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Re: [Quantlib-users] Aging a swap without changing the curve producing unexpected results
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From: Arkadiy N. <ark...@gm...> - 2023-01-07 18:48:32
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As far as I understand, because the inputs into the swap include schedules
(which would change if you want to move everything out), you'd have to
rebuild the swap. You could refactor your script a bit to make the swap
creation a parameterized function (thus making such changes more
streamlined going forward), but that's entirely up to you.
On Wed, Jan 4, 2023 at 1:22 PM Shaun Viguerie <svi...@ve...>
wrote:
> Thank you for the explanation here. Is there a simple way to push the
> settlement date out on an existing swap once created? Or would I need to
> create an additional swap?
>
>
>
>
>
> *From:* Arkadiy Naumov <ark...@gm...>
> *Sent:* Monday, December 19, 2022 10:57 PM
> *To:* Shaun Viguerie <svi...@ve...>
> *Cc:* qua...@li...
> *Subject:* Re: [Quantlib-users] Aging a swap without changing the curve
> producing unexpected results
>
>
>
> *This Message originated outside your organization.*
> ------------------------------
>
> Hi Shaun,
>
>
>
> From what I can see in the script, you've moved your evaluation date
> forward, but kept swap settlement the same, so your forward rates that
> drive floating leg cash flows are now different. Before it was a series of
> 3M forwards starting 1Y out, and now it's forwards starting 345 days out.
> In order to keep the cash flows unchanged, you'd need to account for the
> 20-days "roll" down the curve or push the settlement out.
>
>
>
> On Mon, Dec 19, 2022 at 6:14 PM Shaun Viguerie <svi...@ve...>
> wrote:
>
> Hi All,
>
>
>
> First, I want to thank Luigi & the community for all of the work on
> QuantLib. I’m a new user so apologies if my question is stupid…
>
>
>
> I’ve been trying to get a feel for the mechanics of library—specifically
> around TermStructures and Interest Rate Swaps. In doing so, I wanted to
> test a base case:
>
>
>
> - Create a simple YieldCurve instance using a 3M Short Rate future +
> 1Y-10Y Swap Rates
> - Create a VanillaSwap on top of this structure
> - Evaluate the NPV of this swap & examine the cashflows
> - Advance the calendar 10 days [*without changing the curve at all]*
> - Evaluate the NPV of the swap & examine the cashflows]
>
>
>
> In the above experiment, given that I *am not *changing the curve, I
> would expect the cashflows to remain the same [while the NPVs would
> change]. However, I am unable get this working, despite running through
> several tutorials online (DIMA’s slides, a couple of Luigi’s videos). I
> have gleaned that this might have something to do with adding fixing days
> to the indices? But I’m not sure I understand the mechanics of why that
> would be or how I should think about managing fixings as I advance time in
> the library.
>
>
>
> I’m happy to provide more information…. A messy version of the code is
> attached below:
>
>
>
> import pandas as pd
>
> import QuantLib as ql
>
> from QuantLib import *
>
>
>
> def show_cashflows(leg):
>
> for c in leg:
>
> print ('%20s | %s | %.4f%%' % (c.date(), c.amount(),
>
> as_coupon(c).rate()*100))
>
>
>
>
>
> calendar = TARGET()
>
>
>
> tddt = pd.to_datetime('today').date()
>
> todaysDate = ql.Date(tddt.day, tddt.month, tddt.year)
>
>
>
> Settings.instance().evaluationDate = todaysDate
>
> settlementDate = calendar.advance(todaysDate, 12, ql.Months)
>
>
>
> # market quotes
>
> deposits = { (3,Months): 0.047245}
>
>
>
> swaps = {
>
> (1,Years): 0.05876,
>
> (2,Years): 0.045986,
>
> (4,Years): 0.038589,
>
> (5,Years): 0.036954,
>
> (6,Years): 0.035925,
>
> (7,Years): 0.0352,
>
> (8,Years): 0.034683,
>
> (9,Years): 0.03437,
>
> (10,Years): .034186
>
> }
>
>
>
>
>
> # convert them to Quote objects
>
> for n,unit in deposits.keys():
>
> deposits[(n,unit)] = SimpleQuote(deposits[(n,unit)])
>
> for n,unit in swaps.keys():
>
> swaps[(n,unit)] = SimpleQuote(swaps[(n,unit)])
>
>
>
>
>
> # build rate helpers
>
> dayCounter = Actual360()
>
> settlementDays = 2
>
> depositHelpers = [ DepositRateHelper(QuoteHandle(deposits[(n,unit)]),
>
> Period(n,unit), settlementDays,
>
> calendar, ModifiedFollowing,
>
> False, dayCounter)
>
> for n, unit in [(3,Months) ]]
>
>
>
>
>
> swapHelpers = [ SwapRateHelper(QuoteHandle(swaps[(n,unit)]),
>
> Period(n,unit), calendar,
>
> Annual, Unadjusted,
>
> Actual360(), Euribor6M())
>
> for n, unit in swaps.keys() ]
>
>
>
>
>
> # term-structure construction
>
> helpers = depositHelpers + swapHelpers
>
>
>
> # term structure handles...why do I need both?
