Rates and Discount Factors

In fmbasics: Financial Market Building Blocks

knitr::opts_chunk$set(collapse = TRUE, comment = "#>")

fmbasics makes it easy to work with interest rates and discount factors. You can convert interest rates to discount factors and vice-versa.

Interest rates

Let's make an interest rate object:

library("fmdates")
library("fmbasics")
# Quarterly compounding, with Actual/365 day basis
(rate <- InterestRate(value = 0.04, compounding = 4, day_basis = 'act/365'))

You can convert this rate to another rate with a different compounding/day basis:

as_InterestRate(rate, compounding = 2)
as_InterestRate(rate, day_basis = 'act/360')
as_InterestRate(rate, compounding = Inf, day_basis = '30/360us')

You can perform arithmetic on interest rates. Rates are implicitly converted to equivalent day basis and compounding before the operation is performed on the rates' values.

rate1 <- InterestRate(0.04, 2, 'act/365')
rate2 <- InterestRate(0.01, Inf, 'act/360')
rate1 + rate2

You can also convert interest rates into discount factors:

library("lubridate")
df <- as_DiscountFactor(rate, ymd(20140101), ymd(20140401))

The InterestRate class is vectorised.

rates <- InterestRate(seq(0.04, 0.05, 1e-4), 2, 'act/365')
rates[23:26]
rates[23:26] <- InterestRate(0.05, 2, 'act/365')
rates[23:26]

Discount factors

Let's make a discount factor object:

(df <- DiscountFactor(0.9, ymd(20140101), ymd(20150101)))

You can convert discount factors to interest rates.

as_InterestRate(df, compounding = 2, day_basis = 'act/365')

The DiscountFactor class is vectorised.

dfs <- DiscountFactor(seq(1, 0.9, -1e-3), ymd(20140101), ymd(20150101) + days(0:100))
dfs[23:26]

fmbasics documentation built on May 2, 2019, 6:22 a.m.