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Floating rate Bond_ Bootstrapping error

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Kulkarni, Amit3

Floating rate Bond_ Bootstrapping error

Hi

I am trying to test the Floating rate Bond, however ended up with the following error;

" could not bootstrap the 1st instrument, maturity date April 28,2008.
error message: negative time <-0.00273224> given "

Is the error related to bond Settlement date/dated date??

Also , I would like to know what is "Gearing" & "DatedDate" in Floating Rate Bond constructor

given is the test code I tried;
..............................................................................................
Integer settlementDays = 3;
Integer length = 5;
Calendar calendar = TARGET();
Date today = calendar.adjust(Date::todaysDate());
Settings::instance().evaluationDate() = today;
Date settlementDate = calendar.advance(today, settlementDays, Days);
Date exerciseDate = calendar.advance(settlementDate, length, Years);
Date issueDate = calendar.advance(exerciseDate, -length, Years);

Real faceAmount_=100;
BusinessDayConvention businessDayConvention_=Following;
DayCounter dayCount_ = Actual365Fixed();
Date stub_;
bool fromEnd_=true;
std::vector<Rate> coupons_(1);
coupons_[0]=0.07875;

Date maturityDate_ = exerciseDate ;
Date datedDate_ = settlementDate;
Frequency frequency_ = Semiannual;
Real redemption_ = 100.0;

bool longFinal_= false;
BusinessDayConvention accrualConvention_ = Following;

//FLOATING RATE BOND:

std::vector< Real > Gearings(1, 1.0);
std::vector< Spread > Spreads(1, 0.0);
Integer fixingDays = 2;

// deposits
Rate d1wQuote=0.0382;
Rate d1mQuote=0.0372;
Rate d3mQuote=0.0363;
Rate d6mQuote=0.0353;
Rate d9mQuote=0.0348;
Rate d1yQuote=0.0345;

// swaps
Rate s2yQuote=0.037125;
Rate s3yQuote=0.0398;
Rate s5yQuote=0.0443;
Rate s10yQuote=0.05165;
Rate s15yQuote=0.055175;

// Market data setup in QUOTES

// deposits
boost::shared_ptr<Quote> d1wRate(new SimpleQuote(d1wQuote));
boost::shared_ptr<Quote> d1mRate(new SimpleQuote(d1mQuote));
boost::shared_ptr<Quote> d3mRate(new SimpleQuote(d3mQuote));
boost::shared_ptr<Quote> d6mRate(new SimpleQuote(d6mQuote));
boost::shared_ptr<Quote> d9mRate(new SimpleQuote(d9mQuote));
boost::shared_ptr<Quote> d1yRate(new SimpleQuote(d1yQuote));

// swaps
boost::shared_ptr<Quote> s2yRate(new SimpleQuote(s2yQuote));
boost::shared_ptr<Quote> s3yRate(new SimpleQuote(s3yQuote));
boost::shared_ptr<Quote> s5yRate(new SimpleQuote(s5yQuote));
boost::shared_ptr<Quote> s10yRate(new SimpleQuote(s10yQuote));
boost::shared_ptr<Quote> s15yRate(new SimpleQuote(s15yQuote));

DayCounter depositDayCounter = Actual360();

//RATE HELPER CLASS

//set DEPOSITS
boost::shared_ptr<RateHelper> d1w(new DepositRateHelper(
Handle<Quote>(d1wRate),
1*Weeks, fixingDays,
calendar, ModifiedFollowing,
true, fixingDays, depositDayCounter));
boost::shared_ptr<RateHelper> d1m(new DepositRateHelper(
Handle<Quote>(d1mRate),
1*Months, fixingDays,
calendar, ModifiedFollowing,
true, fixingDays, depositDayCounter));
boost::shared_ptr<RateHelper> d3m(new DepositRateHelper(
Handle<Quote>(d3mRate),
3*Months, fixingDays,
calendar, ModifiedFollowing,
true, fixingDays, depositDayCounter));
boost::shared_ptr<RateHelper> d6m(new DepositRateHelper(
Handle<Quote>(d6mRate),
6*Months, fixingDays,
calendar, ModifiedFollowing,
true, fixingDays, depositDayCounter));
boost::shared_ptr<RateHelper> d9m(new DepositRateHelper(
Handle<Quote>(d9mRate),
9*Months, fixingDays,
calendar, ModifiedFollowing,
true, fixingDays, depositDayCounter));
boost::shared_ptr<RateHelper> d1y(new DepositRateHelper(
Handle<Quote>(d1yRate),
1*Years, fixingDays,
calendar, ModifiedFollowing,
true, fixingDays, depositDayCounter));

