package net.finmath.marketdata.model.curves;
import java.util.Arrays;
import java.util.HashMap;
import java.util.HashSet;
import java.util.Map;
import java.util.Set;
import java.util.Vector;
import org.joda.time.DateTimeConstants;
import org.joda.time.LocalDate;
import org.junit.Assert;
import org.junit.Test;
import net.finmath.marketdata.calibration.ParameterObjectInterface;
import net.finmath.marketdata.calibration.Solver;
import net.finmath.marketdata.model.AnalyticModel;
import net.finmath.marketdata.model.AnalyticModelInterface;
import net.finmath.marketdata.products.AnalyticProductInterface;
import net.finmath.marketdata.products.Swap;
import net.finmath.optimizer.SolverException;
import net.finmath.time.ScheduleGenerator;
import net.finmath.time.ScheduleInterface;
import net.finmath.time.businessdaycalendar.BusinessdayCalendarExcludingTARGETHolidays;
import net.finmath.time.businessdaycalendar.BusinessdayCalendarInterface.DateRollConvention;
public class NelsonSiegelSvenssonCalibrationTest {
/**
* Calibrate a Nelson-Siegel-Svensson curve to a given set of swap rates of
* (self-discounted) swaps.
*
* @param parameters Key-Value-Map of parameters.
* @return The best fitting NSS parameters.
* @throws SolverException Thrown is the solver encountered a problem.
*/
public double[] calibrateNSSCurve(Map<String, Object> parameters) throws SolverException {
final LocalDate referenceDate = (LocalDate) parameters.get("referenceDate");
final String currency = (String) parameters.get("currency");
final String forwardCurveTenor = (String) parameters.get("forwardCurveTenor");
final String[] maturities = (String[]) parameters.get("maturities");
final String[] frequency = (String[]) parameters.get("fixLegFrequencies");
final String[] frequencyFloat = (String[]) parameters.get("floatLegFrequencies");
final String[] daycountConventions = (String[]) parameters.get("fixLegDaycountConventions");
final String[] daycountConventionsFloat = (String[]) parameters.get("floatLegDaycountConventions");
final double[] rates = (double[]) parameters.get("rates");
Assert.assertEquals(maturities.length, frequency.length);
Assert.assertEquals(maturities.length, daycountConventions.length);
Assert.assertEquals(maturities.length, rates.length);
Assert.assertEquals(frequency.length, frequencyFloat.length);
Assert.assertEquals(daycountConventions.length, daycountConventionsFloat.length);
int spotOffsetDays = 2;
String forwardStartPeriod = "0D";
double[] initialParameters = new double[] { 0.025, -0.015, -0.025, 0.03, 1.5, 10 };
DiscountCurveInterface discountCurve = new DiscountCurveNelsonSiegelSvensson("discountCurve-" + currency, referenceDate, initialParameters, 1.0);
/*
* We create a forward curve by referencing the same discount curve, since
* this is a single curve setup.
*
* Note that using an independent NSS forward curve with its own NSS parameters
* would result in a problem where both, the forward curve and the discount curve
* have free parameters.
*/
ForwardCurveInterface forwardCurve = new ForwardCurveFromDiscountCurve(discountCurve.getName(), referenceDate, forwardCurveTenor);
/*
* Model consists of the two curves, but only one of them provides free parameters.
