/**
* Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.bond.provider;
import static com.opengamma.financial.convention.yield.SimpleYieldConvention.INDEX_LINKED_FLOAT;
import static com.opengamma.financial.convention.yield.SimpleYieldConvention.UK_IL_BOND;
import static com.opengamma.financial.convention.yield.SimpleYieldConvention.US_IL_REAL;
import org.apache.commons.lang.Validate;
import com.opengamma.OpenGammaRuntimeException;
import com.opengamma.analytics.financial.instrument.inflation.CouponInflationGearing;
import com.opengamma.analytics.financial.interestrate.bond.definition.BondCapitalIndexedSecurity;
import com.opengamma.analytics.financial.interestrate.inflation.derivative.CouponInflationZeroCouponInterpolationGearing;
import com.opengamma.analytics.financial.interestrate.inflation.derivative.CouponInflationZeroCouponMonthlyGearing;
import com.opengamma.analytics.financial.interestrate.payments.derivative.Coupon;
import com.opengamma.analytics.financial.provider.calculator.inflation.NetAmountInflationCalculator;
import com.opengamma.analytics.financial.provider.calculator.inflation.PresentValueCurveSensitivityDiscountingInflationCalculator;
import com.opengamma.analytics.financial.provider.calculator.inflation.PresentValueDiscountingInflationCalculator;
import com.opengamma.analytics.financial.provider.description.inflation.InflationIssuerProviderInterface;
import com.opengamma.analytics.financial.provider.description.inflation.InflationIssuerProviderIssuerDecoratedSpread;
import com.opengamma.analytics.financial.provider.description.inflation.InflationProviderDecoratedMulticurve;
import com.opengamma.analytics.financial.provider.description.inflation.InflationProviderInterface;
import com.opengamma.analytics.financial.provider.description.inflation.ParameterInflationIssuerProviderInterface;
import com.opengamma.analytics.financial.provider.description.interestrate.MulticurveProviderDiscountingDecoratedIssuer;
import com.opengamma.analytics.financial.provider.description.interestrate.MulticurveProviderInterface;
import com.opengamma.analytics.financial.provider.sensitivity.inflation.MultipleCurrencyInflationSensitivity;
import com.opengamma.analytics.math.function.Function1D;
import com.opengamma.analytics.math.rootfinding.BracketRoot;
import com.opengamma.analytics.math.rootfinding.BrentSingleRootFinder;
import com.opengamma.analytics.math.rootfinding.RealSingleRootFinder;
import com.opengamma.financial.convention.yield.YieldConvention;
import com.opengamma.util.ArgumentChecker;
import com.opengamma.util.money.Currency;
import com.opengamma.util.money.MultipleCurrencyAmount;
/**
* Pricing method for inflation bond. The price is computed by index estimation and discounting.
*/
public final class BondCapitalIndexedSecurityDiscountingMethod {
/**
* The unique instance of the class.
*/
private static final BondCapitalIndexedSecurityDiscountingMethod INSTANCE = new BondCapitalIndexedSecurityDiscountingMethod();
/**
* Return the class instance.
* @return The instance.
*/
public static BondCapitalIndexedSecurityDiscountingMethod getInstance() {
return INSTANCE;
}
/**
* The present value inflation calculator (for the different parts of the bond transaction).
*/
private static final PresentValueDiscountingInflationCalculator PVIC = PresentValueDiscountingInflationCalculator.getInstance();
private static final NetAmountInflationCalculator NAIC = NetAmountInflationCalculator.getInstance();
private static final PresentValueCurveSensitivityDiscountingInflationCalculator PVCSIC = PresentValueCurveSensitivityDiscountingInflationCalculator.getInstance();
//TODO: REVIEW: Method depends on Calculator; Calculator would depend on Method (code duplicated to avoid circularity).
/**
* The root bracket used for yield finding.
*/
private static final BracketRoot BRACKETER = new BracketRoot();
/**
* The root finder used for yield finding.
*/
private static final RealSingleRootFinder ROOT_FINDER = new BrentSingleRootFinder();
/**
* Computes the present value of a capital indexed bound by index estimation and discounting. The value is the value of the nominal and the coupons but not the settlement.
* @param bond The bond.
* @param provider The provider.
* @return The present value.
*/
public MultipleCurrencyAmount presentValue(final BondCapitalIndexedSecurity<?> bond,
final ParameterInflationIssuerProviderInterface provider) {
ArgumentChecker.notNull(bond, "Bond");
MulticurveProviderInterface multicurveDecorated = new MulticurveProviderDiscountingDecoratedIssuer(
provider.getIssuerProvider(), bond.getCurrency(), bond.getIssuerEntity());
InflationProviderInterface inflationDecorated = new InflationProviderDecoratedMulticurve(
provider.getInflationProvider(), multicurveDecorated);
final MultipleCurrencyAmount pvNominal = bond.getNominal().accept(PVIC, inflationDecorated);
final MultipleCurrencyAmount pvCoupon = bond.getCoupon().accept(PVIC, inflationDecorated);
return pvNominal.plus(pvCoupon);
}
/**
* Computes the security present value from a quoted clean real price. The real accrued are added to the clean real price,
* the result is multiplied by the inflation index ratio and then discounted from settlement time to 0 with the discounting curve.