// setup SWAPS
Frequency swFixedLegFrequency = Annual;
BusinessDayConvention swFixedLegConvention = Unadjusted;
DayCounter swFixedLegDayCounter = Thirty360(Thirty360::European);
boost::shared_ptr<IborIndex> swFloatingLegIndex(new Euribor6M);

boost::shared_ptr<RateHelper> s2y(new SwapRateHelper(
Handle<Quote>(s2yRate),
2*Years, fixingDays,
calendar, swFixedLegFrequency,
swFixedLegConvention, swFixedLegDayCounter,
swFloatingLegIndex));
boost::shared_ptr<RateHelper> s3y(new SwapRateHelper(
Handle<Quote>(s3yRate),
3*Years, fixingDays,
calendar, swFixedLegFrequency,
swFixedLegConvention, swFixedLegDayCounter,
swFloatingLegIndex));
boost::shared_ptr<RateHelper> s5y(new SwapRateHelper(
Handle<Quote>(s5yRate),
5*Years, fixingDays,
calendar, swFixedLegFrequency,
swFixedLegConvention, swFixedLegDayCounter,
swFloatingLegIndex));
boost::shared_ptr<RateHelper> s10y(new SwapRateHelper(
Handle<Quote>(s10yRate),
10*Years, fixingDays,
calendar, swFixedLegFrequency,
swFixedLegConvention, swFixedLegDayCounter,
swFloatingLegIndex));
boost::shared_ptr<RateHelper> s15y(new SwapRateHelper(
Handle<Quote>(s15yRate),
15*Years, fixingDays,
calendar, swFixedLegFrequency,
swFixedLegConvention, swFixedLegDayCounter,
swFloatingLegIndex));

DayCounter termStructureDayCounter =
ActualActual(ActualActual::ISDA);

double tolerance = 1.0e-15;

//Instrument vector creation
// A depo-swap curve
std::vector<boost::shared_ptr<RateHelper> > depoSwapInstruments;
depoSwapInstruments.push_back(d1w);
depoSwapInstruments.push_back(d1m);
depoSwapInstruments.push_back(d3m);
depoSwapInstruments.push_back(d6m);
depoSwapInstruments.push_back(d9m);
depoSwapInstruments.push_back(d1y);
depoSwapInstruments.push_back(s2y);
depoSwapInstruments.push_back(s3y);
depoSwapInstruments.push_back(s5y);
depoSwapInstruments.push_back(s10y);
depoSwapInstruments.push_back(s15y);
boost::shared_ptr<YieldTermStructure> depoSwapTermStructure(
new PiecewiseYieldCurve<Discount,LogLinear>(
settlementDate, depoSwapInstruments,termStructureDayCounter, tolerance));

Handle<YieldTermStructure> forecastingTermStructure;
forecastingTermStructure.linkTo(depoSwapTermStructure);

boost::shared_ptr<IborIndex> euriborIndex(
new Euribor6M(forecastingTermStructure));

/* FloatingRateBond CONSTRUCTOR:

FloatingRateBond FLOATINGbond(faceAmount_,issueDate,datedDate_,maturityDate_,settlementDays,euriborIndex,fixingDays,Gearings,Spreads,frequency_,calendar,dayCount_,accrualConvention_,businessDayConvention_,redemption_,forecastingTermStructure,stub_,fromEnd_);

Real dirtypriceBondF = FLOATINGbond.dirtyPrice();
std::cout<<"DIRTY PRICE"<<" "<<dirtypriceBondF<<std::endl;

Compounding comp_=Compounded;
Real YIELDF = FLOATINGbond.yield(comp_);
std::cout<<"YIELD"<<" "<<YIELDF<<std::endl;

.........................................................................................................................

Thanks
Amit

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FORNAROLA CHIARA-3

Re: Floating rate Bond_ Bootstrapping error

Hi Amit,
if I remember correctly in the release you're using for "dated date" is
meant the first accrual date of the bond, not the settlement date.
By "gearing" is meant a vector of multiplicative leverages applied to
the floating rate index. For example if your bond pays euribor flat for
all its life the gearing is 1. But in case you consider a reverse
floater your gearing should be negative (usually -2). Another example is
a bond paying fixed for some coupon periods and then switching to a
floater. In that case the vector of gearing should be 0 as many coupon
periods as the bond is paying a fixed rate than 1 for the periods it's
paying one time the floating rate index.
These are just some examples.
Anyway I suggest to download and use the latest realease of QuantLib.
Hope this help.

