Re: Bond Credit Spread Calibration

Posted by John Orford on
URL: http://quantlib.414.s1.nabble.com/Bond-Credit-Spread-Calibration-tp16237p16244.html

Thanks Cheng! I'll check your amendments now and let you know : )

On Mon Feb 09 2015 at 9:58:35 AM cheng li <[hidden email]> wrote:

Hi John,

 

Thank you for sharing your codes. There are some changes needed to be made to your codes to make the example work properly:

 

Line 80: z_spreaded_term_structure = ZeroSpreadedTermStructure( discounting_term_structure, QuoteHandle( z_spread ))

 

Should be amended as :

 

Line 80: z_spreaded_term_structure = ZeroSpreadedTermStructure( discounting_term_structure, QuoteHandle( z_spread ), compounding,  payment_frequency)

 

Z-Spread has its own compounding rule and frequency. And you should make it consistent with what you offer to the function when you call CashFlows.zSpread.

 

Line 153: print "NPV+AA\t" + str(fixed_rate_bond.NPV() + fixed_rate_bond.accruedAmount())

 

Should be:

 

Line 153: print "NPV-AA\t" + str(fixed_rate_bond.NPV() - fixed_rate_bond.accruedAmount())

 

Normally NPV of bond is it dirty price. So AA should be excluded to be compared with MV which supposed to be clean price.

 

Regards,

Cheng

 

发件人: John Orford [mailto:[hidden email]]
发送时间: 2015年2月6日 18:34
收件人: QuantLib users
主题: Re: [Quantlib-users] Bond Credit Spread Calibration

 

Previous file was wrong - this is the one to look at.

On Fri Feb 06 2015 at 6:23:46 PM John Orford <[hidden email]> wrote:

I attached an example.

 

Suspect this isn't a stupid mistake, but a fundamental misunderstanding of mine, which is a little worrying.

 

Any help'll be appreciated.

 

John

 

On Fri Feb 06 2015 at 1:06:50 PM John Orford <[hidden email]> wrote:

Hey Guys,

 

Long time no questions - looking forward to getting back into QL again! Spending too much time ensconced in Javascript.

 

In any case, I can't figure out what I am doing wrong.

 

I create a FixedRateBond object with all the requisite accoutrements.

 

Then call a zSpread function reusing everything from the FixedRateBond object.

 

For the NPV which'll be calibrated to, I take a quoted clean market price and add the accrued amount from the bond object.

 

For example, MV = 135, Accrued Amt = 9.99, and NPV ~= 145.

 

However, when I take the output of the zSpread function and create a new object, the NPV turns out to be ~144.

 

I tried increasing accuracy and iterations but to no avail.

 

Are there any common gotchas while using the zSpread function?

 

As I write this I realise, a code example would be very helpful. I will do that now.

 

John

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