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Kumar Aiyer

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I'm a newbie to quantlib. Trying to build a 1-mo USD Libor forward curve from a swap curve. Here is a skeletal code. Can an expert in the list take a quick look and comment if I am doing things correctly. Without documentation, its been a little bit of trial and error to getting started with quantlib. Some of the code is boilerplate from some of the examples.

I'm trying to build a cublic spline interpolated forward curve and I want to output forwardrates for 1-mo Libor.

Any guidance would be greatly appreicated.
thanks

Kumar

    /*********************
    *** MARKET DATA ***
    *********************/

    Calendar calendar = QuantLib::TARGET();
    // must be a business day
    settlementDate = calendar.adjust(settlementDate);
    // assume fixings for same date
    Integer fixingDays = 0;
    Natural curveSettlementDays = 0;
    Date currentDate = calendar.advance(settlementDate, -fixingDays, Days);
    // nothing to do with Date::todaysDate
    Settings::instance().evaluationDate() = currentDate;

    Period OneMonth(1, TimeUnit::Months);

    std::cout << "Today: " << currentDate.weekday()
        << ", " << currentDate << std::endl;

    std::cout << "Settlement date: " << settlementDate.weekday()
        << ", " << settlementDate << std::endl;

    // deposit rates
    Rate d1mQuote = yc.month1.get()/100.0;
    Rate d3mQuote = yc.month3.get()/100.0;
    Rate d6mQuote = yc.month6.get()/100.0;
    Rate d1yQuote = yc.year1.get()/100.0;
    // swaps
    Rate s2yQuote = yc.year2.get()/100.0;
    Rate s3yQuote = yc.year3.get()/100.0;
    Rate s4yQuote =yc.year4.get()/100.0;
    Rate s5yQuote = yc.year5.get()/100.0;
    Rate s7yrQuote = yc.year7.get()/100.0;
    Rate s10yQuote = yc.year10.get()/100.0;
    Rate s15yQuote = yc.year15.get()/100.0;
    Rate s20yQuote = yc.year20.get()/100.0;
    Rate s30yQuote = yc.year30.get()/100.0;

    /********************
    ***    QUOTES    ***
    ********************/

    // SimpleQuote stores a value which can be manually changed;
    // other Quote subclasses could read the value from a database
    // or some kind of data feed.

    // deposits
    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> 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> s4yRate(new SimpleQuote(s4yQuote));
    boost::shared_ptr<Quote> s5yRate(new SimpleQuote(s5yQuote));
    boost::shared_ptr<Quote> s7yRate(new SimpleQuote(s5yQuote));
    boost::shared_ptr<Quote> s10yRate(new SimpleQuote(s10yQuote));
    boost::shared_ptr<Quote> s15yRate(new SimpleQuote(s15yQuote));
    boost::shared_ptr<Quote> s20yRate(new SimpleQuote(s20yQuote));
    boost::shared_ptr<Quote> s30yRate(new SimpleQuote(s30yQuote));

    /*********************
    *** RATE HELPERS ***
    *********************/

    // RateHelpers are built from the above quotes together with
    // other instrument dependant infos. Quotes are passed in
    // relinkable handles which could be relinked to some other
    // data source later.

    // deposits
    DayCounter depositDayCounter = QuantLib::Actual360();
    boost::shared_ptr<RateHelper> d1m(new DepositRateHelper(
        Handle<Quote>(d1mRate),
        1*Months, fixingDays,
        calendar, ModifiedFollowing,
        true, depositDayCounter));
    boost::shared_ptr<RateHelper> d3m(new DepositRateHelper(
        Handle<Quote>(d3mRate),
        3*Months, fixingDays,
        calendar, ModifiedFollowing,
        true, depositDayCounter));
    boost::shared_ptr<RateHelper> d6m(new DepositRateHelper(
        Handle<Quote>(d6mRate),
        6*Months, fixingDays,
        calendar, ModifiedFollowing,
        true, depositDayCounter));
    boost::shared_ptr<RateHelper> d1y(new DepositRateHelper(
        Handle<Quote>(d1yRate),
        1*Years, fixingDays,
        calendar, ModifiedFollowing,
        true, depositDayCounter));

