Re: [Quantlib-users] MarkovFunctional instantiation error

[Peter C. <pca...@gm...>]

Hi Giuseppe

can you possibly check whether the problem occurs in pure C++ code as well?

Thank you
Peter



Giuseppe Trapani <tr...@gm...> schrieb am Do. 17. Aug. 2023 um 18:17:

> Good evening everyone,
>
> I am working with QuantLib python (version 1.31 from pypi). I'm trying to
> instantiate *MarkovFunctional to be calibrated on a single expiry / smile*
> and I noticed the following RuntimeError:
>
> RuntimeError: year 2200 out of bounds. It must be in [1901,2199]
>
>
> The error is raised in the following case:
>
>
>    - The SwapIndex passed to MarkovFunctional has a certain fixed leg
>    tenor (e.g., 1y)
>    - The swaptionTenors (that is, the smile to be calibrated to) is
>    greater than that of the fixed leg tenor of the SwapIndex (from the example
>    above, > 1y).
>
>
> Notice that *this happens only for SwapIndex with a fixed leg tenor
> greater or equal than 1y*: if I create a SwapIndex with fixed leg tenor
> smaller than 1y, the MarkovFunctional object gets instantiated correctly
> with whatever smile I choose.
>
> *Another weird thing*: if I use a standard EuriborSwapIsdaFixA (that has
> a fixed leg tenor of 1y), I can also correctly instantiate the
> MarkovFunctional object with whatever smile I choose.
>
> Is this behaviour expected? Please, find below a minimum replication code.
>
>
> Thanks in advance for your time and availability.
>
>
>
> ivol = 0.25
>>
>> ivol_quote = ql.SimpleQuote(ivol)
>>
>> ln_shift = 0.02
>>
>>
>>> forward_rate = 0.02
>>
>> forward_rate_quote = ql.SimpleQuote(forward_rate)
>>
>>
>>> calendar = ql.UnitedStates(ql.UnitedStates.SOFR)
>>
>>
>>> oswp_blackvols = ql.ConstantSwaptionVolatility(2, calendar,
>>> ql.Following, ql.QuoteHandle(ivol_quote), ql.Actual365Fixed(),
>>> ql.ShiftedLognormal, ln_shift)
>>
>> forward_curve = ql.FlatForward(2, calendar,
>>> ql.QuoteHandle(forward_rate_quote), ql.Actual360())
>>
>>
>>> #swap_index = ql.EuriborSwapIsdaFixA(
>>
>> #    ql.Period("10y"),
>>
>> #    ql.YieldTermStructureHandle(forward_curve),
>>
>> #    ql.YieldTermStructureHandle(forward_curve)
>>
>> #)
>>
>>
>>>
>>> floating_leg_tenor = ql.Period("6m")
>>
>> fixed_leg_tenor = ql.Period("1y")
>>
>> ibor_index = ql.Libor("DummyIborIndex", floating_leg_tenor, 2,
>>> ql.USDCurrency(), calendar, ql.Actual360(),
>>> ql.YieldTermStructureHandle(forward_curve))
>>
>> swap_index = ql.SwapIndex("DummySwapIndex", ql.Period("10y"), 2,
>>> ql.USDCurrency(), calendar, fixed_leg_tenor, ql.ModifiedFollowing,
>>> ql.Actual360(), ibor_index)
>>
>>
>>> mean_reversion = 0.05
>>
>>
>>> exercise_dates = [ql.Date(30, 5, 2025)]
>>
>> swaption_dates = [ql.Date(30, 5, 2025)]
>>
>>
>>>
>>> ## smile_tenors > then fixed_leg_tenor => ERROR
>>
>> smile_tenors = [ql.Period("5y")]
>>
>>
>>> ## smile_tenors <= fixed_leg_tenor => NO ERROR
>>
>> # smile_tenors = [ql.Period("1y")]
>>
>>
>>> mm = ql.MarkovFunctional(
>>
>>     ql.YieldTermStructureHandle(forward_curve),
>>
>>     mean_reversion,
>>
>>     exercise_dates,
>>
>>     [0.01, 0.01],
>>
>>     ql.SwaptionVolatilityStructureHandle(oswp_blackvols),
>>
>>     swaption_dates,
>>
>>     smile_tenors,
>>
>>     swap_index
>>
>> )
>>
>>
>
>
>
> --
> *Giuseppe Trapani*
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