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InterpolatedZeroCurve -- > Understanding Problem

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d0tc0mguy
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InterpolatedZeroCurve -- > Understanding Problem

d0tc0mguy
I am newbie to the Quantlib library and I'm trying to understand the way yield curve function in the Quantlib.

I am using the interpolatedzerocurve interface

Code Snippet follows :

       // Calendar calendar = TARGET();
                Calendar calendar = NullCalendar();
        Date settlementDate(10, March, 2011);

                Date Date1(10, March, 2011);
                Date Date2(10, March, 2012);
                Date Date3(10, March, 2013);
                Date Date4(10, March, 2014);
                Date Date5(10, March, 2015);


        std::vector<Date> dates;
    std::vector<Rate> rates;
    dates.push_back(Date1);
    dates.push_back(Date2);
        dates.push_back(Date3);
        dates.push_back(Date4);
        dates.push_back(Date5);
    rates.push_back(0.05);
    rates.push_back(0.05);
        rates.push_back(0.05);
        rates.push_back(0.05);
        rates.push_back(0.05);

        Handle<YieldTermStructure> bondDiscountingTermStructure(
                                    new InterpolatedZeroCurve<Linear>(dates, rates,termStructureDayCounter));
       



        std::cout<< "Date: " << Date1 << "  ZeroRate:" << bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure->timeFromReference(Date1),Simple,Annual,false) <<std::endl;
        std::cout<< "Date: " << Date2 << "  ZeroRate:" << bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure->timeFromReference(Date2),Simple,Annual,false) <<std::endl;
        std::cout<< "Date: " << Date3 << "  ZeroRate:" << bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure->timeFromReference(Date3),Simple,Annual,false) <<std::endl;
        std::cout<< "Date: " << Date4 << "  ZeroRate:" << bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure->timeFromReference(Date4),Simple,Annual,false) <<std::endl;
        std::cout<< "Date: " << Date5 << "  ZeroRate:" << bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure->timeFromReference(Date5),Simple,Annual,false) <<std::endl;

Output -

Date: March 10th, 2011  ZeroRate:5.000013 % Actual/Actual (ISDA) simple compounding
Date: March 10th, 2012  ZeroRate:5.127397 % Actual/Actual (ISDA) simple compounding
Date: March 10th, 2013  ZeroRate:5.258546 % Actual/Actual (ISDA) simple compounding
Date: March 10th, 2014  ZeroRate:5.394475 % Actual/Actual (ISDA) simple compounding
Date: March 10th, 2015  ZeroRate:5.535069 % Actual/Actual (ISDA) simple compounding

I am not able to understand why the a flat zero rate curve with 5%, when interpolated returns - 5.12%, 5.25%, 5.39% ....


Thanks in advance,

Das
Luigi Ballabio
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Re: InterpolatedZeroCurve -- > Understanding Problem

Luigi Ballabio

Different compoundings.  The rates you're passing to the zero curve  
are assumed by default to be continuously compounded.  So when you ask  
for rates with simple compounding, you get that 5% continuously  
compounded for 1 year is equivalent to 5.12% simply compounded.  Ditto  
for 2 years, 3 years etc.

Luigi


On Jun 14, 2011, at 7:28 AM, d0tc0mguy wrote:

> I am using the interpolatedzerocurve interface
>
> Code Snippet follows :
>
>       // Calendar calendar = TARGET();
> Calendar calendar = NullCalendar();
>        Date settlementDate(10, March, 2011);
>
> Date Date1(10, March, 2011);
> Date Date2(10, March, 2012);
> Date Date3(10, March, 2013);
> Date Date4(10, March, 2014);
> Date Date5(10, March, 2015);
>
>
> std::vector<Date> dates;
>    std::vector<Rate> rates;
>    dates.push_back(Date1);
>    dates.push_back(Date2);
> dates.push_back(Date3);
> dates.push_back(Date4);
> dates.push_back(Date5);
>    rates.push_back(0.05);
>    rates.push_back(0.05);
> rates.push_back(0.05);
> rates.push_back(0.05);
> rates.push_back(0.05);
>
> Handle<YieldTermStructure> bondDiscountingTermStructure(
>                                    new  
> InterpolatedZeroCurve<Linear>(dates,
> rates,termStructureDayCounter));
>
>
>
>
> std::cout<< "Date: " << Date1 << "  ZeroRate:" <<
> bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure-
> >timeFromReference(Date1),Simple,Annual,false)
> <<std::endl;
> std::cout<< "Date: " << Date2 << "  ZeroRate:" <<
> bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure-
> >timeFromReference(Date2),Simple,Annual,false)
> <<std::endl;
> std::cout<< "Date: " << Date3 << "  ZeroRate:" <<
> bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure-
> >timeFromReference(Date3),Simple,Annual,false)
> <<std::endl;
> std::cout<< "Date: " << Date4 << "  ZeroRate:" <<
> bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure-
> >timeFromReference(Date4),Simple,Annual,false)
> <<std::endl;
> std::cout<< "Date: " << Date5 << "  ZeroRate:" <<
> bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure-
> >timeFromReference(Date5),Simple,Annual,false)
> <<std::endl;
>
> Output -
>
> Date: March 10th, 2011  ZeroRate:5.000013 % Actual/Actual (ISDA)  
> simple
> compounding
> Date: March 10th, 2012  ZeroRate:5.127397 % Actual/Actual (ISDA)  
> simple
> compounding
> Date: March 10th, 2013  ZeroRate:5.258546 % Actual/Actual (ISDA)  
> simple
> compounding
> Date: March 10th, 2014  ZeroRate:5.394475 % Actual/Actual (ISDA)  
> simple
> compounding
> Date: March 10th, 2015  ZeroRate:5.535069 % Actual/Actual (ISDA)  
> simple
> compounding
>
> I am not able to understand why the a flat zero rate curve with 5%,  
> when
> interpolated returns - 5.12%, 5.25%, 5.39% ....
>
>
> Thanks in advance,
>
> Das
>
> --
> View this message in context: http://old.nabble.com/InterpolatedZeroCurve----%3E-Understanding-Problem-tp31839931p31839931.html
> Sent from the quantlib-users mailing list archive at Nabble.com.
>
>
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d0tc0mguy
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Re: InterpolatedZeroCurve -- > Understanding Problem