* @param bond The bond security.
* @param market The market.
* @param cleanPriceReal The real clean price.
* @return The present value.
*/
public MultipleCurrencyAmount presentValueFromCleanRealPrice(final BondCapitalIndexedSecurity<?> bond,
final InflationIssuerProviderInterface market, final double cleanPriceReal) {
Validate.notNull(bond, "Coupon");
Validate.notNull(market, "Market");
double settlementFactor = bond.getIndexRatio();
final double cleanPriceNominal = cleanPriceReal * settlementFactor;
return presentValueFromCleanNominalPrice(bond, market, cleanPriceNominal);
}
/**
* Computes the security present value from a quoted clean real price.
* The real accrued inflated and discounted from settlement are added to the discounted clean nominal price.
* @param bond The bond security.
* @param market The market.
* @param cleanPriceNominal The nominal clean price.
* @return The present value.
*/
public MultipleCurrencyAmount presentValueFromCleanNominalPrice(final BondCapitalIndexedSecurity<?> bond,
final InflationIssuerProviderInterface market, final double cleanPriceNominal) {
Validate.notNull(bond, "Coupon");
Validate.notNull(market, "Market");
Currency ccy = bond.getCurrency();
final double notional = bond.getCoupon().getNthPayment(0).getNotional();
final MultipleCurrencyAmount nominalAccruedInterest =
bond.getSettlement().accept(PVIC, market.getInflationProvider()).multipliedBy(bond.getAccruedInterest());
double dfSettle = market.getDiscountFactor(ccy, bond.getSettlementTime());
double pvPrice = dfSettle * cleanPriceNominal * notional;
return nominalAccruedInterest.plus(ccy, pvPrice);
}
/**
* Calculates the accrued interest for a fixed-coupon bond using the clean price. The accrued interest is defined
* as dirty price - clean price.
* @param bond The bond, not null
* @param cleanPrice The clean price
* @return The accrued interest
*/
public double accruedInterestFromCleanRealPrice(final BondCapitalIndexedSecurity<?> bond, final double cleanPrice) {
ArgumentChecker.notNull(bond, "bond");
return dirtyRealPriceFromCleanRealPrice(bond, cleanPrice) - cleanPrice;
}
/**
* Calculates the accrued interest for a fixed-coupon bond using the clean price. The accrued interest is defined
* as dirty price - clean price.
* @param bond The bond, not null
* @param yield The yield
* @return The accrued interest
*/
public double accruedInterestFromCleanYield(final BondCapitalIndexedSecurity<?> bond, final double yield) {
ArgumentChecker.notNull(bond, "bond");
return dirtyPriceFromRealYield(bond, yield) - cleanPriceFromYield(bond, yield);
}
/**
* Computes the clean real price of a bond security from a dirty real price.
* @param bond The bond security.
* @param dirtyPrice The dirty price.
* @return The clean price.
*/
public double cleanRealPriceFromDirtyRealPrice(final BondCapitalIndexedSecurity<?> bond, final double dirtyPrice) {
final double notional = bond.getCoupon().getNthPayment(0).getNotional();
return dirtyPrice - bond.getAccruedInterest() / notional;
}
/**
* Computes the clean nominal price of a bond security from a dirty real price.
* @param bond The bond security.
* @param dirtyPrice The dirty price.
* @return The clean price.
*/
public double cleanNominalPriceFromDirtyNominalPrice(final BondCapitalIndexedSecurity<?> bond, final double dirtyPrice) {
final double notional = bond.getCoupon().getNthPayment(0).getNotional();
final double indexRatio = bond.getIndexRatio();
return dirtyPrice - bond.getAccruedInterest() / notional * indexRatio;
}
/**
* Computes the clean price of a bond security from curves.
* @param bond The bond security.
* @param curves The issuer and inflation curve provider.
* @return The clean price.
