Re: [Quantlib-users] bond helpers pricing on curve

[Luigi B. <lui...@gm...>]

Yes and yes.

Luigi


On Mon, Jun 8, 2020 at 11:44 AM Philippe Hatstadt <
phi...@ex...> wrote:

> Thanks Luigi.
> Two quick follow up questions;
> 1. Does dirryPrice() work for an amortizing bond where I set the cash
> flows myself, albeit as QL.Bond()?
> 2. Does dirtyPrice() have the lazy NPV property?
>
> Regards
>
> Philippe Hatstadt
> +1-203-252-0408
> pha...@ma...
> https://www.linkedin.com/in/philippe-hatstadt
>
>
> On Jun 8, 2020, at 2:43 AM, Luigi Ballabio <lui...@gm...>
> wrote:
>
> 
> Hello,
>     that's correct.  With the evaluation date set to the value date, the
> bonds will take care of calculating the settlement date (you can check that
> by calling bond.settlementDate() without arguments once you set the date).
> To avoid confusion, I suggest you ignore the NPV() method and use
> dirtyPrice() instead, which always discounts to the settlement date.
>
> Luigi
>
>
> On Sun, Jun 7, 2020 at 9:41 PM Philippe Hatstadt <
> phi...@ex...> wrote:
>
>> Thanks Mike.
>> In my calculations, I was blipping the cleanPrice of a bond by its dv01,
>> but I was unsure whether I had to set the evaluationDate() to settle_date
>> to make sure the bond helpers understood my quote to be as of the
>> settlement date. it appears that this is not impacted by the
>> evaluationDate(), which is the correct design. So going forward, I see no
>> reason to set the evaluationDate() to anything other than the trade date to
>> get the correct numerical partial dv01s.
>> Thanks
>>
>> Regards
>>
>> Philippe
>>
>>
>> On Sun, Jun 7, 2020 at 2:28 PM Mike DelMedico <mik...@gm...>
>> wrote:
>>
>>> Reference date = date which has discount factor of 1.0
>>>
>>> So if you build a curve say with data from Tokyo open tonight, which is
>>> for trade date Monday June 8, then 6/8/20 should be your reference date.
>>> The settlement date of any instruments can and usually will be a different
>>>  date.
>>>
>>> I would assume that all the NPV calculations are discounting back to
>>> reference date.
>>>
>>> - Mike
>>>
>>> On Sun, Jun 7, 2020 at 11:33 Philippe Hatstadt <
>>> phi...@ex...> wrote:
>>>
>>>> Luigi,
>>>> what do you mean by "reference date" of the curve?
>>>> The odd behavior I am observing is that if I build a curve with 2y, 3y,
>>>> 5y, 7y, 10y and 30y US treasuries, and then I manually blip the 2y point to
>>>> compute a key rate dv01, I would expect that only the 2y price is impacted.
>>>> This is by setting  as follows: ql.Settings.instance().evaluationDate =
>>>> settle_date. To be 100% clear, I am repricing the bonds used to build
>>>> the curve on the curve itself via a PricingEngine, not using bond math.
>>>> However, the behavior I observe is that all maturities are slightly
>>>> impacted by blipping the 2y price used to build the curve, whereas for
>>>> instance, the 5y is not impacted by blipping the 3y, and the 10y is not
>>>> impacted by clipping the 3y or the 5y. Furthermore, I set the yield on the
>>>> 2y to zero, in which case the impact was zero.
>>>> So my conclusion is that although I set the evaluationDate to settle
>>>> date, the NPV() method discounts to trade_date, and since the first
>>>> instrument I use to build my curve is the 2y, then the discount factor from
>>>> trade date to settle date is only impacted by the 2y yield.
>>>> Lastly, if I do  ql.Settings.instance().evaluationDate  = trade_date,
>>>> then everything works as expected. However, this is exactly the behavior I
>>>> would not expect, as I would only expect the 2y sensitivity to impact
>>>> valuation Date based on settle_date, in which case all discounting from
>>>> tared date to settle date is irrelevant.
>>>> So I am utterly confused by how to use evaluationDate to discount
>>>> properly to either trade or settle date with the NPV() method.
>>>> Data is below, i highlighted in yellow the "anomaly", which would be
>>>> expected if evaluationDate was set to trade date and not settle date.
>>>>
>>>> evaluationDate = settle date
>>>>   2y 3y 5y 7y 10y 30y
>>>> 2y -192.38 -0.27 -0.28 -0.28 -0.27 -0.27
>>>> 3y 0.00 -295.21 0.00 0.00 0.00 0.00
>>>> 5y 0.00 0.00 -488.57 0.00 0.00 0.00
>>>> 7y 0.00 0.00 0.00 -679.34 0.00 0.00
>>>> 10y 0.00 0.00 0.00 0.00 -960.92 0.00
>>>> 30y 0.00 0.00 0.00 0.00 0.00 -2,404.86
>>>>
>>>> evaluationDate = trade date
>>>>   2y 3y 5y 7y 10y 30y
>>>> 2y -191.12 0.00 0.00 0.00 0.00 0.00
>>>> 3y 1.26 -295.48 0.00 0.00 0.00 0.00
>>>> 5y 1.26 0.00 -488.85 0.00 0.00 0.00
