/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */ /* Copyright (C) 2006 Allen Kuo This file is part of QuantLib, a free-software/open-source library for financial quantitative analysts and developers - http://quantlib.org/ QuantLib is free software: you can redistribute it and/or modify it under the terms of the QuantLib license. You should have received a copy of the license along with this program; if not, please email <quantlib-dev@lists.sf.net>. The license is also available online at <http://quantlib.org/license.shtml>. This program is distributed in the hope that it will be useful, but WITHOUT ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE. See the license for more details. */ /*! \file fixedratebondforward.hpp \brief forward contract on a fixed-rate bond */ #ifndef quantlib_fixed_rate_bond_forward_hpp #define quantlib_fixed_rate_bond_forward_hpp #include <ql/instruments/forward.hpp> #include <ql/instruments/bonds/fixedratebond.hpp> namespace QuantLib { //! %Forward contract on a fixed-rate bond /*! 1. valueDate refers to the settlement date of the bond forward contract. maturityDate is the delivery (or repurchase) date for the underlying bond (not the bond's maturity date). 2. Relevant formulas used in the calculations (\f$P\f$ refers to a price): a. \f$ P_{CleanFwd}(t) = P_{DirtyFwd}(t) - AI(t=deliveryDate) \f$ where \f$ AI \f$ refers to the accrued interest on the underlying bond. b. \f$ P_{DirtyFwd}(t) = \frac{P_{DirtySpot}(t) - SpotIncome(t)} {discountCurve->discount(t=deliveryDate)} \f$ c. \f$ SpotIncome(t) = \sum_i \left( CF_i \times incomeDiscountCurve->discount(t_i) \right) \f$ where \f$ CF_i \f$ represents the ith bond cash flow (coupon payment) associated with the underlying bond falling between the settlementDate and the deliveryDate. (Note the two different discount curves used in b. and c.) <b>Example: </b> \link Repo.cpp valuation of a repo on a fixed-rate bond \endlink \todo Add preconditions and tests \todo Create switch- if coupon goes to seller is toggled on, don't consider income in the \f$ P_{DirtyFwd}(t) \f$ calculation. \todo Verify this works when the underlying is paper (in which case ignore all AI.) \warning This class still needs to be rigorously tested \ingroup instruments */ 00073 class FixedRateBondForward : public Forward { public: //! \name Constructors /*! If strike is given in the constructor, can calculate the NPV of the contract via NPV(). If strike/forward price is desired, it can be obtained via forwardPrice(). In this case, the strike variable in the constructor is irrelevant and will be ignored. */ //@{ FixedRateBondForward( const Date& valueDate, const Date& maturityDate, Position::Type type, Real strike, Natural settlementDays, const DayCounter& dayCounter, const Calendar& calendar, BusinessDayConvention businessDayConvention, const boost::shared_ptr<FixedRateBond>& fixedCouponBond, const Handle<YieldTermStructure>& discountCurve = Handle<YieldTermStructure>(), const Handle<YieldTermStructure>& incomeDiscountCurve = Handle<YieldTermStructure>()); //@} //! \name Calculations //@{ //! (dirty) forward bond price Real forwardPrice() const; //! (dirty) forward bond price minus accrued on bond at delivery Real cleanForwardPrice() const; //! NPV of bond coupons discounted using incomeDiscountCurve /*! Here only coupons between max(evaluation date,settlement date) and maturity date of bond forward contract are considered income. */ Real spotIncome(const Handle<YieldTermStructure>& incomeDiscountCurve) const; //! NPV of underlying bond Real spotValue() const; //@} protected: boost::shared_ptr<FixedRateBond> fixedCouponBond_; void performCalculations() const; }; } #endif

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