;
import com.opengamma.financial.convention.businessday.BusinessDayConventionFactory;
import com.opengamma.financial.convention.calendar.Calendar;
import com.opengamma.financial.convention.calendar.MondayToFridayCalendar;
import com.opengamma.financial.convention.daycount.DayCount;
import com.opengamma.financial.convention.daycount.DayCountFactory;
import com.opengamma.financial.convention.yield.YieldConvention;
import com.opengamma.financial.convention.yield.YieldConventionFactory;
import com.opengamma.util.money.Currency;
import com.opengamma.util.time.DateUtils;
/**
* Tests related to the bond future figures computed by discounting.
*/
public class BondFuturesSecurityDiscountingMethodTest {
private final static IssuerProviderDiscount ISSUER_MULTICURVES = IssuerProviderDiscountDataSets.createIssuerProvider();
private final static String[] ISSUER_NAMES = IssuerProviderDiscountDataSets.getIssuerNames();
// 5-Year U.S. Treasury Note Futures: FVU1
private static final Currency USD = Currency.USD;
private static final Period PAYMENT_TENOR = Period.ofMonths(6);
private static final Calendar CALENDAR = new MondayToFridayCalendar("A");
private static final String US_GOVT = ISSUER_NAMES[0];
private static final DayCount DAY_COUNT = DayCountFactory.INSTANCE.getDayCount("Actual/Actual ICMA");
private static final BusinessDayConvention BUSINESS_DAY = BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Following");
private static final boolean IS_EOM = false;
private static final int SETTLEMENT_DAYS = 1;
private static final YieldConvention YIELD_CONVENTION = YieldConventionFactory.INSTANCE.getYieldConvention("STREET CONVENTION");
private static final int NB_BOND = 7;
private static final Period[] BOND_TENOR = new Period[] {Period.ofYears(5), Period.ofYears(5), Period.ofYears(5), Period.ofYears(8), Period.ofYears(5), Period.ofYears(5), Period.ofYears(5) };
private static final ZonedDateTime[] START_ACCRUAL_DATE = new ZonedDateTime[] {DateUtils.getUTCDate(2010, 11, 30), DateUtils.getUTCDate(2010, 12, 31), DateUtils.getUTCDate(2011, 1, 31),
DateUtils.getUTCDate(2008, 2, 29), DateUtils.getUTCDate(2011, 3, 31), DateUtils.getUTCDate(2011, 4, 30), DateUtils.getUTCDate(2011, 5, 31) };
private static final double[] RATE = new double[] {0.01375, 0.02125, 0.0200, 0.02125, 0.0225, 0.0200, 0.0175 };
private static final double[] CONVERSION_FACTOR = new double[] {.8317, .8565, .8493, .8516, .8540, .8417, .8292 };
private static final ZonedDateTime[] MATURITY_DATE = new ZonedDateTime[NB_BOND];
private static final BondFixedSecurityDefinition[] BASKET_DEFINITION = new BondFixedSecurityDefinition[NB_BOND];
static {
for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) {
MATURITY_DATE[loopbasket] = START_ACCRUAL_DATE[loopbasket].plus(BOND_TENOR[loopbasket]);
BASKET_DEFINITION[loopbasket] = BondFixedSecurityDefinition.from(USD, MATURITY_DATE[loopbasket], START_ACCRUAL_DATE[loopbasket], PAYMENT_TENOR, RATE[loopbasket], SETTLEMENT_DAYS, CALENDAR,
DAY_COUNT, BUSINESS_DAY, YIELD_CONVENTION, IS_EOM, US_GOVT);
}
}
private static final ZonedDateTime LAST_TRADING_DATE = DateUtils.getUTCDate(2011, 9, 30);
private static final ZonedDateTime FIRST_NOTICE_DATE = DateUtils.getUTCDate(2011, 8, 31);
private static final ZonedDateTime LAST_NOTICE_DATE = DateUtils.getUTCDate(2011, 10, 4);
private static final ZonedDateTime FIRST_DELIVERY_DATE = ScheduleCalculator.getAdjustedDate(FIRST_NOTICE_DATE, SETTLEMENT_DAYS, CALENDAR);
private static final ZonedDateTime LAST_DELIVERY_DATE = ScheduleCalculator.getAdjustedDate(LAST_NOTICE_DATE, SETTLEMENT_DAYS, CALENDAR);
private static final double NOTIONAL = 100000;
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 6, 20);