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

    boost::shared_ptr<RateHelper> s2y(new SwapRateHelper(
        Handle<Quote>(s2yRate), 2*Years,
        calendar, swFixedLegFrequency,
        swFixedLegConvention, swFixedLegDayCounter,
        swFloatingLegIndex));
    boost::shared_ptr<RateHelper> s3y(new SwapRateHelper(
        Handle<Quote>(s3yRate), 3*Years,
        calendar, swFixedLegFrequency,
        swFixedLegConvention, swFixedLegDayCounter,
        swFloatingLegIndex));
    boost::shared_ptr<RateHelper> s4y(new SwapRateHelper(
        Handle<Quote>(s4yRate), 4*Years,
        calendar, swFixedLegFrequency,
        swFixedLegConvention, swFixedLegDayCounter,
        swFloatingLegIndex));
    boost::shared_ptr<RateHelper> s5y(new SwapRateHelper(
        Handle<Quote>(s5yRate), 5*Years,
        calendar, swFixedLegFrequency,
        swFixedLegConvention, swFixedLegDayCounter,
        swFloatingLegIndex));
    boost::shared_ptr<RateHelper> s7y(new SwapRateHelper(
        Handle<Quote>(s7yRate), 7*Years,
        calendar, swFixedLegFrequency,
        swFixedLegConvention, swFixedLegDayCounter,
        swFloatingLegIndex));
    boost::shared_ptr<RateHelper> s10y(new SwapRateHelper(
        Handle<Quote>(s10yRate), 10*Years,
        calendar, swFixedLegFrequency,
        swFixedLegConvention, swFixedLegDayCounter,
        swFloatingLegIndex));
    boost::shared_ptr<RateHelper> s15y(new SwapRateHelper(
        Handle<Quote>(s15yRate), 15*Years,
        calendar, swFixedLegFrequency,
        swFixedLegConvention, swFixedLegDayCounter,
        swFloatingLegIndex));
    boost::shared_ptr<RateHelper> s20y(new SwapRateHelper(
        Handle<Quote>(s20yRate), 20*Years,
        calendar, swFixedLegFrequency,
        swFixedLegConvention, swFixedLegDayCounter,
        swFloatingLegIndex));
    boost::shared_ptr<RateHelper> s30y(new SwapRateHelper(
        Handle<Quote>(s30yRate), 30*Years,
        calendar, swFixedLegFrequency,
        swFixedLegConvention, swFixedLegDayCounter,
        swFloatingLegIndex));
    /*********************
    ** CURVE BUILDING **
    *********************/

    // Any DayCounter would be fine.
    // ActualActual::ISDA ensures that 30 years is 30.0
    DayCounter termStructureDayCounter =
        Actual360();

    Real tolerance = 1.0e-10;
    Size max = 5000;
    // A depo-swap curve
    std::vector<boost::shared_ptr<RateHelper> > depoSwapInstruments;

    depoSwapInstruments.push_back(d1m);
    depoSwapInstruments.push_back(d3m);
    depoSwapInstruments.push_back(d6m);
    depoSwapInstruments.push_back(d1y);
    depoSwapInstruments.push_back(s2y);
    depoSwapInstruments.push_back(s3y);
    depoSwapInstruments.push_back(s4y);
    depoSwapInstruments.push_back(s5y);
    depoSwapInstruments.push_back(s7y);
    depoSwapInstruments.push_back(s10y);
    depoSwapInstruments.push_back(s15y);
    depoSwapInstruments.push_back(s20y);
    depoSwapInstruments.push_back(s30y);
    Cubic interpolator(CubicInterpolation::Spline, true,
                         CubicInterpolation::SecondDerivative, 0.0,
                         CubicInterpolation::SecondDerivative, 0.0);
    boost::shared_ptr<YieldTermStructure> depoSwapTermStructure (
        new PiecewiseYieldCurve<ForwardRate,Cubic,IterativeBootStrap>(
        settlementDate, depoSwapInstruments,
        termStructureDayCounter,
        std::vector<Handle<Quote> >(),
        std::vector<Date>(),
        tolerance, interpolator));

    RelinkableHandle<YieldTermStructure> forecastingTermStructure;
    forecastingTermStructure.linkTo(depoSwapTermStructure);
    // Loop over period of term structure.
    // do it for 360 months
    int i;
    int mos = 360;

    std::vector<Rate> fwdRates(mos);
    USDLibor libor1M(OneMonth);
    Period indexTenor = libor1M.tenor();
    DayCounter indexDayCounter = libor1M.dayCounter();

    for (i=0; i<mos; i++) {
        currentDate = calendar.advance(currentDate, OneMonth, Following);
        // move the evaluationDate to currentDate
        // and update ratehelpers dates...
        //Settings::instance().evaluationDate() = currentDate;
        fwdRates[i] = forecastingTermStructure->forwardRate(currentDate,indexTenor,indexDayCounter,Simple);
        cout << "date: " << currentDate << ", fwdRate[" << i << "]: " << fwdRates[i] << endl;
    }

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Luigi Ballabio

Re: (no subject)

On Wed, 2009-07-15 at 12:45 -0700, Kumar Aiyer wrote:
> I'm a newbie to quantlib. Trying to build a 1-mo USD Libor forward
> curve from a swap curve. Here is a skeletal code. Can an expert in the
> list take a quick look and comment if I am doing things correctly.

> I'm trying to build a cublic spline interpolated forward curve and I
> want to output forwardrates for 1-mo Libor.

Apologies for the delay--I was on vacation.

>From a quick look, it seems correct. But at the end, you might want to
replace your loop (and the calls to forwardRate) with:

USDLibor libor1M(OneMonth, forecastingTermStructure);
...

for (i=0; i<mos; i++) {
currentDate = calendar.advance(currentDate,
OneMonth, Following);
Date fixingDate = libor1M->fixingDate(currentDate);
fwdRates[i] = libor1M->fixing(fixingDate);
}

This way, you let the Libor make the call to forwardRate() with all the
correct conventions (rolling, end-of-month, etc.)

Luigi

--

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weather forecasters.
-- Jean-Paul Kauffmann

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