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LinearTsrPricer: fix past payment dates, support overnight swap indices, add missing include #1775

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merged 4 commits into from
Mar 22, 2024
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LinearTsrPricer: fix past payment dates, support overnight swap indices, add missing include #1775

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17883f2
fix handling of past payment dates, add missing include
pcaspers Aug 26, 2023
d2cff82
fix namespace
pcaspers Aug 26, 2023
f97c6d9
Merge branch 'master' into pull-request-1775
lballabio Mar 22, 2024
fffcb9f
Use fixed vs floater swap
lballabio Mar 22, 2024
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63 changes: 34 additions & 29 deletions ql/cashflows/lineartsrpricer.cpp
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Original file line number Diff line number Diff line change
Expand Up @@ -27,6 +27,7 @@
#include <ql/cashflows/lineartsrpricer.hpp>
#include <ql/indexes/iborindex.hpp>
#include <ql/instruments/vanillaswap.hpp>
#include <ql/instruments/overnightindexedswap.hpp>
#include <ql/math/integrals/kronrodintegral.hpp>
#include <ql/math/solvers1d/brent.hpp>
#include <ql/pricingengines/blackformula.hpp>
Expand Down Expand Up @@ -122,24 +123,37 @@ namespace QuantLib {

today_ = QuantLib::Settings::instance().evaluationDate();

if (paymentDate_ > today_ && !couponDiscountCurve_.empty())
couponDiscountRatio_ =
couponDiscountCurve_->discount(paymentDate_) /
discountCurve_->discount(paymentDate_);
else
couponDiscountRatio_ = 1.;
Real couponCurvePaymentDiscount;
if (!couponDiscountCurve_.empty() && paymentDate_ > couponDiscountCurve_->referenceDate()) {
couponCurvePaymentDiscount = couponDiscountCurve_->discount(paymentDate_);
} else {
couponCurvePaymentDiscount = 1.0;
}

if (paymentDate_ > discountCurve_->referenceDate()) {
discountCurvePaymentDiscount_ = discountCurve_->discount(paymentDate_);
} else {
discountCurvePaymentDiscount_ = 1.0;
}

spreadLegValue_ = spread_ * coupon_->accrualPeriod() *
discountCurve_->discount(paymentDate_) *

couponDiscountRatio_ = couponCurvePaymentDiscount / discountCurvePaymentDiscount_;

spreadLegValue_ = spread_ * coupon_->accrualPeriod() * discountCurvePaymentDiscount_ *
couponDiscountRatio_;

if (fixingDate_ > today_) {

swapTenor_ = swapIndex_->tenor();
swap_ = swapIndex_->underlyingSwap(fixingDate_);

if (auto on = ext::dynamic_pointer_cast<OvernightIndexedSwapIndex>(swapIndex_)) {
swap_ = on->underlyingSwap(fixingDate_);
} else {
swap_ = swapIndex_->underlyingSwap(fixingDate_);
}
swapRateValue_ = swap_->fairRate();
annuity_ = 1.0E4 * std::fabs(swap_->fixedLegBPS());
Leg swapFixedLeg = swap_->fixedLeg();

ext::shared_ptr<SmileSection> sectionTmp =
swaptionVolatility()->smileSection(fixingDate_, swapTenor_);
Expand Down Expand Up @@ -169,7 +183,7 @@ namespace QuantLib {
// compute linear model's parameters

Real gx = 0.0, gy = 0.0;
for (const auto& i : swap_->fixedLeg()) {
for (const auto& i : swapFixedLeg) {
ext::shared_ptr<Coupon> c = ext::dynamic_pointer_cast<Coupon>(i);
Real yf = c->accrualPeriod();
Date d = c->date();
Expand All @@ -179,7 +193,7 @@ namespace QuantLib {
}

Real gamma = gx / gy;
Date lastd = swap_->fixedLeg().back()->date();
Date lastd = swapFixedLeg.back()->date();

a_ = discountCurve_->discount(paymentDate_) *
(gamma - GsrG(paymentDate_)) /
Expand Down Expand Up @@ -360,8 +374,7 @@ namespace QuantLib {

Rate LinearTsrPricer::swapletRate() const {
return swapletPrice() /
(coupon_->accrualPeriod() *
discountCurve_->discount(paymentDate_) * couponDiscountRatio_);
(coupon_->accrualPeriod() * discountCurvePaymentDiscount_ * couponDiscountRatio_);
}

