RQuantLib (version 0.4.0)

FixedRateBond: Fixed-Rate bond pricing

Description

The FixedRateBond function evaluates a fixed rate bond using discount curve, the yield or the clean price. More specificly, when a discount curve is provided the calculation is done by DiscountingBondEngine from QuantLib. The NPV, clean price, dirty price, accrued interest, yield, duration, actual settlement date and cash flows of the bond is returned. When a yield is provided instead, no engine is provided to the bond class and prices are computed from yield. In the latter case, NPV is set to NA. Same situation when the clean price is given instead of discount curve or yield. For more detail, see the source codes in QuantLib's file test-suite/bond.cpp.

The FixedRateBondPriceByYield function calculates the theoretical price of a fixed rate bond from its yield.

The FixedRateBondYield function calculates the theoretical yield of a fixed rate bond from its price.

Usage

## S3 method for class 'default':
FixedRateBond(bond, rates, schedule,
                                calc=list(dayCounter='ActualActual.ISMA',
                                          compounding='Compounded',
                                          freq='Annual',
                                          durationType='Modified'),
                                discountCurve = NULL, yield = NA, price = NA)
## S3 method for class 'default':
FixedRateBondPriceByYield( settlementDays=1, yield, faceAmount=100, 
                                 effectiveDate, maturityDate,
                                 period, calendar="UnitedStates/GovernmentBond", 
                                 rates, dayCounter=2,
                                 businessDayConvention=0, compound = 0, redemption=100, 
                                 issueDate)
## S3 method for class 'default':
FixedRateBondYield( settlementDays=1, price, faceAmount=100, 
                                 effectiveDate, maturityDate,
                                 period, calendar="UnitedStates/GovernmentBond", 
                                 rates, dayCounter=2,
                                 businessDayConvention=0, 
                                 compound = 0, redemption=100, 
                                 issueDate)

Arguments

bond

(Optional) bond parameters, a named list whose elements are: ll{ settlementDays (Optional) a double, settlement days. Default value is 1. faceAmount (Op

rates

a numeric vector, bond's coupon rates

schedule

(Optional) a named list, QuantLib's parameters of the bond's schedule. ll{ effectiveDate a Date, when the schedule becomes effective. maturityDate a Date, when the schedule matures.

calc

(Optional) a named list, QuantLib's parameters for calculations. ll{ dayCounter (Optional) a number or string, day counter convention. Defaults to 'ActualActual.ISMA'

discountCurve

Can be one of the following: ll{ a DiscountCurve a object of DiscountCurve class For more detail, see example or the discountCurve function A 2 ite

yield

yield of the bond

price

clean price of the bond

settlementDays

an integer, 1 for T+1, 2 for T+2, etc...

effectiveDate

bond's effective date

maturityDate

bond's maturity date

period

frequency of events,0=NoFrequency, 1=Once, 2=Annual, 3=Semiannual, 4=EveryFourthMonth, 5=Quarterly, 6=Bimonthly ,7=Monthly ,8=EveryFourthWeely,9=Biweekly, 10=Weekly, 11=Daily. For more information, see QuantLib's Frequency class

calendar

Business Calendar. Either us or uk

faceAmount

face amount of the bond

businessDayConvention

convention used to adjust a date in case it is not a valid business day. See quantlib for more detail. 0 = Following, 1 = ModifiedFollowing, 2 = Preceding, 3 = ModifiedPreceding, other = Unadjusted

dayCounter

day count convention. 0 = Actual360(), 1 = Actual365Fixed(), 2 = ActualActual(), 3 = Business252(), 4 = OneDayCounter(), 5 = SimpleDayCounter(), all other = Thirty360(). For more information, see QuantLib's DayCounter class

compound

compounding type. 0=Simple, 1=Compounded, 2=Continuous, all other=SimpleThenCompounded. See QuantLib's Compound class

