ConvertibleBond: Convertible Bond evaluation for Fixed, Floating and Zero...

In RQuantLib: R interface to the QuantLib library

Description

The ConvertibleFixedCouponBond function setups and evaluates a ConvertibleFixedCouponBond using QuantLib's BinomialConvertibleEngine and BlackScholesMertonProcess The NPV, clean price, dirty price, accrued interest, yield and cash flows of the bond is returned. For detail, see test-suite/convertiblebond.cpp

The ConvertibleFloatingCouponBond function setups and evaluates a ConvertibleFixedCouponBond using QuantLib's BinomialConvertibleEngine and BlackScholesMertonProcess The NPV, clean price, dirty price, accrued interest, yield and cash flows of the bond is returned. For detail, see test-suite/convertiblebond.cpp

The ConvertibleZeroCouponBond function setups and evaluates a ConvertibleFixedCouponBond using QuantLib's BinomialConvertibleEngine and BlackScholesMertonProcess The NPV, clean price, dirty price, accrued interest, yield and cash flows of the bond is returned. For detail, see test-suite/convertiblebond.cpp.

Usage

## Default S3 method:
ConvertibleFloatingCouponBond(bondparams, iborindex, spread, process, dateparams)
## Default S3 method:
ConvertibleFixedCouponBond(bondparams, coupon, process, dateparams)
## Default S3 method:
ConvertibleZeroCouponBond(bondparams, process, dateparams)

Arguments

bondparams	bond parameters, a named list whose elements are: issueDate a Date, the bond's issue date maturityDate a Date, the bond's maturity date creditSpread a double, credit spread parameter in the constructor of the bond. conversitionRatio a double, conversition ratio parameter in the constructor of the bond. exercise (Optional) a string, either "eu" for European option, or "am" for American option. Default value is 'am'. faceAmount (Optional) a double, face amount of the bond. Default value is 100. redemption (Optional) a double, percentage of the initial face amount that will be returned at maturity date. Default value is 100. divSch (Optional) a data frame whose columns are "Type", "Amount", "Rate", and "Date" corresponding to QuantLib's DividendSchedule. Default value is an empty frame, or no dividend. callSch (Optional) a data frame whose columns are "Price", "Type" and "Date" corresponding to QuantLib's CallabilitySchedule. Defaule is an empty frame, or no callability.
iborindex	a DiscountCurve object, represents an IborIndex
spread	a double vector, represents paramter 'spreads' in ConvertibleFloatingBond's constructor.
coupon	a double vector of coupon rate
process	arguments to construct a BlackScholes process and set up the binomial pricing engine for this bond. underlying a double, flat underlying term structure volatility a double, flat volatility term structure dividendYield a DiscountCurve object riskFreeRate a DiscountCurve object
dateparams	(Optional) a named list, QuantLib's date parameters of the bond. settlementDays (Optional) a double, settlement days. Default value is 1. calendar (Optional) a string, either 'us' or 'uk' corresponding to US Goverment Bond calendar and UK Exchange calendar. Default value is 'us'. dayCounter (Optional) a number or string, day counter convention. See Enum. Default value is 'Thirty360' period (Optional) a number or string, interest compounding interval. See Enum. Default value is 'Semiannual'. businessDayConvention (Optional) a number or string, business day convention. See Enum. Default value is 'Following'. See the examples below.

Details

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

Value

The ConvertibleFloatingCouponBond function returns an object of class ConvertibleFloatingCouponBond (which inherits from class Bond). It contains a list with the following components:

NPV	net present value of the bond
cleanPrice	price price of the bond
dirtyPrice	dirty price of the bond
accruedAmount	accrued amount of the bond
yield	yield of the bond
cashFlows	cash flows of the bond

The ConvertibleFixedCouponBond function returns an object of class ConvertibleFixedCouponBond (which inherits from class Bond). It contains a list with the following components:

NPV	net present value of the bond
cleanPrice	price price of the bond
dirtyPrice	dirty price of the bond
accruedAmount	accrued amount of the bond
yield	yield of the bond
cashFlows	cash flows of the bond

The ConvertibleZeroCouponBond function returns an object of class ConvertibleZeroCouponBond (which inherits from class Bond). It contains a list with the following components:

NPV	net present value of the bond
cleanPrice	price price of the bond
dirtyPrice	dirty price of the bond
accruedAmount	accrued amount of the bond
yield	yield of the bond
cashFlows	cash flows of the bond

Author(s)

Khanh Nguyen [e-mail] for the inplementation; Dirk Eddelbuettel [e-mail] for the R interface; the QuantLib Group for QuantLib