Real LinearTsrPricer::capletPrice(Rate effectiveCap) const {
Expand All @@ -370,10 +383,8 @@ namespace QuantLib {
// the fixing is determined
const Rate Rs = std::max(
coupon_->swapIndex()->fixing(fixingDate_) - effectiveCap, 0.);
Rate price =
(gearing_ * Rs) *
(coupon_->accrualPeriod() *
discountCurve_->discount(paymentDate_) * couponDiscountRatio_);
Rate price = (gearing_ * Rs) * (coupon_->accrualPeriod() *
discountCurvePaymentDiscount_ * couponDiscountRatio_);
return price;
} else {
Real capletPrice = optionletPrice(Option::Call, effectiveCap);
Expand All @@ -383,8 +394,7 @@ namespace QuantLib {

Rate LinearTsrPricer::capletRate(Rate effectiveCap) const {
return capletPrice(effectiveCap) /
(coupon_->accrualPeriod() *
discountCurve_->discount(paymentDate_) * couponDiscountRatio_);
(coupon_->accrualPeriod() * discountCurvePaymentDiscount_ * couponDiscountRatio_);
}

Real LinearTsrPricer::floorletPrice(Rate effectiveFloor) const {
Expand All @@ -393,10 +403,8 @@ namespace QuantLib {
// the fixing is determined
const Rate Rs = std::max(
effectiveFloor - coupon_->swapIndex()->fixing(fixingDate_), 0.);
Rate price =
(gearing_ * Rs) *
(coupon_->accrualPeriod() *
discountCurve_->discount(paymentDate_) * couponDiscountRatio_);
Rate price = (gearing_ * Rs) * (coupon_->accrualPeriod() *
discountCurvePaymentDiscount_ * couponDiscountRatio_);
return price;
} else {
Real floorletPrice = optionletPrice(Option::Put, effectiveFloor);
Expand All @@ -406,8 +414,7 @@ namespace QuantLib {

Rate LinearTsrPricer::floorletRate(Rate effectiveFloor) const {
return floorletPrice(effectiveFloor) /
(coupon_->accrualPeriod() *
discountCurve_->discount(paymentDate_) * couponDiscountRatio_);
(coupon_->accrualPeriod() * discountCurvePaymentDiscount_ * couponDiscountRatio_);
}

Real LinearTsrPricer::swapletPrice() const {
Expand All @@ -416,14 +423,12 @@ namespace QuantLib {
const Rate Rs = coupon_->swapIndex()->fixing(fixingDate_);
Rate price =
(gearing_ * Rs + spread_) *
(coupon_->accrualPeriod() *
discountCurve_->discount(paymentDate_) * couponDiscountRatio_);
(coupon_->accrualPeriod() * discountCurvePaymentDiscount_ * couponDiscountRatio_);
return price;
} else {
Real atmCapletPrice = optionletPrice(Option::Call, swapRateValue_);
Real atmFloorletPrice = optionletPrice(Option::Put, swapRateValue_);
return gearing_ * (coupon_->accrualPeriod() *
discountCurve_->discount(paymentDate_) *
return gearing_ * (coupon_->accrualPeriod() * discountCurvePaymentDiscount_ *
swapRateValue_ * couponDiscountRatio_ +
atmCapletPrice - atmFloorletPrice) +
spreadLegValue_;
Expand Down
6 changes: 4 additions & 2 deletions ql/cashflows/lineartsrpricer.hpp
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Original file line number Diff line number Diff line change
Expand Up @@ -28,6 +28,7 @@
#include <ql/cashflows/couponpricer.hpp>
#include <ql/instruments/payoffs.hpp>
#include <ql/indexes/swapindex.hpp>
#include <ql/instruments/fixedvsfloatingswap.hpp>
#include <ql/math/integrals/integral.hpp>

namespace QuantLib {
Expand Down Expand Up @@ -233,10 +234,11 @@ namespace QuantLib {
Real gearing_, spread_;

Period swapTenor_;
Real spreadLegValue_, swapRateValue_, couponDiscountRatio_, annuity_;
Real spreadLegValue_, swapRateValue_, couponDiscountRatio_, discountCurvePaymentDiscount_,
annuity_;

ext::shared_ptr<SwapIndex> swapIndex_;
ext::shared_ptr<VanillaSwap> swap_;
ext::shared_ptr<FixedVsFloatingSwap> swap_;
ext::shared_ptr<SmileSection> smileSection_;

Settings settings_;
Expand Down
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