*/
public double cleanRealPriceFromCurves(
BondCapitalIndexedSecurity<?> bond,
InflationIssuerProviderInterface curves) {
Validate.notNull(bond, "Coupon");
Validate.notNull(curves, "Curves");
Currency ccy = bond.getCurrency();
double indexRatioAtSettlement = bond.getIndexRatio();
double notional = bond.getCoupon().getNthPayment(0).getNotional();
MultipleCurrencyAmount nominalAccruedInterest =
bond.getSettlement().accept(PVIC, curves.getInflationProvider()).multipliedBy(bond.getAccruedInterest() / notional);
double df = curves.getMulticurveProvider().getDiscountFactor(bond.getCurrency(), bond.getSettlementTime());
double pv = presentValue(bond, curves).getAmount(bond.getCurrency());
double pvPriceNominal = pv - nominalAccruedInterest.getAmount(ccy);
return pvPriceNominal / df / notional / indexRatioAtSettlement;
}
/**
* Computes the clean price of a bond security from curves.
* @param bond The bond security.
* @param issuerMulticurves The issuer and multi-curves provider.
* @return The clean price.
*/
public double cleanNominalPriceFromCurves(final BondCapitalIndexedSecurity<?> bond, final InflationIssuerProviderInterface issuerMulticurves) {
final double dirtyNominalPrice = dirtyNominalPriceFromCurves(bond, issuerMulticurves);
return cleanNominalPriceFromDirtyNominalPrice(bond, dirtyNominalPrice);
}
/**
* Computes the clean real price of a bond security from a dirty real price.
* @param bond The bond security.
* @param cleanNominalPrice The clean nominal price.
* @param issuerMulticurves The issuer and multi-curves provider.
* @return The clean price.
*/
public double cleanRealPriceFromCleanNominalPrice(final BondCapitalIndexedSecurity<?> bond, final double cleanNominalPrice, final InflationIssuerProviderInterface issuerMulticurves) {
final double indexRatio = bond.getIndexRatio();
return cleanNominalPrice / indexRatio;
}
/**
* Compute the dirty price of a bond security from curves.
* @param bond The bond security.
* @param issuerMulticurves The issuer and multi-curves provider.
* @return The dirty price.
*/
public double dirtyNominalPriceFromCurves(final BondCapitalIndexedSecurity<?> bond, final InflationIssuerProviderInterface issuerMulticurves) {
ArgumentChecker.notNull(bond, "Bond");
ArgumentChecker.notNull(issuerMulticurves, "Issuer and multi-curves provider");
final MultipleCurrencyAmount pv = presentValue(bond, issuerMulticurves);
final double df = issuerMulticurves.getMulticurveProvider().getDiscountFactor(bond.getCurrency(), bond.getSettlementTime());
final double notional = bond.getCoupon().getNthPayment(0).getNotional();
return pv.getAmount(bond.getCurrency()) / df / notional;
}
/**
* Compute the dirty price of a bond security from curves.
* @param bond The bond security.
* @param curves The issuer and multi-curves provider.
* @return The dirty price.
*/
public double dirtyRealPriceFromCurves(
BondCapitalIndexedSecurity<?> bond,
InflationIssuerProviderInterface curves) {
ArgumentChecker.notNull(bond, "Bond");
ArgumentChecker.notNull(curves, "Issuer and multi-curves provider");
final MultipleCurrencyAmount pv = presentValue(bond, curves);
final double settlement = bond.getIndexRatio();
final double notional = bond.getCoupon().getNthPayment(0).getNotional();
double df = curves.getMulticurveProvider().getDiscountFactor(bond.getCurrency(), bond.getSettlementTime());
return pv.getAmount(bond.getCurrency()) / df / settlement / notional;
}
/**
* Computes the dirty real price of a bond security from the clean real price.
* @param bond The bond security.
* @param cleanPrice The clean price.
* @return The clean price.
*/
public double dirtyRealPriceFromCleanRealPrice(final BondCapitalIndexedSecurity<?> bond, final double cleanPrice) {
final double notional = bond.getCoupon().getNthPayment(0).getNotional();
return cleanPrice + bond.getAccruedInterest() / notional;
}
/**
* The net amount paid at settlement date for a given clean real price.
* @param bond The bond.
* @param market The market.
* @param cleanPriceReal The clean real price.
* @return The net amount.
*/
public MultipleCurrencyAmount netAmount(final BondCapitalIndexedSecurity<Coupon> bond, final InflationIssuerProviderInterface market, final double cleanPriceReal) {
final double notional = bond.getCoupon().getNthPayment(0).getNotional();
final double netAmountRealByUnit = cleanPriceReal + bond.getAccruedInterest() / notional;
final MultipleCurrencyAmount netAmount = bond.getSettlement().accept(NAIC, market.getInflationProvider());
return netAmount.multipliedBy(netAmountRealByUnit);
}
/**
* Computes the dirty (real or nominal depending of the convention) price from the conventional real yield.
* @param bond The bond security.
* @param yield The bond yield.
* @return The dirty price.