>
> discountTermStructure = RelinkableYieldTermStructureHandle()
>
> forecastTermStructure = RelinkableYieldTermStructureHandle()
>
>
>
> depoSwapCurve = PiecewiseLogCubicDiscount(settlementDays, TARGET(),
> helpers, Actual360())
>
> depoSwapCurve.enableExtrapolation()
>
>
>
> swapEngine = DiscountingSwapEngine(discountTermStructure)
>
>
>
> # 5Y Swap
>
> nominal = 1000000
>
> maturity1 = calendar.advance(settlementDate,5,Years)
>
>
>
>
>
> fixedRate = 0.036954
>
>
>
> spread = 0.0
>
>
>
> index = ql.USDLibor(ql.Period(3, ql.Months), forecastTermStructure)
>
>
>
> floatingLegAdjustment = ModifiedFollowing
>
> floatingLegDayCounter = index.dayCounter()
>
>
>
> fixedSchedule1 = Schedule(settlementDate, maturity1,
>
> Period(1, Years), calendar,
>
> Unadjusted, Unadjusted,
>
> DateGeneration.Forward, False)
>
> floatingSchedule1 = Schedule(settlementDate, maturity1,
>
> Period(6,Months), calendar,
>
> ModifiedFollowing, ModifiedFollowing,
>
> DateGeneration.Forward, False)
>
>
>
> # when I create the swap using this method, the cashflows remain fixed
> upon advancing the day
>
> spot1 = VanillaSwap(VanillaSwap.Receiver, nominal,
>
> fixedSchedule1, fixedRate, Actual360(),
>
> floatingSchedule1, index, spread,
>
> floatingLegDayCounter)
>
>
>
>
>
> spot1.setPricingEngine(swapEngine)
>
> discountTermStructure.linkTo(depoSwapCurve)
>
> forecastTermStructure.linkTo(depoSwapCurve)
>
>
>
>
>
> Settings.instance().evaluationDate = todaysDate
>
> print ('Fair Rate: {}'.format(spot1.fairRate()))
>
> print('NPV: {}'.format(spot1.NPV()))
>
> print('fixed cashflows:')
>
> show_cashflows(spot1.fixedLeg())
>
> print('floating cashflows:')
>
> show_cashflows(spot1.floatingLeg())
>
>
>
> ## AFTER DOING THIS THE FLOATING CASHFLOWS CHANGE AND I WOULD NOT EXPECT
> THEM TO
>
>
>
> Settings.instance().evaluationDate = calendar.advance(todaysDate, 20, Days)
>
> print (spot1.fairRate())
>
> print(spot1.NPV())
>
> print ('Fair Rate: {}'.format(spot1.fairRate()))
>
> print('NPV: {}'.format(spot1.NPV()))
>
> print('fixed cashflows:')
>
> show_cashflows(spot1.fixedLeg())
>
> print('floating cashflows:')
>
> show_cashflows(spot1.floatingLeg())
>
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