d0tc0mguy
Thanks Luigi


Luigi Ballabio wrote
Different compoundings.  The rates you're passing to the zero curve  
are assumed by default to be continuously compounded.  So when you ask  
for rates with simple compounding, you get that 5% continuously  
compounded for 1 year is equivalent to 5.12% simply compounded.  Ditto  
for 2 years, 3 years etc.

Luigi


On Jun 14, 2011, at 7:28 AM, d0tc0mguy wrote:
> I am using the interpolatedzerocurve interface
>
> Code Snippet follows :
>
>       // Calendar calendar = TARGET();
> Calendar calendar = NullCalendar();
>        Date settlementDate(10, March, 2011);
>
> Date Date1(10, March, 2011);
> Date Date2(10, March, 2012);
> Date Date3(10, March, 2013);
> Date Date4(10, March, 2014);
> Date Date5(10, March, 2015);
>
>
> std::vector<Date> dates;
>    std::vector<Rate> rates;
>    dates.push_back(Date1);
>    dates.push_back(Date2);
> dates.push_back(Date3);
> dates.push_back(Date4);
> dates.push_back(Date5);
>    rates.push_back(0.05);
>    rates.push_back(0.05);
> rates.push_back(0.05);
> rates.push_back(0.05);
> rates.push_back(0.05);
>
> Handle<YieldTermStructure> bondDiscountingTermStructure(
>                                    new  
> InterpolatedZeroCurve<Linear>(dates,
> rates,termStructureDayCounter));
>
>
>
>
> std::cout<< "Date: " << Date1 << "  ZeroRate:" <<
> bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure-
> >timeFromReference(Date1),Simple,Annual,false)
> <<std::endl;
>  std::cout<< "Date: " << Date2 << "  ZeroRate:" <<
> bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure-
> >timeFromReference(Date2),Simple,Annual,false)
> <<std::endl;
>  std::cout<< "Date: " << Date3 << "  ZeroRate:" <<
> bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure-
> >timeFromReference(Date3),Simple,Annual,false)
> <<std::endl;
>  std::cout<< "Date: " << Date4 << "  ZeroRate:" <<
> bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure-
> >timeFromReference(Date4),Simple,Annual,false)
> <<std::endl;
>  std::cout<< "Date: " << Date5 << "  ZeroRate:" <<
> bondDiscountingTermStructure->zeroRate(bondDiscountingTermStructure-
> >timeFromReference(Date5),Simple,Annual,false)
> <<std::endl;
>
> Output -
>
> Date: March 10th, 2011  ZeroRate:5.000013 % Actual/Actual (ISDA)  
> simple
> compounding
> Date: March 10th, 2012  ZeroRate:5.127397 % Actual/Actual (ISDA)  
> simple
> compounding
> Date: March 10th, 2013  ZeroRate:5.258546 % Actual/Actual (ISDA)  
> simple
> compounding
> Date: March 10th, 2014  ZeroRate:5.394475 % Actual/Actual (ISDA)  
> simple
> compounding
> Date: March 10th, 2015  ZeroRate:5.535069 % Actual/Actual (ISDA)  
> simple
> compounding
>
> I am not able to understand why the a flat zero rate curve with 5%,  
> when
> interpolated returns - 5.12%, 5.25%, 5.39% ....
>
>
> Thanks in advance,
>
> Das
>
> --
> View this message in context: http://old.nabble.com/InterpolatedZeroCurve----%3E-Understanding-Problem-tp31839931p31839931.html
> Sent from the quantlib-users mailing list archive at Nabble.com.
>
>
> ------------------------------------------------------------------------------
> EditLive Enterprise is the world's most technically advanced content
> authoring tool. Experience the power of Track Changes, Inline Image
> Editing and ensure content is compliant with Accessibility Checking.
> http://p.sf.net/sfu/ephox-dev2dev
> _______________________________________________
> QuantLib-users mailing list
> QuantLib-users@lists.sourceforge.net
> https://lists.sourceforge.net/lists/listinfo/quantlib-users


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