*/
public double dirtyPriceFromRealYield(final BondCapitalIndexedSecurity<?> bond, final double yield) {
Validate.isTrue(bond.getNominal().getNumberOfPayments() == 1, "Yield: more than one nominal repayment.");
final int nbCoupon = bond.getCoupon().getNumberOfPayments();
final YieldConvention yieldConvention = bond.getYieldConvention();
if (yieldConvention.equals(US_IL_REAL)) {
// Coupon period rate to next coupon and simple rate from next coupon to settlement.
double pvAtFirstCoupon;
double cpnRate = 0.0;
if (bond.getCoupon().getNthPayment(0) instanceof CouponInflationGearing) {
cpnRate = ((CouponInflationGearing) bond.getCoupon().getNthPayment(0)).getFactor();
} else if (bond.getCoupon().getNumberOfPayments() > 1
&& (bond.getCoupon().getNthPayment(1) instanceof CouponInflationGearing)) {
cpnRate = ((CouponInflationGearing) bond.getCoupon().getNthPayment(1)).getFactor();
} else {
throw new OpenGammaRuntimeException("Cannot deal with real yield when all inflation coupons have fixed.");
}
if (Math.abs(yield) > 1.0E-8) {
final double factorOnPeriod = 1 + yield / bond.getCouponPerYear();
final double vn = Math.pow(factorOnPeriod, 1 - nbCoupon);
pvAtFirstCoupon = cpnRate * bond.getCouponPerYear() / yield * (factorOnPeriod - vn) + vn;
} else {
pvAtFirstCoupon = cpnRate * nbCoupon + 1; /// bond.getCouponPerYear()
}
return pvAtFirstCoupon / (1 + bond.getAccrualFactorToNextCoupon() * yield / bond.getCouponPerYear());
}
if (yieldConvention.equals(INDEX_LINKED_FLOAT)) {
final double realRate = ((CouponInflationGearing) bond.getCoupon().getNthPayment(1)).getFactor();
final double firstYearFraction = bond.getCoupon().getNthPayment(0).getPaymentYearFraction();
double firstCouponEndFixingTime = 0.0;
double firstCouponPayementTime = 0.0;
if (bond.getCoupon().getNthPayment(1) instanceof CouponInflationZeroCouponInterpolationGearing) {
firstCouponEndFixingTime = ((CouponInflationZeroCouponInterpolationGearing) bond.getCoupon().getNthPayment(1)).getReferenceEndTime()[1];
firstCouponPayementTime = ((CouponInflationZeroCouponInterpolationGearing) bond.getCoupon().getNthPayment(1)).getPaymentTime();
} else if (bond.getCoupon().getNthPayment(1) instanceof CouponInflationZeroCouponMonthlyGearing) {
firstCouponEndFixingTime = ((CouponInflationZeroCouponMonthlyGearing) bond.getCoupon().getNthPayment(1)).getReferenceEndTime();
firstCouponPayementTime = ((CouponInflationZeroCouponMonthlyGearing) bond.getCoupon().getNthPayment(1)).getPaymentTime();
}
final double lag = firstCouponPayementTime - firstCouponEndFixingTime;
final double v = 1 / (1 + yield / bond.getCouponPerYear());
final double rpibase = bond.getIndexStartValue();
final double rpiLast = bond.getLastIndexKnownFixing();
final double indexRatio = rpiLast / rpibase;
final int nbMonth = (int) Math.max(Math.round((bond.getLastKnownFixingTime() - bond.getCoupon().getNthPayment(0).getPaymentTime() + lag) * 12), 0.0);
final double u = Math.pow(1 / (1 + .03), .5);
final double a = indexRatio * Math.pow(u, 2.0 * nbMonth / 12.0);
final double firstCashFlow = firstYearFraction * realRate * indexRatio;
if (bond.getCoupon().getNumberOfPayments() == 1) {
return Math.pow(u * v, bond.getAccrualFactorToNextCoupon()) * (firstCashFlow + 1) * a / u;
} else {
final double secondYearFraction = bond.getCoupon().getNthPayment(1).getPaymentYearFraction();
final double secondCashFlow = secondYearFraction * realRate * indexRatio;
final double vn = Math.pow(v, nbCoupon - 1);
final double pvAtFirstCoupon = firstCashFlow + secondCashFlow * u * v + a * realRate * v * v * (1 - vn / v) / (1 - v) + a * vn;
return pvAtFirstCoupon * Math.pow(u * v, bond.getRatioPeriodToNextCoupon());
}
}
if (yieldConvention.equals(UK_IL_BOND)) {
final double firstYearFraction = bond.getCoupon().getNthPayment(0).getPaymentYearFraction();
final double realRate = ((CouponInflationGearing) bond.getCoupon().getNthPayment(1)).getFactor();
// Real rate adjusted by the number of coupons, i.e. annual rate / 2 for UK bonds
final double firstCashFlow = firstYearFraction * realRate;
final double v = 1 / (1 + yield / bond.getCouponPerYear());
if (bond.getCoupon().getNumberOfPayments() == 1) {
return Math.pow(v, bond.getAccrualFactorToNextCoupon()) * (firstCashFlow + 1);
} else {
final double secondYearFraction = bond.getCoupon().getNthPayment(1).getPaymentYearFraction();
final double secondCashFlow = secondYearFraction * realRate;
final double vn = Math.pow(v, nbCoupon - 1);
final double pvAtFirstCoupon = firstCashFlow + secondCashFlow * v + realRate * v * v * (1 - vn / v) / (1 - v) + vn;
return pvAtFirstCoupon * Math.pow(v, bond.getAccrualFactorToNextCoupon());
}
}
throw new UnsupportedOperationException("The convention " + bond.getYieldConvention().getName() + " is not supported.");
}
/**
* Computes the clean price (real or nominal depending on the convention) from the conventional real yield.