Chiara

>-----Original Message-----
>From: [hidden email]
[mailto:quantlib-users-

>[hidden email]] On Behalf Of Kulkarni, Amit3
>Sent: Thursday, April 17, 2008 7:44 AM
>To: [hidden email]
>Cc: Kulkarni, Amit3
>Subject: [Quantlib-users] Floating rate Bond_ Bootstrapping error
>
>
>Hi
>
>I am trying to test the Floating rate Bond, however ended up with the
>following error;
>
>" could not bootstrap the 1st instrument, maturity date April 28,2008.
>error message: negative time <-0.00273224> given "
>
>Is the error related to bond Settlement date/dated date??
>
>Also , I would like to know what is "Gearing" & "DatedDate" in Floating
>Rate Bond constructor
>
>given is the test code I tried;
>.......................................................................

....

>...................
>Integer settlementDays = 3;
>Integer length = 5;
>Calendar calendar = TARGET();
> Date today = calendar.adjust(Date::todaysDate());
> Settings::instance().evaluationDate() = today;
> Date settlementDate = calendar.advance(today, settlementDays, Days);
> Date exerciseDate = calendar.advance(settlementDate, length, Years);
> Date issueDate = calendar.advance(exerciseDate, -length, Years);
>
>
> Real faceAmount_=100;
> BusinessDayConvention businessDayConvention_=Following;
> DayCounter dayCount_ = Actual365Fixed();
> Date stub_;
> bool fromEnd_=true;
> std::vector<Rate> coupons_(1);
> coupons_[0]=0.07875;
>
> Date maturityDate_ = exerciseDate ;
> Date datedDate_ = settlementDate;
> Frequency frequency_ = Semiannual;
> Real redemption_ = 100.0;
>
> bool longFinal_= false;
> BusinessDayConvention accrualConvention_ = Following;
>
>
> //FLOATING RATE BOND:
>
> std::vector< Real > Gearings(1, 1.0);
> std::vector< Spread > Spreads(1, 0.0);
> Integer fixingDays = 2;
>
> // deposits
> Rate d1wQuote=0.0382;
> Rate d1mQuote=0.0372;
> Rate d3mQuote=0.0363;
> Rate d6mQuote=0.0353;
> Rate d9mQuote=0.0348;
> Rate d1yQuote=0.0345;
>
> // swaps
> Rate s2yQuote=0.037125;
> Rate s3yQuote=0.0398;
> Rate s5yQuote=0.0443;
> Rate s10yQuote=0.05165;
> Rate s15yQuote=0.055175;
>
>// Market data setup in QUOTES
>
> // deposits
> boost::shared_ptr<Quote> d1wRate(new SimpleQuote(d1wQuote));
> boost::shared_ptr<Quote> d1mRate(new SimpleQuote(d1mQuote));
> boost::shared_ptr<Quote> d3mRate(new SimpleQuote(d3mQuote));
> boost::shared_ptr<Quote> d6mRate(new SimpleQuote(d6mQuote));
> boost::shared_ptr<Quote> d9mRate(new SimpleQuote(d9mQuote));
> boost::shared_ptr<Quote> d1yRate(new SimpleQuote(d1yQuote));
>
>
>
> // swaps
> boost::shared_ptr<Quote> s2yRate(new SimpleQuote(s2yQuote));
> boost::shared_ptr<Quote> s3yRate(new SimpleQuote(s3yQuote));
> boost::shared_ptr<Quote> s5yRate(new SimpleQuote(s5yQuote));
> boost::shared_ptr<Quote> s10yRate(new SimpleQuote(s10yQuote));
> boost::shared_ptr<Quote> s15yRate(new SimpleQuote(s15yQuote));
>
> DayCounter depositDayCounter = Actual360();
>
>
>//RATE HELPER CLASS
>
>//set DEPOSITS
> boost::shared_ptr<RateHelper> d1w(new DepositRateHelper(
> Handle<Quote>(d1wRate),
> 1*Weeks, fixingDays,
> calendar, ModifiedFollowing,
> true, fixingDays, depositDayCounter));
> boost::shared_ptr<RateHelper> d1m(new DepositRateHelper(
> Handle<Quote>(d1mRate),
> 1*Months, fixingDays,
> calendar, ModifiedFollowing,
> true, fixingDays, depositDayCounter));
> boost::shared_ptr<RateHelper> d3m(new DepositRateHelper(
> Handle<Quote>(d3mRate),
> 3*Months, fixingDays,
> calendar, ModifiedFollowing,
> true, fixingDays, depositDayCounter));
> boost::shared_ptr<RateHelper> d6m(new DepositRateHelper(
> Handle<Quote>(d6mRate),
> 6*Months, fixingDays,
> calendar, ModifiedFollowing,
> true, fixingDays, depositDayCounter));
> boost::shared_ptr<RateHelper> d9m(new DepositRateHelper(
> Handle<Quote>(d9mRate),
> 9*Months, fixingDays,
> calendar, ModifiedFollowing,
> true, fixingDays, depositDayCounter));
> boost::shared_ptr<RateHelper> d1y(new DepositRateHelper(
> Handle<Quote>(d1yRate),
> 1*Years, fixingDays,
> calendar, ModifiedFollowing,
> true, fixingDays, depositDayCounter));
>
> // setup SWAPS
> Frequency swFixedLegFrequency = Annual;
> BusinessDayConvention swFixedLegConvention = Unadjusted;
> DayCounter swFixedLegDayCounter =

