IsdaCompliantCurveCalibratorTest.java

/**
 * Copyright (C) 2013 - present by OpenGamma Inc. and the OpenGamma group of companies
 * 
 * Please see distribution for license.
 */
package com.opengamma.strata.pricer.impl.credit.isda;

import static org.testng.AssertJUnit.assertEquals;

import java.time.LocalDate;
import java.time.Period;
import java.util.Arrays;

import org.testng.annotations.Test;

import com.opengamma.strata.basics.date.DayCount;
import com.opengamma.strata.basics.date.DayCounts;
import com.opengamma.strata.basics.schedule.StubConvention;

/**
 * Test.
 */
@Test
public class IsdaCompliantCurveCalibratorTest {
  private static final IsdaCompliantPresentValueCreditDefaultSwap PRICER = new IsdaCompliantPresentValueCreditDefaultSwap();

  private static final LocalDate TODAY = LocalDate.of(2013, 4, 21);
  private static final LocalDate BASE_DATE = TODAY;

  private static final LocalDate[] YC_DATES = new LocalDate[] {LocalDate.of(2013, 6, 27), LocalDate.of(2013, 8, 27), LocalDate.of(2013, 11, 27), LocalDate.of(2014, 5, 27), LocalDate.of(2015, 5, 27),
    LocalDate.of(2016, 5, 27), LocalDate.of(2018, 5, 27), LocalDate.of(2020, 5, 27), LocalDate.of(2023, 5, 27), LocalDate.of(2028, 5, 27), LocalDate.of(2033, 5, 27), LocalDate.of(2043, 5, 27) };
  private static final double[] YC_RATES;
  private static final double[] DISCOUNT_FACT;
  private static final double[] YC_TIMES;
  private static final IsdaCompliantDateYieldCurve YIELD_CURVE;
  private static final DayCount ACT365 = DayCounts.ACT_365F;

  static {
    final int ycPoints = YC_DATES.length;
    YC_RATES = new double[ycPoints];
    DISCOUNT_FACT = new double[ycPoints];
    Arrays.fill(DISCOUNT_FACT, 1.0);
    YC_TIMES = new double[ycPoints];
    for (int i = 0; i < ycPoints; i++) {
      YC_TIMES[i] = ACT365.yearFraction(BASE_DATE, YC_DATES[i]);
    }
    YIELD_CURVE = new IsdaCompliantDateYieldCurve(BASE_DATE, YC_DATES, YC_RATES);
  }

  public void test() {

    final LocalDate today = LocalDate.of(2013, 2, 2);
    final LocalDate stepinDate = today.plusDays(1); // aka effective date
    final LocalDate valueDate = today; // NOT + 3 business days
    final LocalDate startDate = LocalDate.of(2012, 7, 29);
    final LocalDate[] endDates = new LocalDate[] {LocalDate.of(2013, 6, 20), LocalDate.of(2013, 9, 20), LocalDate.of(2014, 3, 20), LocalDate.of(2015, 3, 20), LocalDate.of(2016, 3, 20),
      LocalDate.of(2018, 3, 20), LocalDate.of(2023, 3, 20) };

    final double[] coupons = new double[] {50, 70, 100, 150, 200, 400, 1000 };
    final int n = coupons.length;
    for (int i = 0; i < n; i++) {
      coupons[i] /= 10000;
    }

    final Period tenor = Period.ofMonths(3);
    final StubConvention stubType = StubConvention.SHORT_INITIAL;
    final boolean payAccOndefault = true;
    final boolean protectionStart = true;
    final double recovery = 0.4;

    final IsdaCompliantCurveCalibrator calibrator = new IsdaCompliantCurveCalibrator();
    final IsdaCompliantDateCreditCurve hc = calibrator.calibrateHazardCurve(today, stepinDate, valueDate, startDate, endDates, coupons, payAccOndefault, tenor, stubType, protectionStart, YIELD_CURVE,
        recovery);

    for (int i = 0; i < n; i++) {
      final double rpv01 = PRICER.pvPremiumLegPerUnitSpread(today, stepinDate, valueDate, startDate, endDates[i], payAccOndefault, tenor, stubType, YIELD_CURVE, hc, protectionStart, CdsPriceType.CLEAN);
      final double proLeg = PRICER.calculateProtectionLeg(today, stepinDate, valueDate, startDate, endDates[i], YIELD_CURVE, hc, recovery, protectionStart);
      final double pv = 1e7 * (proLeg - coupons[i] * rpv01);
      assertEquals(0.0, pv, 1e-8); // on a notional of 1e7

    }
  }

}