* @param bond The bond security.
* @param yield The bond yield.
* @return The clean price.
*/
public double cleanPriceFromYield(final BondCapitalIndexedSecurity<?> bond, final double yield) {
Validate.isTrue(bond.getNominal().getNumberOfPayments() == 1, "Yield: more than one nominal repayment.");
final double dirtyPrice = dirtyPriceFromRealYield(bond, yield);
if (bond.getYieldConvention().equals(INDEX_LINKED_FLOAT)) {
return cleanNominalPriceFromDirtyNominalPrice(bond, dirtyPrice);
}
return cleanRealPriceFromDirtyRealPrice(bond, dirtyPrice);
}
/**
* Compute the conventional yield from the dirty price.
* @param bond The bond security.
* @param dirtyPrice The bond dirty price.
* @return The yield.
*/
public double yieldRealFromDirtyRealPrice(final BondCapitalIndexedSecurity<?> bond, final double dirtyPrice) {
/**
* Inner function used to find the yield.
*/
final Function1D<Double, Double> priceResidual = new Function1D<Double, Double>() {
@Override
public Double evaluate(final Double y) {
return dirtyPriceFromRealYield(bond, y) - dirtyPrice;
}
};
final double[] range = BRACKETER.getBracketedPoints(priceResidual, -0.05, 0.10);
final double yield = ROOT_FINDER.getRoot(priceResidual, range[0], range[1]);
return yield;
}
/**
* Computes the present value sensitivity of a capital indexed bound by index estimation and discounting. The sensitivity is the sensitivity of the nominal and the coupons but not the settlement.
* @param bond The bond.
* @param provider The provider.
* @return The present value.
*/
public MultipleCurrencyInflationSensitivity presentValueCurveSensitivity(final BondCapitalIndexedSecurity<?> bond,
final ParameterInflationIssuerProviderInterface provider) {
ArgumentChecker.notNull(bond, "Bond");
MulticurveProviderInterface multicurveDecorated = new MulticurveProviderDiscountingDecoratedIssuer(
provider.getIssuerProvider(), bond.getCurrency(), bond.getIssuerEntity());
InflationProviderInterface creditDiscounting = new InflationProviderDecoratedMulticurve(
provider.getInflationProvider(), multicurveDecorated);
final MultipleCurrencyInflationSensitivity sensitivityNominal = bond.getNominal().accept(PVCSIC, creditDiscounting);
final MultipleCurrencyInflationSensitivity sensitivityCoupon = bond.getCoupon().accept(PVCSIC, creditDiscounting);
return sensitivityNominal.plus(sensitivityCoupon);
}
/**
* Compute the conventional yield from the clean price.
* @param bond The bond security.
* @param cleanPrice The bond clean price.
* @return The yield.
*/
public double yieldRealFromCleanPrice(final BondCapitalIndexedSecurity<?> bond, final double cleanPrice) {
/**
* Inner function used to find the yield.
*/
final Function1D<Double, Double> priceResidual = new Function1D<Double, Double>() {
@Override
public Double evaluate(final Double y) {
return cleanPriceFromYield(bond, y) - cleanPrice;
}
};
final double[] range = BRACKETER.getBracketedPoints(priceResidual, -0.05, 0.10);
final double yield = ROOT_FINDER.getRoot(priceResidual, range[0], range[1]);
return yield;
}
/**
* Calculates the modified duration from a standard yield.