private static final double LAST_TRADING_TIME = TimeCalculator.getTimeBetween(REFERENCE_DATE, LAST_TRADING_DATE);
private static final double FIRST_NOTICE_TIME = TimeCalculator.getTimeBetween(REFERENCE_DATE, FIRST_NOTICE_DATE);
private static final double LAST_NOTICE_TIME = TimeCalculator.getTimeBetween(REFERENCE_DATE, LAST_NOTICE_DATE);
private static final double FIRST_DELIVERY_TIME = TimeCalculator.getTimeBetween(REFERENCE_DATE, FIRST_DELIVERY_DATE);
private static final double LAST_DELIVERY_TIME = TimeCalculator.getTimeBetween(REFERENCE_DATE, LAST_DELIVERY_DATE);
private static final BondFixedSecurity[] BASKET = new BondFixedSecurity[NB_BOND];
private static final BondFixedSecurity[] STANDARD = new BondFixedSecurity[NB_BOND];
static {
for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) {
BASKET[loopbasket] = BASKET_DEFINITION[loopbasket].toDerivative(REFERENCE_DATE, LAST_DELIVERY_DATE);
STANDARD[loopbasket] = BASKET_DEFINITION[loopbasket].toDerivative(REFERENCE_DATE);
}
}
private static final BondFuturesSecurity BOND_FUTURE = new BondFuturesSecurity(LAST_TRADING_TIME, FIRST_NOTICE_TIME, LAST_NOTICE_TIME, FIRST_DELIVERY_TIME, LAST_DELIVERY_TIME, NOTIONAL, BASKET,
CONVERSION_FACTOR);
private static final BondFuturesSecurityDiscountingMethod METHOD_FUT_SEC_DSC = BondFuturesSecurityDiscountingMethod.getInstance();
private static final BondSecurityDiscountingMethod METHOD_BOND_SEC = BondSecurityDiscountingMethod.getInstance();
private static final Min MIN_FUNCTION = new Min();
private static final double TOLERANCE_PRICE = 1.0E-8;
private static final double TOLERANCE_PRICE_DELTA = 1.0E-6;
@Test
public void price() {
final double priceComputed = METHOD_FUT_SEC_DSC.price(BOND_FUTURE, ISSUER_MULTICURVES);
final double[] bondForwardPrice = new double[NB_BOND];
final double[] bondForwardPriceAdjusted = new double[NB_BOND];
double priceExpected = 2.0;
for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) {
bondForwardPrice[loopbasket] = METHOD_BOND_SEC.cleanPriceFromCurves(BASKET[loopbasket], ISSUER_MULTICURVES);
bondForwardPriceAdjusted[loopbasket] = bondForwardPrice[loopbasket] / CONVERSION_FACTOR[loopbasket];
priceExpected = Math.min(priceExpected, bondForwardPriceAdjusted[loopbasket]);
}
assertEquals("Bond future security Discounting Method: price from curves", priceExpected, priceComputed, TOLERANCE_PRICE);
}
@Test
/**
* Tests the computation of the price curve sensitivity.
*/
public void priceCurveSensitivity() {
MulticurveSensitivity sensiFuture = METHOD_FUT_SEC_DSC.priceCurveSensitivity(BOND_FUTURE, ISSUER_MULTICURVES);
final double[] bondForwardPrice = new double[NB_BOND];
final double[] bondFuturePrice = new double[NB_BOND];
double minPrice = 100.0;
int minIndex = 0;
for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) {
bondForwardPrice[loopbasket] = METHOD_BOND_SEC.dirtyPriceFromCurves(BASKET[loopbasket], ISSUER_MULTICURVES);
bondFuturePrice[loopbasket] = (bondForwardPrice[loopbasket] - BASKET[loopbasket].getAccruedInterest()) / CONVERSION_FACTOR[loopbasket];
if (bondFuturePrice[loopbasket] < minPrice) {
minPrice = (bondForwardPrice[loopbasket] - BASKET[loopbasket].getAccruedInterest()) / CONVERSION_FACTOR[loopbasket];
minIndex = loopbasket;
}
}
MulticurveSensitivity sensiBond = METHOD_BOND_SEC.dirtyPriceCurveSensitivity(BASKET[minIndex], ISSUER_MULTICURVES);
sensiBond = sensiBond.multipliedBy(1.0 / CONVERSION_FACTOR[minIndex]);
sensiFuture = sensiFuture.cleaned();
sensiBond = sensiBond.cleaned();
AssertSensivityObjects.assertEquals("BondFutureSecurityDiscountingMethod: priceCurveSensitivity", sensiBond, sensiFuture, TOLERANCE_PRICE_DELTA);
}
@Test
/**
* Tests the net basis of all bonds computed from the curves.
