RE: FixedCouponBond pricing wrong?

Posted by Jeffrey-J.Yu on
URL: http://quantlib.414.s1.nabble.com/FixedCouponBond-pricing-wrong-tp3741p3744.html

Ning,

I think you present one extreme condition in the way you use FixedCouponBond:

1. the issue date is 11/1/04;
2. the settlement date is 11/1/04;

In reality, I dont know if you can do this.  However, you make a case that the
price/yield calculation should consider this, or prevent further calculation because of
the invalid entry.  Let me think about how this should be addressed.

You can certainly put in some more realistic inputs to test it out.

Cheers,
Jeff

-----Original Message-----
From: [hidden email]
[mailto:[hidden email]]On Behalf Of Feng
Ning
Sent: Friday, April 22, 2005 10:23 AM
To: [hidden email]
Cc: [hidden email]
Subject: Re: [Quantlib-users] FixedCouponBond pricing wrong?


Thanks to Luigi for his reply. But the problem persist.
1) I am not clear what it means:
Date today(30, October, 2004);

I assume it means we should set the evaluation date, so I use:
   
Settings::instance().setEvaluationDate(Date(31,October,2004));
It turns out: calculated clean price=95.92, dirty price = 98.42.

2) my computation differs from Luigi's bcoz I feel that the coupon is
semiannual value, so I use c=0.025/2, instead of c=0.025.
I verify this by printing out the cashflows as in the code.

The complete code is below:
// bond-tester.cpp
#include <iostream>
#include <ql/quantlib.hpp>
using namespace QuantLib;

int main() {
    Settings::instance().setEvaluationDate(Date(31,October,2004));
    std::cout << "today date: "<< Date::todaysDate() << std::endl;
 
    Calendar bondCalendar = nullCalendar();
 
    DayCounter bondDayCount = OneDayCounter();
    Integer settlementDays = 1;

        // actual market values from the evaluation date

        FixedCouponBond bond1(Date(1,November,2004),
                          Date(31,October,2004),
                          Date(31,October,2006),
                          settlementDays,
                          0.025, Semiannual,
                          bondDayCount, bondCalendar,
                          Unadjusted, 100.0);

             
             
        Real marketPrice1 = 99.203125;
        Rate marketYield1 = 0.02925;
   
        // check
        Real tolerance = 1.0e-6;
        Real price, dprice, yield;
      // calculated values

        Real cachedPrice1 = 99.204505;
       Rate cachedYield1 = 0.029257;    
   
        price = bond1.cleanPrice(marketYield1);
        dprice = bond1.dirtyPrice(marketYield1);
   
        std::cout <<  "    calculated clean price: "
                   << DecimalFormatter::toString(price,6) << "\n"
           << "    calculated dirty price: "
           << DecimalFormatter::toString(dprice,6) << "\n"
                   << "    expected:   "
                   << DecimalFormatter::toString(cachedPrice1,6) << "\n"
                   << "    error:      "
                   << DecimalFormatter::toString(price-cachedPrice1,6)
<< std::endl;
       
    std::cout << " Show cashflow: \n";
    std::vector<boost::shared_ptr<CashFlow> > cashflows = bond1.cashflows();
     
    for (Size i=0; i<cashflows.size(); ++i) {
        std::cout << cashflows[i]->date() << ": " <<
cashflows[i]->amount() <<"\n";
    }
   
    return 0;
} //main




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