* @param bond The bond
* @param yield The yield
* @return The modified duration
*/
public double modifiedDurationFromYieldStandard(final BondCapitalIndexedSecurity<?> bond, final double yield) {
ArgumentChecker.isTrue(bond.getNominal().getNumberOfPayments() == 1, "Yield: more than one nominal repayment.");
final int nbCoupon = bond.getCoupon().getNumberOfPayments();
final double nominal = bond.getNominal().getNthPayment(0).getNotional();
final double factorOnPeriod = 1 + yield / bond.getCouponPerYear();
double mdAtFirstCoupon = 0;
double pvAtFirstCoupon = 0;
for (int loopcpn = 0; loopcpn < nbCoupon; loopcpn++) {
mdAtFirstCoupon += bond.getCoupon().getNthPayment(loopcpn).getNotional() / Math.pow(factorOnPeriod, loopcpn + 1) * (loopcpn + bond.getAccrualFactorToNextCoupon()) / bond.getCouponPerYear();
pvAtFirstCoupon += bond.getCoupon().getNthPayment(loopcpn).getNotional() / Math.pow(factorOnPeriod, loopcpn);
}
mdAtFirstCoupon += nominal / Math.pow(factorOnPeriod, nbCoupon) * (nbCoupon - 1 + bond.getAccrualFactorToNextCoupon()) / bond.getCouponPerYear();
pvAtFirstCoupon += nominal / Math.pow(factorOnPeriod, nbCoupon - 1);
final double pv = pvAtFirstCoupon * Math.pow(factorOnPeriod, -bond.getAccrualFactorToNextCoupon());
final double md = mdAtFirstCoupon * Math.pow(factorOnPeriod, -bond.getAccrualFactorToNextCoupon()) / pv;
return md;
}
/**
* Calculates the modified duration from a standard yield.
* @param bond The bond
* @param yield The yield
* @return The modified duration
*/
public double modifiedDurationFromYieldFiniteDifference(final BondCapitalIndexedSecurity<?> bond, final double yield) {
ArgumentChecker.isTrue(bond.getNominal().getNumberOfPayments() == 1, "Yield: more than one nominal repayment.");
final double price = cleanPriceFromYield(bond, yield);
final double priceplus = cleanPriceFromYield(bond, yield + 10e-6);
final double priceminus = cleanPriceFromYield(bond, yield - 10e-6);
return -(priceplus - priceminus) / (2 * price * 10e-6);
}
/**
* Calculates the modified duration from a standard yield.
* @param bond The bond
* @param yield The yield
* @return The modified duration
*/
public double convexityFromYieldFiniteDifference(final BondCapitalIndexedSecurity<?> bond, final double yield) {
ArgumentChecker.isTrue(bond.getNominal().getNumberOfPayments() == 1, "Yield: more than one nominal repayment.");
ArgumentChecker.isTrue(bond.getNominal().getNumberOfPayments() == 1, "Yield: more than one nominal repayment.");
final double price = cleanPriceFromYield(bond, yield);
final double priceplus = cleanPriceFromYield(bond, yield + 10e-6);
final double priceminus = cleanPriceFromYield(bond, yield - 10e-6);
return (priceplus - 2 * price + priceminus) / (price * 10e-6 * 10e-6);
}
/**
* Computes the bill yield from the curves. The yield is in the bill yield convention.
* @param bond The bond.
* @param provider The inflation and multi-curves provider.
* @return The yield.
*/
public double yieldRealFromCurves(final BondCapitalIndexedSecurity<?> bond, final InflationIssuerProviderInterface provider) {
ArgumentChecker.notNull(bond, "Bond");
ArgumentChecker.notNull(provider, "inflation and multi-curves provider");
double dirtyPrice;
if (bond.getYieldConvention().equals(INDEX_LINKED_FLOAT)) {
dirtyPrice = dirtyNominalPriceFromCurves(bond, provider);
} else {
dirtyPrice = dirtyRealPriceFromCurves(bond, provider);
}
final double yield = yieldRealFromDirtyRealPrice(bond, dirtyPrice);
return yield;
}
/**
* Computes the modified duration of a bond from the curves.
* @param bond The bond security.
* @param issuerMulticurves The issuer and multi-curves provider.
* @return The modified duration.
*/
public double modifiedDurationFromCurves(final BondCapitalIndexedSecurity<?> bond, final InflationIssuerProviderInterface issuerMulticurves) {
final double yield = yieldRealFromCurves(bond, issuerMulticurves);
return modifiedDurationFromYieldFiniteDifference(bond, yield);
}
/**
* Compute the conventional yield from the clean price.
* @param bond The bond security.
* @param cleanPrice The bond clean price.
* @return The yield.
*/
public double yieldRealFromCleanRealPrice(final BondCapitalIndexedSecurity<?> bond, final double cleanPrice) {
final double dirtyPrice = dirtyRealPriceFromCleanRealPrice(bond, cleanPrice);
final double yield = yieldRealFromDirtyRealPrice(bond, dirtyPrice);
return yield;
}
/**
* Computes the modified duration of a bond from the clean price.
* @param bond The bond security.
* @param cleanPrice The bond clean price.
* @return The modified duration.
*/
public double modifiedDurationFromCleanPrice(final BondCapitalIndexedSecurity<?> bond, final double cleanPrice) {
final double yield = yieldRealFromCleanPrice(bond, cleanPrice);
return modifiedDurationFromYieldFiniteDifference(bond, yield);
}
/**
* Calculates the convexity from a standard yield.