*/
public void netBasisAllBonds() {
//final double priceFuture = 1.0320;
final double priceFuture = METHOD_FUT_SEC_DSC.price(BOND_FUTURE, ISSUER_MULTICURVES);
final double[] netBasisComputed = METHOD_FUT_SEC_DSC.netBasisAllBonds(BOND_FUTURE, ISSUER_MULTICURVES, priceFuture);
final double[] netBasisExpected = new double[NB_BOND];
for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) {
final double bondPriceForward = METHOD_BOND_SEC.dirtyPriceFromCurves(BOND_FUTURE.getDeliveryBasket()[loopbasket], ISSUER_MULTICURVES);
netBasisExpected[loopbasket] = bondPriceForward - (priceFuture * CONVERSION_FACTOR[loopbasket] + BOND_FUTURE.getDeliveryBasket()[loopbasket].getAccruedInterest());
assertEquals("Bond future security Discounting Method: netBasis", netBasisExpected[loopbasket], netBasisComputed[loopbasket], 1.0E-10);
}
final Min minFunction = new Min();
final double netBasisMin = minFunction.evaluate(netBasisComputed);
final double priceFutureFromNetBasis = METHOD_FUT_SEC_DSC.priceFromNetBasis(BOND_FUTURE, ISSUER_MULTICURVES, netBasisMin);
assertEquals("Bond future security Discounting Method: netBasis", priceFuture, priceFutureFromNetBasis, 1.0E-10);
}
@Test
/**
* Tests the net basis of the cheapest to deliver computed from the curves.
*/
public void netBasisCheapest() {
final double netBasisInput = 0.0001;
final double priceFuture = METHOD_FUT_SEC_DSC.price(BOND_FUTURE, ISSUER_MULTICURVES) + netBasisInput;
final double netBasisCheapest = METHOD_FUT_SEC_DSC.netBasisCheapest(BOND_FUTURE, ISSUER_MULTICURVES, priceFuture);
final double[] netBasisAll = METHOD_FUT_SEC_DSC.netBasisAllBonds(BOND_FUTURE, ISSUER_MULTICURVES, priceFuture);
assertEquals("Bond future security Discounting Method: netBasis", MIN_FUNCTION.evaluate(netBasisAll), netBasisCheapest, TOLERANCE_PRICE);
}
@Test
/**
* Tests the cheapest to deliver figures: yield, modified duration and gross basis.
*/
public void cheapestToDeliver() {
final double yieldTest = 0.01345;
final double priceTest = 1.03414063;
final double mdTest = 4.271;
final double grossBasisTest = 20.718; // Quoted in 32ds of %
final double futurePriceTest = 1.19984375;
final double[] priceCTD = new double[NB_BOND];
final double[] mdCTD = new double[NB_BOND];
final double[] yieldCTD = new double[NB_BOND];
for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) {
priceCTD[loopbasket] = priceTest;
mdCTD[loopbasket] = METHOD_BOND_SEC.modifiedDurationFromYield(STANDARD[loopbasket], yieldTest);
yieldCTD[loopbasket] = METHOD_BOND_SEC.yieldFromCleanPrice(STANDARD[loopbasket], priceTest);
}
final double[] grossBasis = METHOD_FUT_SEC_DSC.grossBasisFromPrices(BOND_FUTURE, priceCTD, futurePriceTest);
final int ctdIndex = 1;
assertEquals("Bond future security: CTD - yield from price", yieldTest, yieldCTD[ctdIndex], 1.0E-4);
assertEquals("Bond future security: CTD - modified duration from yield", mdTest, mdCTD[ctdIndex], 1.0E-3);
assertEquals("Bond future security: CTD - gross basis from price", grossBasisTest / 100.0 / 32.0, grossBasis[ctdIndex], 1.0E-7);
}
@Test
/**
* Tests the gross basis computed from clean prices
*/
public void grossBasis() {
final double futurePriceTest = 1.19984375;
final double[] pricesTest = new double[] {0.86, 0.885, 0.88, 0.8825, 0.885, 0.8725, 0.86 };
final double[] pricesCurves = new double[NB_BOND];
for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) {
pricesCurves[loopbasket] = METHOD_BOND_SEC.cleanPriceFromCurves(BOND_FUTURE.getDeliveryBasket()[loopbasket], ISSUER_MULTICURVES);
}
final double[] basisComputedTest = METHOD_FUT_SEC_DSC.grossBasisFromPrices(BOND_FUTURE, pricesTest, futurePriceTest);
final double[] basisComputedCurves = METHOD_FUT_SEC_DSC.grossBasisFromPrices(BOND_FUTURE, pricesCurves, futurePriceTest);
final double[] basisExpectedTest = new double[NB_BOND];
final double[] basisExpectedCurves = new double[NB_BOND];
for (int loopbasket = 0; loopbasket < NB_BOND; loopbasket++) {
basisExpectedTest[loopbasket] = (pricesTest[loopbasket] - futurePriceTest * CONVERSION_FACTOR[loopbasket]);
basisExpectedCurves[loopbasket] = (pricesCurves[loopbasket] - futurePriceTest * CONVERSION_FACTOR[loopbasket]);
assertEquals("Gross basis from prices", basisExpectedTest[loopbasket], basisComputedTest[loopbasket], 1.0E-10);
assertEquals("Gross basis from curves", basisExpectedCurves[loopbasket], basisComputedCurves[loopbasket], 1.0E-10);
}
}
}