>>>> 7y 1.26 0.00 0.00 -679.61 0.00 0.00
>>>> 10y 1.26 0.00 0.00 0.00 -961.17 0.00
>>>> 30y 1.26 0.00 0.00 0.00 0.00 -2,405.04
>>>>
>>>>
>>>> Philippe
>>>>
>>>>
>>>> On Fri, May 29, 2020 at 3:31 PM Luigi Ballabio <
>>>> lui...@gm...> wrote:
>>>>
>>>>> Philippe,
>>>>>     bond.NPV() discounts to the reference date of the discount curve.
>>>>> bond.dirtyPrice() discounts to the settlement, and thus it does hold that
>>>>> dirtyPrice() - accruedInterest() equals cleanPrice().  As you say, the same
>>>>> doesn't hold for NPV.
>>>>>
>>>>> Hope this helps,
>>>>>     Luigi
>>>>>
>>>>>
>>>>> On Fri, May 29, 2020 at 9:26 PM Philippe Hatstadt <
>>>>> phi...@ex...> wrote:
>>>>>
>>>>>> Peter & others,
>>>>>> Is it 100% a fact that NPV() discounts to today and not to settle
>>>>>> date? because I was trying to reconcile NPV() - accruedInterest() versus
>>>>>> cleanPrice() but that should not work if they don't have the same
>>>>>> settlement date
>>>>>>
>>>>>>
>>>>>> Regards
>>>>>>
>>>>>> Philippe
>>>>>>
>>>>>>
>>>>>> On Fri, May 29, 2020 at 8:49 AM Peter Caspers <pca...@gm...>
>>>>>> wrote:
>>>>>>
>>>>>>> I believe helper.bond().cleanPrice() returns the (clean) price on
>>>>>>> the curve, but as of the bond’s settlement date, typically this is today +
>>>>>>> 2bd. NPV() returns the (dirty) price as of today on the other hand. Could
>>>>>>> that explain the difference you see?
>>>>>>> BR, Peter
>>>>>>>
>>>>>>> On 29 May 2020, at 03:34, Philippe Hatstadt <
>>>>>>> phi...@ex...> wrote:
>>>>>>>
>>>>>>> One unanswered question is whether helper.bond().cleanPrice() is
>>>>>>> supposed to return the clean price of the helper priced on the curve, or
>>>>>>> just the cleanPrice parameter that was used to build the helper?
>>>>>>> Given that it matches to 6 digits of precision the input quote
>>>>>>> clesan price, I assume it is not based on valuation on the curve,
>>>>>>> which should be equal to NPV(0 - accruedInterest but I would be keen to
>>>>>>> know.
>>>>>>>
>>>>>>> Regards
>>>>>>>
>>>>>>> Philippe
>>>>>>>
>>>>>>>
>>>>>>> On Thu, May 28, 2020 at 5:06 PM Mike DelMedico <
>>>>>>> mik...@gm...> wrote:
>>>>>>>
>>>>>>>> Without looking at your code I would guess is a convention thing
>>>>>>>> when you pass instrument specs to the ratehelper. Day counter, calendar,
>>>>>>>> and coupon frequency come to mind?  Maybe try gathering the cash flows off
>>>>>>>> the bond object and see if they match what you expect?
>>>>>>>>
>>>>>>>> -Mike
>>>>>>>>
>>>>>>>>
>>>>>>>>
>>>>>>>> On Thu, May 28, 2020 at 15:34 Philippe Hatstadt <
>>>>>>>> phi...@ex...> wrote:
>>>>>>>>
>>>>>>>>> I am building a US treasury curve from on the run 2/3/5/7/10/30y
>>>>>>>>> US bonds, via tradition bond helper list and so on. How can I tell the
>>>>>>>>> quality of the fit of the curve? Since it's a straight bootstrapping with
>>>>>>>>> PiecewiseFlatForward, I would expect the repricing to be exact.
>>>>>>>>> In order to do that, I am doing first helper.bond().NPV(),
>>>>>>>>> which for the 30y bond gives me a price of 97.0322, whereas if I do
>>>>>>>>> helper.bond().cleanPrice(), I get 97.015625.
>>>>>>>>> Here is the issue: the latter price is *exactly* the input price
>>>>>>>>> that I entered, however, the difference between NPV() and cleanPrice() is
>>>>>>>>> not equal to the correct accrued interest of 0.03767 but equal to 0.01669.
>>>>>>>>> So either (a) helper.bond().cleanPrice() only returns the quote
>>>>>>>>> that was entered, but not the clean price of the bond calculated on the
>>>>>>>>> curve, or (b) the curve construction does not reprice the helper bond
>>>>>>>>> exactly, thence the incorrect value of 0.01699 above.
>>>>>>>>> So I am looking for some guidance on how to evaluate
>>>>>>>>> the exactitude of the curve building?
>>>>>>>>>
>>>>>>>>> Regards
>>>>>>>>>
>>>>>>>>> Philippe
>>>>>>>>>
>>>>>>>>>
>>>>>>>>>
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>>>>>>>>
>>>>>>>
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>>>>>>>
>>>>>>
>>>>>>
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>>>>
>>>>
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>>
>> Brokerage services offered through Exos Securities LLC, member of SIPC
>> <http://www.sipc.org/> / FINRA <http://www.finra.org/>. For important
>> disclosures, click here <https://www.exosfinancial.com/disclosures>.
>>
>
>
>
> Brokerage services offered through Exos Securities LLC, member of SIPC
> <http://www.sipc.org/> / FINRA <http://www.finra.org/>. For important
> disclosures, click here <https://www.exosfinancial.com/disclosures>.
>