* @param bond The bond
* @param yield The yield
* @return The convexity
*/
public double convexityFromYieldStandard(final BondCapitalIndexedSecurity<?> bond, final double yield) {
ArgumentChecker.isTrue(bond.getNominal().getNumberOfPayments() == 1, "Yield: more than one nominal repayment.");
final int nbCoupon = bond.getCoupon().getNumberOfPayments();
final double nominal = bond.getNominal().getNthPayment(bond.getNominal().getNumberOfPayments() - 1).getNotional();
final double factorOnPeriod = 1 + yield / bond.getCouponPerYear();
double cvAtFirstCoupon = 0;
double pvAtFirstCoupon = 0;
for (int loopcpn = 0; loopcpn < nbCoupon; loopcpn++) {
cvAtFirstCoupon += bond.getCoupon().getNthPayment(loopcpn).getNotional() / Math.pow(factorOnPeriod, loopcpn + 2) * (loopcpn + bond.getAccrualFactorToNextCoupon())
* (loopcpn + bond.getAccrualFactorToNextCoupon() + 1) / (bond.getCouponPerYear() * bond.getCouponPerYear());
pvAtFirstCoupon += bond.getCoupon().getNthPayment(loopcpn).getNotional() / Math.pow(factorOnPeriod, loopcpn);
}
cvAtFirstCoupon += nominal / Math.pow(factorOnPeriod, nbCoupon + 1) * (nbCoupon - 1 + bond.getAccrualFactorToNextCoupon()) * (nbCoupon + bond.getAccrualFactorToNextCoupon())
/ (bond.getCouponPerYear() * bond.getCouponPerYear());
pvAtFirstCoupon += nominal / Math.pow(factorOnPeriod, nbCoupon - 1);
final double pv = pvAtFirstCoupon * Math.pow(factorOnPeriod, -bond.getAccrualFactorToNextCoupon());
final double cv = cvAtFirstCoupon * Math.pow(factorOnPeriod, -bond.getAccrualFactorToNextCoupon()) / pv;
return cv;
}
/**
* Computes the convexity of a bond from the curves.
* @param bond The bond security.
* @param issuerMulticurves The issuer and multi-curves provider.
* @return The convexity.
*/
public double convexityFromCurves(final BondCapitalIndexedSecurity<?> bond, final InflationIssuerProviderInterface issuerMulticurves) {
final double yield = yieldRealFromCurves(bond, issuerMulticurves);
return convexityFromYieldFiniteDifference(bond, yield);
}
/**
* Computes the convexity of a bond from the clean price.
* @param bond The bond security.
* @param cleanPrice The bond clean price.
* @return The convexity.
*/
public double convexityFromCleanPrice(final BondCapitalIndexedSecurity<?> bond, final double cleanPrice) {
final double yield = yieldRealFromCleanPrice(bond, cleanPrice);
return convexityFromYieldFiniteDifference(bond, yield);
}
/**
* Computes the present value of a bond security from z-spread. The z-spread is a parallel shift applied to the discounting curve associated to the bond (Issuer Entity).
* The parallel shift is done in the curve convention.
* @param bond The bond security.
* @param issuerMulticurves The issuer and multi-curves provider.
* @param zSpread The z-spread.
* @return The present value.
*/
public MultipleCurrencyAmount presentValueFromZSpread(final BondCapitalIndexedSecurity<?> bond, final InflationIssuerProviderInterface issuerMulticurves, final double zSpread) {
final InflationIssuerProviderIssuerDecoratedSpread issuerShifted = new InflationIssuerProviderIssuerDecoratedSpread(issuerMulticurves, bond.getIssuerEntity(), zSpread);
return presentValue(bond, issuerShifted);
}
/**
* Computes the present value of a bond security from z-spread. The z-spread is a parallel shift applied to the discounting curve associated to the bond (Issuer Entity).
* The parallel shift is done in the curve convention.
* @param bond The bond security.
* @param issuerMulticurves The issuer and multi-curves provider.
* @param zSpread The z-spread.
* @return The present value.
*/
public double cleanPriceFromZSpread(final BondCapitalIndexedSecurity<?> bond, final InflationIssuerProviderInterface issuerMulticurves, final double zSpread) {
final InflationIssuerProviderIssuerDecoratedSpread issuerShifted = new InflationIssuerProviderIssuerDecoratedSpread(issuerMulticurves, bond.getIssuerEntity(), zSpread);
return cleanRealPriceFromCurves(bond, issuerShifted);
}
/**
* Computes a bond z-spread from the curves and a present value.
* The z-spread is a parallel shift applied to the discounting curve associated to the bond (Issuer Entity) to match the present value.
