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PiecewiseYieldCurve ZeroRate

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George Cowie

PiecewiseYieldCurve ZeroRate

I feel like this flavor of question has been asked before on this forum, but I can't seem to figure out what I'm doing wrong. I would expect the following code to return pretty much the same rates I input into the RateHelpers, but that's not the case.

Am I incorrect about the expected functionality, or do I have something wrong with my code?

Thanks,

George

Output:

Period,Input Rate,Curve Rate

1W,0.0012075,0.00120749

1M,0.001515,0.00138513

2M,0.001935,0.00176613

3M,0.0022535,0.00209296

6M,0.00323,0.00306812

1Y,0.00549,0.005284

Code:

#include <ql/quantlib.hpp>

using namespace std ;

using namespace QuantLib ;

int main(int argc, char** argv)

{

vector<Rate> liborRates ;

liborRates.push_back(0.12075 / 100.0) ; //1W

liborRates.push_back(0.1515 / 100.0) ; //1M

liborRates.push_back(0.1935 / 100.0) ; //2M

liborRates.push_back(0.22535 / 100.0) ; //3M

liborRates.push_back(0.323 / 100.0) ; //6M

liborRates.push_back(0.549 / 100.0) ; //12M

vector<Period> periods ;

periods.push_back(Period(1,Weeks)) ;

periods.push_back(Period(1,Months)) ;

periods.push_back(Period(2,Months)) ;

periods.push_back(Period(3,Months)) ;

periods.push_back(Period(6,Months)) ;

periods.push_back(Period(12,Months)) ;

vector<boost::shared_ptr<RateHelper> > instruments ;

for (vector<int>::size_type i = 0 ; i < liborRates.size() ; i++)

{

boost::shared_ptr<Quote> liborQuote(new SimpleQuote(liborRates[i])) ;

Handle<Quote> liborHandle(liborQuote) ;

boost::shared_ptr<IborIndex> liborIndex(new USDLibor(periods[i])) ;

boost::shared_ptr<RateHelper> rateHelper(new DepositRateHelper(liborHandle,liborIndex)) ;

instruments.push_back(rateHelper) ;

}

Calendar calendar = TARGET ();

Date today (29 , Apr ,2014);

Natural settlementDays = 2;

Date settlement = calendar.advance ( today , settlementDays , Days );

DayCounter dc = Actual360 ();

boost::shared_ptr <YieldTermStructure> yieldCurve ;

yieldCurve = boost::shared_ptr <YieldTermStructure>(new

PiecewiseYieldCurve < ZeroYield , Linear >( settlement , instruments , dc ));

cout << "Period,Input Rate,Curve Rate" << endl ;

for(vector<int>::size_type i = 0 ; i < periods.size() ; i++)

{

Rate curveRate = Rate(yieldCurve->zeroRate(settlement + periods[i], dc, Continuous)) ;

cout << periods[i] << "," << liborRates[i] << "," << curveRate << endl ;

}

return 0 ;

}

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Luigi Ballabio

Re: PiecewiseYieldCurve ZeroRate

Hi,
it was a combination of things:
1) once you've chosen today's date, you should also add
Settings::instance().evaluationDate() = today;
to set it as the evaluation date, otherwise some calculations might
not be consistent;
2) Libor rates are simply compounded, but you're asking the curve for
continuously compounded rates. You should use
yieldCurve->zeroRate(d, dc, Simple);
3) you're using TARGET to calculate the spot date, but the USD libor
uses the US calendar. Use
Calendar calendar = UnitedStates();
instead;
4) if you just ask for the rates at settlement + periods[i], you might
end up on a holiday or a weekend. Use
calendar.adjust(settlement + periods[i])
instead, where calendar is as above.

Modifying your program as above, I get the correct rates.

Luigi

On Wed, May 7, 2014 at 2:02 PM, George Cowie <[hidden email]> wrote:

>
> I feel like this flavor of question has been asked before on this forum,
> but I can't seem to figure out what I'm doing wrong. I would expect the
> following code to return pretty much the same rates I input into the
> RateHelpers, but that's not the case.
>
> Am I incorrect about the expected functionality, or do I have something
> wrong with my code?
>
> Thanks,
> George
>
> Output:
>
> Period,Input Rate,Curve Rate
> 1W,0.0012075,0.00120749
> 1M,0.001515,0.00138513
> 2M,0.001935,0.00176613
> 3M,0.0022535,0.00209296
> 6M,0.00323,0.00306812
> 1Y,0.00549,0.005284
>
> Code:
>
> #include <ql/quantlib.hpp>
>
> using namespace std ;
> using namespace QuantLib ;
>
> int main(int argc, char** argv)
> {
> vector<Rate> liborRates ;
> liborRates.push_back(0.12075 / 100.0) ; //1W
> liborRates.push_back(0.1515 / 100.0) ; //1M
> liborRates.push_back(0.1935 / 100.0) ; //2M
> liborRates.push_back(0.22535 / 100.0) ; //3M
> liborRates.push_back(0.323 / 100.0) ; //6M
> liborRates.push_back(0.549 / 100.0) ; //12M
>
> vector<Period> periods ;
> periods.push_back(Period(1,Weeks)) ;
> periods.push_back(Period(1,Months)) ;
> periods.push_back(Period(2,Months)) ;
> periods.push_back(Period(3,Months)) ;
> periods.push_back(Period(6,Months)) ;
> periods.push_back(Period(12,Months)) ;
>
> vector<boost::shared_ptr<RateHelper> > instruments ;
>
> for (vector<int>::size_type i = 0 ; i < liborRates.size() ; i++)
> {
> boost::shared_ptr<Quote> liborQuote(new SimpleQuote(liborRates[i])) ;
> Handle<Quote> liborHandle(liborQuote) ;
> boost::shared_ptr<IborIndex> liborIndex(new USDLibor(periods[i])) ;
> boost::shared_ptr<RateHelper> rateHelper(new
> DepositRateHelper(liborHandle,liborIndex)) ;
> instruments.push_back(rateHelper) ;
> }
>
> Calendar calendar = TARGET ();
> Date today (29 , Apr ,2014);
> Natural settlementDays = 2;
> Date settlement = calendar.advance ( today , settlementDays , Days );
> DayCounter dc = Actual360 ();
> boost::shared_ptr <YieldTermStructure> yieldCurve ;
> yieldCurve = boost::shared_ptr <YieldTermStructure>(new
> PiecewiseYieldCurve < ZeroYield , Linear >( settlement , instruments ,
> dc ));
>
> cout << "Period,Input Rate,Curve Rate" << endl ;
> for(vector<int>::size_type i = 0 ; i < periods.size() ; i++)
> {
> Rate curveRate = Rate(yieldCurve->zeroRate(settlement + periods[i],
> dc, Continuous)) ;
> cout << periods[i] << "," << liborRates[i] << "," << curveRate << endl
> ;
> }
>
> return 0 ;
> }
>
>
> ------------------------------------------------------------------------------
> Is your legacy SCM system holding you back? Join Perforce May 7 to find out:
>  3 signs your SCM is hindering your productivity
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>

--
<https://implementingquantlib.blogspot.com>
<https://twitter.com/lballabio>

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