*/
AnalyticModelInterface model = new AnalyticModel(new CurveInterface[] { discountCurve, forwardCurve });
// Create a collection of objective functions (calibration products)
Vector<AnalyticProductInterface> calibrationProducts = new Vector<AnalyticProductInterface>();
for(int i=0; i<rates.length; i++) {
ScheduleInterface schedulePay = ScheduleGenerator.createScheduleFromConventions(referenceDate, spotOffsetDays, forwardStartPeriod, maturities[i], frequency[i], daycountConventions[i], "first", "following", new BusinessdayCalendarExcludingTARGETHolidays(), -2, 0);
ScheduleInterface scheduleRec = ScheduleGenerator.createScheduleFromConventions(referenceDate, spotOffsetDays, forwardStartPeriod, maturities[i], frequencyFloat[i], daycountConventionsFloat[i], "first", "following", new BusinessdayCalendarExcludingTARGETHolidays(), -2, 0);
calibrationProducts.add(new Swap(schedulePay, null, rates[i], discountCurve.getName(), scheduleRec, forwardCurve.getName(), 0.0, discountCurve.getName()));
}
/*
* Create a collection of curves to calibrate
*/
Set<ParameterObjectInterface> curvesToCalibrate = new HashSet<ParameterObjectInterface>();
curvesToCalibrate.add(discountCurve);
/*
* Calibrate the curve
*/
Solver solver = new Solver(model, calibrationProducts);
AnalyticModelInterface calibratedModel = solver.getCalibratedModel(curvesToCalibrate);
System.out.println("Solver reported acccurary....: " + solver.getAccuracy());
Assert.assertEquals("Calibration accurarcy", 0.0, solver.getAccuracy(), 1E-3);
// Get best parameters
double[] parametersBest = calibratedModel.getDiscountCurve(discountCurve.getName()).getParameter();
// Test calibration
discountCurve = new DiscountCurveNelsonSiegelSvensson(discountCurve.getName(), referenceDate, parametersBest, 1.0);
forwardCurve = new ForwardCurveFromDiscountCurve(forwardCurve.getName(), discountCurve.getName(), referenceDate, "3M", new BusinessdayCalendarExcludingTARGETHolidays(), DateRollConvention.MODIFIED_FOLLOWING, 365.0/365.0, 0.0);
model = new AnalyticModel(new CurveInterface[] { discountCurve, forwardCurve });
double squaredErrorSum = 0.0;
for(AnalyticProductInterface c : calibrationProducts) {
double value = c.getValue(0.0, model);
double valueTaget = 0.0;
double error = value - valueTaget;
squaredErrorSum += error*error;
}
double rms = Math.sqrt(squaredErrorSum/calibrationProducts.size());
System.out.println("Independent checked acccurary: " + rms);
return parametersBest;
}
/**
* Test the calibration of a Nelson-Siegel-Svensson curve to a given set of swap rates of
* (self-discounted) swaps.
*
* @throws SolverException Thrown if the solver cannot find a solution.
*/
@Test
public void testCalibration() throws SolverException {
final String[] maturity = { "3M", "6M", "1Y", "2Y", "3Y", "4Y", "5Y", "6Y", "7Y", "8Y", "9Y", "10Y", "11Y", "12Y", "15Y", "20Y", "25Y", "30Y", "35Y", "40Y", "50Y" };
final String[] frequency = { "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual", "annual" };
final String[] frequencyFloat = { "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly", "quarterly" };
final String[] daycountConventions = { "ACT/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360", "E30/360" };
final String[] daycountConventionsFloat = { "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360", "ACT/360" };
final double[] rates = {0.0042, 0.0032, 0.0038, 0.0052, 0.0069, 0.00855, 0.0102, 0.0119, 0.0134, 0.0150, 0.0165, 0.0178, 0.0189, 0.0200, 0.0224, 0.0250, 0.0264, 0.0271, 0.0275, 0.0276, 0.0276 };
HashMap<String, Object> parameters = new HashMap<String, Object>();
parameters.put("referenceDate", new LocalDate(2014, DateTimeConstants.AUGUST, 12));
parameters.put("currency", "EUR");
parameters.put("forwardCurveTenor", "3M");
parameters.put("maturities", maturity);
parameters.put("fixLegFrequencies", frequency);
parameters.put("floatLegFrequencies", frequencyFloat);
parameters.put("fixLegDaycountConventions", daycountConventions);
parameters.put("floatLegDaycountConventions", daycountConventionsFloat);
parameters.put("rates", rates);
double[] nssParameters = calibrateNSSCurve(parameters);
System.out.println(Arrays.toString(nssParameters));
System.out.println();
}
}