* @param bond The bond.
* @param issuerMulticurves The issuer and multi-curves provider.
* @param cleanPrice The target clean price.
* @return The z-spread.
*/
// TODO : this function have been created specially to match the clean price as it come from bloomberg (ie without specification if it is real or nominal), maybe remove at one point.
public double zSpreadFromCurvesAndCleanPriceDirect(final BondCapitalIndexedSecurity<?> bond, final InflationIssuerProviderInterface issuerMulticurves, final double cleanPrice) {
ArgumentChecker.notNull(bond, "Bond");
ArgumentChecker.notNull(issuerMulticurves, "Issuer and multi-curves provider");
final Function1D<Double, Double> residual = new Function1D<Double, Double>() {
@Override
public Double evaluate(final Double z) {
final InflationIssuerProviderIssuerDecoratedSpread issuerShifted = new InflationIssuerProviderIssuerDecoratedSpread(issuerMulticurves, bond.getIssuerEntity(), z);
if (bond.getYieldConvention().equals(INDEX_LINKED_FLOAT)) {
return cleanNominalPriceFromCurves(bond, issuerShifted) - cleanPrice;
}
return cleanRealPriceFromCurves(bond, issuerShifted) - cleanPrice;
}
};
final double[] range = BRACKETER.getBracketedPoints(residual, -0.5, 0.5); // Starting range is [-1%, 1%]
return ROOT_FINDER.getRoot(residual, range[0], range[1]);
}
/**
* Computes a bond z-spread from the curves and a present value.
* The z-spread is a parallel shift applied to the discounting curve associated to the bond (Issuer Entity) to match the present value.
* @param bond The bond.
* @param issuerMulticurves The issuer and multi-curves provider.
* @param cleanRealPrice The target clean real price.
* @return The z-spread.
*/
public double zSpreadFromCurvesAndCleanRealPriceDirect(final BondCapitalIndexedSecurity<?> bond, final InflationIssuerProviderInterface issuerMulticurves, final double cleanRealPrice) {
return zSpreadFromCurvesAndPV(bond, issuerMulticurves, presentValueFromCleanRealPrice(bond, issuerMulticurves, cleanRealPrice));
}
/**
* Computes a bond z-spread from the curves and a present value.
* The z-spread is a parallel shift applied to the discounting curve associated to the bond (Issuer Entity) to match the present value.
* @param bond The bond.
* @param issuerMulticurves The issuer and multi-curves provider.
* @param cleanRealPrice The target clean real price.
* @return The z-spread.
*/
public double zSpreadFromCurvesAndCleanNominalPriceDirect(final BondCapitalIndexedSecurity<?> bond, final InflationIssuerProviderInterface issuerMulticurves, final double cleanRealPrice) {
return zSpreadFromCurvesAndPV(bond, issuerMulticurves, presentValueFromCleanNominalPrice(bond, issuerMulticurves, cleanRealPrice));
}
/**
* Computes a bond z-spread from the curves and a present value.
* The z-spread is a parallel shift applied to the discounting curve associated to the bond (Issuer Entity) to match the present value.
* @param bond The bond.
* @param issuerMulticurves The issuer and multi-curves provider.
* @param pv The target present value.
* @return The z-spread.
*/
public double zSpreadFromCurvesAndPV(final BondCapitalIndexedSecurity<?> bond, final InflationIssuerProviderInterface issuerMulticurves, final MultipleCurrencyAmount pv) {
ArgumentChecker.notNull(bond, "Bond");
ArgumentChecker.notNull(issuerMulticurves, "Issuer and multi-curves provider");
final Currency ccy = bond.getCurrency();
final Function1D<Double, Double> residual = new Function1D<Double, Double>() {
@Override
public Double evaluate(final Double z) {
return presentValueFromZSpread(bond, issuerMulticurves, z).getAmount(ccy) - pv.getAmount(ccy);
}
};
final double[] range = BRACKETER.getBracketedPoints(residual, -0.5, 0.5); // Starting range is [-1%, 1%]
return ROOT_FINDER.getRoot(residual, range[0], range[1]);
}
/**
* Computes a bond z-spread from the curves and a clean price.
* The z-spread is a parallel shift applied to the discounting curve associated to the bond (Issuer Entity) to match the CleanPrice present value.
* @param bond The bond.
* @param issuerMulticurves The issuer and multi-curves provider.
* @param cleanPrice The target clean price.
* @return The z-spread.
*/
public double zSpreadFromCurvesAndCleanPrice(final BondCapitalIndexedSecurity<Coupon> bond, final InflationIssuerProviderInterface issuerMulticurves, final double cleanPrice) {
return zSpreadFromCurvesAndPV(bond, issuerMulticurves, presentValueFromCleanRealPrice(bond, issuerMulticurves, cleanPrice));
}
}