redemption

redemption when the bond expires

issueDate

date the bond is issued

Value

• The FixedRateBond function returns an object of class FixedRateBond (which inherits from class Bond). It contains a list with the following components:
• NPV
  net present value of the bond
• cleanPrice
  clean price of the bond
• dirtyPrice
  dirty price of the bond
• accruedAmount
  accrued amount of the bond
• yield
  yield of the bond
• duration
  the duration of the bond
• settlementDate
  the actual settlement date used for the bond
• cashFlows
  cash flows of the bond
• The FixedRateBondPriceByYield function returns an object of class FixedRateBondPriceByYield (which inherits from class Bond). It contains a list with the following components:
• price
  price of the bond
• The FixedRateBondYield function returns an object of class FixedRateBondYield (which inherits from class Bond). It contains a list with the following components:
• yield
  yield of the bond

Details

A discount curve is built to calculate the bond value.

Please see any decent Finance textbook for background reading, and the QuantLib documentation for details on the QuantLib implementation.

References

http://quantlib.org for details on QuantLib.

Examples

#Simple call with a flat curve
bond <- list(settlementDays=1,
             issueDate=as.Date("2004-11-30"),
             faceAmount=100,
             accrualDayCounter='Thirty360',
             paymentConvention='Unadjusted')
schedule <- list(effectiveDate=as.Date("2004-11-30"),
                 maturityDate=as.Date("2008-11-30"),
                 period='Semiannual',
                 calendar='UnitedStates/GovernmentBond',
                 businessDayConvention='Unadjusted',
                 terminationDateConvention='Unadjusted',
                 dateGeneration='Forward',
                 endOfMonth=1)
calc=list(dayCounter='Actual360',
          compounding='Compounded',
          freq='Annual',
          durationType='Modified')
coupon.rate <- c(0.02875)
                       
params <- list(tradeDate=as.Date('2002-2-15'),
               settleDate=as.Date('2002-2-19'),
               dt=.25,
               interpWhat="discount",
               interpHow="loglinear")
setEvaluationDate(as.Date("2004-11-22"))

discountCurve.flat <- DiscountCurve(params, list(flat=0.05))
FixedRateBond(bond,
              coupon.rate,
              schedule,
              calc,
              discountCurve=discountCurve.flat)


#Same bond with a discount curve constructed from market quotes
tsQuotes <- list(d1w  =0.0382,
                 d1m  =0.0372,
                 fut1=96.2875,
                 fut2=96.7875,
                 fut3=96.9875,
                 fut4=96.6875,
                 fut5=96.4875,
                 fut6=96.3875,
                 fut7=96.2875,
                 fut8=96.0875,
                 s3y  =0.0398,
                 s5y  =0.0443,
                 s10y =0.05165,
                 s15y =0.055175)
tsQuotes <- list("flat" = 0.02)		## While discount curve code is buggy

discountCurve <- DiscountCurve(params, tsQuotes)
FixedRateBond(bond,
              coupon.rate,
              schedule,
              calc,
              discountCurve=discountCurve)

#Same bond calculated from yield rather than from the discount curve
yield <- 0.02
FixedRateBond(bond,
              coupon.rate,
              schedule,
              calc,
              yield=yield)


#same example with clean price
price <- 103.31
FixedRateBond(bond,
              coupon.rate,
              schedule,
              calc,
              price = price)

#example with default calc parameter
FixedRateBond(bond,
              coupon.rate,
              schedule,
              discountCurve=discountCurve)
              
#example with default calc and schedule parameters
schedule <- list(effectiveDate=as.Date("2004-11-30"),
                 maturityDate=as.Date("2008-11-30"))
FixedRateBond(bond,
              coupon.rate,
              schedule,
              discountCurve=discountCurve)

#example with default calc, schedule and bond parameters
FixedRateBond(,
              coupon.rate,
              schedule,
              discountCurve=discountCurve)

FixedRateBondPriceByYield(,0.0307, 100000, as.Date("2004-11-30"),
                          as.Date("2008-11-30"), 3, , c(0.02875),
                          , , , ,as.Date("2004-11-30"))

FixedRateBondYield(,90, 100000, as.Date("2004-11-30"), as.Date("2008-11-30"),
                   3, , c(0.02875), , , , ,as.Date("2004-11-30"))