/**
* 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.date.HolidayCalendar;
import com.opengamma.strata.basics.date.HolidayCalendars;
import com.opengamma.strata.basics.schedule.StubConvention;
/**
* Test.
*/
@Test
public class IsdaCompliantPresentValueCreditDefaultSwapTest {
private static final double NOTIONAL = 1e7;
private static final HolidayCalendar DEFAULT_CALENDAR = HolidayCalendars.SAT_SUN;
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 double RECOVERY_RATE = 0.4;
// points related to the yield curve (note: here we use yield curve points directly rather than fit from IR instruments)
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[] DISCOUNT_FACT;
private static final double[] YC_TIMES;
private static final IsdaCompliantDateYieldCurve YIELD_CURVE_ZERO_FLAT;
private static final IsdaCompliantDateYieldCurve YIELD_CURVE_5PC_FLAT;
private static final DayCount ACT365 = DayCounts.ACT_365F;
// examples
private static final IsdaModelDatasets.ISDA_Results[] EXAMPLE1 = IsdaModelDatasets.getExample1();
private static final IsdaModelDatasets.ISDA_Results[] EXAMPLE3 = IsdaModelDatasets.getExample3();
static {
final int ycPoints = YC_DATES.length;
final double[] zeros = new double[ycPoints];
final double[] fivePC = new double[ycPoints];
Arrays.fill(fivePC, 0.05);
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_ZERO_FLAT = new IsdaCompliantDateYieldCurve(BASE_DATE, YC_DATES, zeros);
YIELD_CURVE_5PC_FLAT = new IsdaCompliantDateYieldCurve(BASE_DATE, YC_DATES, fivePC);
}
private void testISDA_Results(final IsdaModelDatasets.ISDA_Results[] data, final IsdaCompliantDateYieldCurve yieldCurve, final boolean debug) {
final int nEx = data.length;
for (int count = 0; count < nEx; count++) {
final IsdaModelDatasets.ISDA_Results res = data[count];
final LocalDate today = res.today;
final LocalDate stepinDate = today.plusDays(1); // aka effective date
final LocalDate valueDate = DEFAULT_CALENDAR.shift(today, 3); // 3 working days on
final LocalDate startDate = res.startDate;
final LocalDate endDate = res.endDate;
final Period tenor = Period.ofMonths(3); // TODO should be part of the CSV
final StubConvention stubType = StubConvention.SHORT_INITIAL; // TODO ditto
final boolean protectionStart = true; // TODO ditto
double protectionLeg_new = 0;
double premLeg_clean_new = 0;
if (!today.isAfter(endDate)) {
final boolean payAccOnDefault = true;
try {
final CdsAnalytic cds = new CdsAnalytic(today, stepinDate, valueDate, startDate, endDate, payAccOnDefault, tenor, stubType, protectionStart, RECOVERY_RATE);
final AnalyticCdsPricer analPricer = new AnalyticCdsPricer();
protectionLeg_new = NOTIONAL * analPricer.protectionLeg(cds, yieldCurve, res.creditCurve);
final double rpv01_clean_new = NOTIONAL * analPricer.annuity(cds, yieldCurve, res.creditCurve, CdsPriceType.CLEAN);
premLeg_clean_new = res.fracSpread * rpv01_clean_new;
} catch (final Exception e) {
}
}
// price with code written to mimic ISDA c - i.e. date logic in the analytics
final double rpv01_clean_ISDA = NOTIONAL *
PRICER.pvPremiumLegPerUnitSpread(today, stepinDate, valueDate, startDate, endDate, true, tenor, stubType, yieldCurve, res.creditCurve, protectionStart, CdsPriceType.CLEAN);
final double rpv01_clean_ISDA_noAccOnDefault = NOTIONAL *
PRICER.pvPremiumLegPerUnitSpread(today, stepinDate, valueDate, startDate, endDate, false, tenor, stubType, yieldCurve, res.creditCurve, protectionStart, CdsPriceType.CLEAN);
final double rpv01_dirty_ISDA = NOTIONAL *
PRICER.pvPremiumLegPerUnitSpread(today, stepinDate, valueDate, startDate, endDate, true, tenor, stubType, yieldCurve, res.creditCurve, protectionStart, CdsPriceType.DIRTY);
final double contLeg_ISDA = NOTIONAL * PRICER.calculateProtectionLeg(today, stepinDate, valueDate, startDate, endDate, yieldCurve, res.creditCurve, RECOVERY_RATE, protectionStart);
final double premLeg_clean_ISDA = res.fracSpread * rpv01_clean_ISDA;
final double defaultAcc = res.fracSpread * (rpv01_clean_ISDA - rpv01_clean_ISDA_noAccOnDefault);
final double rpv01_accrued = rpv01_dirty_ISDA - rpv01_clean_ISDA;
final double accruedPrem = rpv01_accrued * res.fracSpread;
// back out the accrued-days by inverting the accrued premium formula (which is ACT/360) - this matched the formula on the ISDA spread sheet
final int accruedDays = (int) Math.round(360 * rpv01_accrued / NOTIONAL);
// tests against ISDA c
assertEquals("Premium Leg:", res.premiumLeg, premLeg_clean_ISDA, 1e-12 * NOTIONAL); // This should be 1e-15*NOTIONAL
assertEquals("Protection Leg:", res.protectionLeg, contLeg_ISDA, 1e-11 * NOTIONAL); // ditto
assertEquals("Default Acc:", res.defaultAcc, defaultAcc, 1e-13 * NOTIONAL);
assertEquals("Accrued Premium: ", res.accruedPremium, accruedPrem, 1e-15 * NOTIONAL); // the accrued is trivial, so should be highly accurate
assertEquals("Accrued Days: ", res.accruedDays, accruedDays);
// tests date free vs date-full code
assertEquals("Premium Leg:", premLeg_clean_ISDA, premLeg_clean_new, 1e-13 * NOTIONAL);
assertEquals("Protection Leg:", contLeg_ISDA, protectionLeg_new, 1e-15 * NOTIONAL);
}
}
@Test
public void example1Test() {
testISDA_Results(EXAMPLE1, YIELD_CURVE_ZERO_FLAT, false);
}
@Test
public void example3Test() {
testISDA_Results(EXAMPLE3, YIELD_CURVE_ZERO_FLAT, false);
}
@Test
public void exampleSheet1Test() {
testISDA_Results(IsdaModelDatasetsSheetReader.loadSheet("yield_curve_flat_0pc.csv", RECOVERY_RATE), YIELD_CURVE_ZERO_FLAT, false);
}
@Test
public void exampleSheet2Test() {
testISDA_Results(IsdaModelDatasetsSheetReader.loadSheet("yield_curve_flat_5pc.csv", RECOVERY_RATE), YIELD_CURVE_5PC_FLAT, false);
}
@Test
public void yieldCurveTest() {
final int n = YC_TIMES.length;
for (int i = 0; i < n; i++) {
final double t = YC_TIMES[i];
final double df = YIELD_CURVE_ZERO_FLAT.getDiscountFactor(t);
assertEquals(DISCOUNT_FACT[i], df, 1e-10);
}
}
}