Thirty360(Thirty360::European);

> boost::shared_ptr<IborIndex> swFloatingLegIndex(new Euribor6M);
>
>boost::shared_ptr<RateHelper> s2y(new SwapRateHelper(
> Handle<Quote>(s2yRate),
> 2*Years, fixingDays,
> calendar, swFixedLegFrequency,
> swFixedLegConvention, swFixedLegDayCounter,
> swFloatingLegIndex));
> boost::shared_ptr<RateHelper> s3y(new SwapRateHelper(
> Handle<Quote>(s3yRate),
> 3*Years, fixingDays,
> calendar, swFixedLegFrequency,
> swFixedLegConvention, swFixedLegDayCounter,
> swFloatingLegIndex));
> boost::shared_ptr<RateHelper> s5y(new SwapRateHelper(
> Handle<Quote>(s5yRate),
> 5*Years, fixingDays,
> calendar, swFixedLegFrequency,
> swFixedLegConvention, swFixedLegDayCounter,
> swFloatingLegIndex));
> boost::shared_ptr<RateHelper> s10y(new SwapRateHelper(
> Handle<Quote>(s10yRate),
> 10*Years, fixingDays,
> calendar, swFixedLegFrequency,
> swFixedLegConvention, swFixedLegDayCounter,
> swFloatingLegIndex));
> boost::shared_ptr<RateHelper> s15y(new SwapRateHelper(
> Handle<Quote>(s15yRate),
> 15*Years, fixingDays,
> calendar, swFixedLegFrequency,
> swFixedLegConvention, swFixedLegDayCounter,
> swFloatingLegIndex));
>
>
> DayCounter termStructureDayCounter =
> ActualActual(ActualActual::ISDA);
>
>
> double tolerance = 1.0e-15;
>
>//Instrument vector creation
> // A depo-swap curve
> std::vector<boost::shared_ptr<RateHelper> >

depoSwapInstruments;

> depoSwapInstruments.push_back(d1w);
> depoSwapInstruments.push_back(d1m);
> depoSwapInstruments.push_back(d3m);
> depoSwapInstruments.push_back(d6m);
> depoSwapInstruments.push_back(d9m);
> depoSwapInstruments.push_back(d1y);
> depoSwapInstruments.push_back(s2y);
> depoSwapInstruments.push_back(s3y);
> depoSwapInstruments.push_back(s5y);
> depoSwapInstruments.push_back(s10y);
> depoSwapInstruments.push_back(s15y);
> boost::shared_ptr<YieldTermStructure> depoSwapTermStructure(
> new PiecewiseYieldCurve<Discount,LogLinear>(
> settlementDate, depoSwapInstruments,termStructureDayCounter,
>tolerance));
>
> Handle<YieldTermStructure> forecastingTermStructure;
> forecastingTermStructure.linkTo(depoSwapTermStructure);
>
>boost::shared_ptr<IborIndex> euriborIndex(
> new Euribor6M(forecastingTermStructure));
>
>
>
>
> /* FloatingRateBond CONSTRUCTOR:
>
> FloatingRateBond
>FLOATINGbond(faceAmount_,issueDate,datedDate_,maturityDate_,settlementD

ays,
>euriborIndex,fixingDays,Gearings,Spreads,frequency_,calendar,dayCount_,
accr
>ualConvention_,businessDayConvention_,redemption_,forecastingTermStruct
ure,
>stub_,fromEnd_);
>
>
>Real dirtypriceBondF = FLOATINGbond.dirtyPrice();
> std::cout<<"DIRTY PRICE"<<"
"<<dirtypriceBondF<<std::endl;
>
> Compounding comp_=Compounded;
> Real YIELDF = FLOATINGbond.yield(comp_);
> std::cout<<"YIELD"<<" "<<YIELDF<<std::endl;
>
>.......................................................................
....
>..............................................
>
>Thanks
>Amit
>
>-----------------------------------------------------------------------
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java
>one
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Kulkarni, Amit3

Re: Floating rate Bond_ Bootstrapping error

In reply to this post by Kulkarni, Amit3

Thanks Chiara..

It helped a lot. I shall get the 0.9.0 version

Regards
Amit

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