Re: [Quantlib-users] Bond dirty price different from discounted cashflow?

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

Hello,

to work correctly, act/act(ISMA) needs to know the reference period for a
given coupon.  The bond has the information and knows how to pass it,
but the InterestRate object doesn't.  To fix that, you can pass the bond
schedule when you build the day counter, as in:

    day_count = ql.ActualActual(ql.ActualActual.ISMA, schedule)

so the day counter itself has the information.  Using this day counter
should give you the same result in both cases.

Luigi



On Fri, Aug 13, 2021 at 4:15 PM <mat...@gm...> wrote:

> On first glance, I was also wondering about the impact of the reference
> period, see
> https://quant.stackexchange.com/questions/12707/pricing-a-fixedratebond-in-quantlib-yield-vs-termstructure/12715#12715
>
> But being thrown off by a difference in NPVs when using
> ql.Thirty360(Thirty360.BondBasis). Not quite clear about that one.
>
>
> -----Original Message-----
> From: jian Xu <jia...@gm...>
> Sent: Friday, 13 August, 2021 15:53
> To: QuantLib users <qua...@li...>
> Subject: Re: [Quantlib-users] Bond dirty price different from discounted
> cashflow?
>
> One thing I noticed is that if I set "day_count" to ql.ActualActual()
> instead of ql.ActualActual(ql.ActualActual.ISMA), then the dirty price
> matches the npv exactly.  This is very strange.  The "day_count"
> variable is consistently used in the bond's constructor, dirtyPrice(), and
> InterestRate's constructor.  Why would ql.ActualActual.ISMA causing dirty
> price and the npv to be different?  Am I missing something?
>
> On Fri, Aug 13, 2021 at 7:57 AM jian Xu <jia...@gm...> wrote:
> >
> > Hi,
> > I saw some difference between a bond's dirty price and the discounted
> > cashflow to the settlement date.  Cannot figure out why.
> >
> > For example, in the following code, the dirty price is 103.4815, while
> > my discounted cashflow is 103.4674, why?  Thanks a lot.
> >
> > ===============================
> > import QuantLib as ql
> >
> > ## setup the security
> > schedule = ql.MakeSchedule(effectiveDate = ql.Date(30, 6, 2018),
> >                            terminationDate = ql.Date(30, 6, 2023),
> >                            tenor = ql.Period(2),
> >                            calendar =
> > ql.UnitedStates(ql.UnitedStates.GovernmentBond),
> >                            convention = ql.Unadjusted,
> >                            terminalDateConvention=ql.Unadjusted,
> >                            rule = ql.DateGeneration.Backward,
> >                            endOfMonth = True)
> >
> > day_count = ql.ActualActual(ql.ActualActual.ISMA)  # US market
> > convention, not the QuantLib default !!!
> > face = 100
> > redemption = 100
> > issue_date = ql.Date(2, 7, 2018)
> > days_settle = 1
> > coupon = 2.625/100
> > payment_convention = ql.Unadjusted
> > bond = ql.FixedRateBond(days_settle,
> >                         face,
> >                         schedule,
> >                         [coupon],
> >                         day_count,
> >                         payment_convention,
> >                         redemption,
> >                         issue_date)
> >
> > ## Dirty price
> > settle_date = ql.Date(5, 10, 2021)
> > yld = 0.01
> > freq = ql.Semiannual
> > print(bond.dirtyPrice(yld, day_count, ql.Compounded, freq,
> > settle_date))
> >
> > ## my discount cash flow
> > disc = ql.InterestRate(yld, day_count, ql.Compounded, freq) npv = 0
> > for cf in bond.cashflows():
> >     if cf.date() < settle_date:
> >         continue
> >     df = disc.discountFactor(settle_date, cf.date())
> >     npv += cf.amount() * df
> > print(npv)
>
>
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