References

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

Examples

#this follow an example in test-suite/convertiblebond.cpp 
params <- list(tradeDate=Sys.Date()-2,
               settleDate=Sys.Date(),
               dt=.25,
               interpWhat="discount",
               interpHow="loglinear")


dividendYield <- DiscountCurve(params, list(flat=0.02))
riskFreeRate <- DiscountCurve(params, list(flat=0.05))

dividendSchedule <- data.frame(Type=character(0), Amount=numeric(0),
                            Rate = numeric(0), Date = as.Date(character(0)))
callabilitySchedule <- data.frame(Price = numeric(0), Type=character(0),
                          Date = as.Date(character(0)))

process <- list(underlying=50, divYield = dividendYield,
                rff = riskFreeRate, volatility=0.15)

today <- Sys.Date()
bondparams <- list(exercise="am", faceAmount=100,
                   divSch = dividendSchedule, 
                   callSch = callabilitySchedule,
                   redemption=100,
                   creditSpread=0.005,
                   conversionRatio = 0.0000000001, 
                   issueDate=as.Date(today+2), 
                   maturityDate=as.Date(today+3650))
dateparams <- list(settlementDays=3, 
                   dayCounter="ActualActual", 
                   period = "Semiannual", calendar = "us", 
                   businessDayConvention="Following")

lengths <- c(2,4,6,8,10,12,14,16,18,20,22,24,26,28,30)
coupons <- c( 0.0200, 0.0225, 0.0250, 0.0275, 0.0300,
              0.0325, 0.0350, 0.0375, 0.0400, 0.0425,
              0.0450, 0.0475, 0.0500, 0.0525, 0.0550 )
marketQuotes <- rep(100, length(lengths))
curvedateparams <- list(settlementDays=0, period="Annual", 
                   dayCounter="ActualActual", 
                  businessDayConvention ="Unadjusted")
curveparams <- list(method="ExponentialSplinesFitting", 
                    origDate = Sys.Date())
curve <- FittedBondCurve(curveparams, lengths, coupons, marketQuotes, curvedateparams)
iborindex <- list(type="USDLibor", length=6, 
                  inTermOf="Month", term=curve)   
spreads <- c()
#ConvertibleFloatingCouponBond(bondparams, iborindex, spreads, process, dateparams)


#example using default values
#ConvertibleFloatingCouponBond(bondparams, iborindex,spreads, process)

dateparams <- list(settlementDays=3,                    
                   period = "Semiannual", 
                   businessDayConvention="Unadjusted")

bondparams <- list(                  
                   creditSpread=0.005, conversionRatio = 0.0000000001, 
                   issueDate=as.Date(today+2), 
                   maturityDate=as.Date(today+3650))
#ConvertibleFloatingCouponBond(bondparams, iborindex,
#spreads, process, dateparams)



#this follow an example in test-suite/convertiblebond.cpp 
#for ConvertibleFixedCouponBond

#set up arguments to build a pricing engine.
params <- list(tradeDate=Sys.Date()-2,
               settleDate=Sys.Date(),
               dt=.25,
               interpWhat="discount",
               interpHow="loglinear")
times <- seq(0,10,.1)

dividendYield <- DiscountCurve(params, list(flat=0.02), times)
riskFreeRate <- DiscountCurve(params, list(flat=0.05), times)

dividendSchedule <- data.frame(Type=character(0), Amount=numeric(0),
                            Rate = numeric(0), Date = as.Date(character(0)))
callabilitySchedule <- data.frame(Price = numeric(0), Type=character(0),
                          Date = as.Date(character(0)))

process <- list(underlying=50, divYield = dividendYield,
                rff = riskFreeRate, volatility=0.15)

today <- Sys.Date()
bondparams <- list(exercise="am", faceAmount=100, divSch = dividendSchedule, 
                   callSch = callabilitySchedule, redemption=100, 
                   creditSpread=0.005, conversionRatio = 0.0000000001, 
                   issueDate=as.Date(today+2), 
                   maturityDate=as.Date(today+3650))
dateparams <- list(settlementDays=3, 
                   dayCounter="Actual360", 
                   period = "Once", calendar = "us", 
                   businessDayConvention="Following"
                   )
coupon <- c(0.05)
ConvertibleFixedCouponBond(bondparams, coupon, process, dateparams)

#example with default value
ConvertibleFixedCouponBond(bondparams, coupon, process)

dateparams <- list(settlementDays=3, 
                   dayCounter="Actual360")
ConvertibleFixedCouponBond(bondparams, coupon, process, dateparams)

bondparams <- list(creditSpread=0.005, conversionRatio = 0.0000000001, 
                   issueDate=as.Date(today+2), 
                   maturityDate=as.Date(today+3650))
ConvertibleFixedCouponBond(bondparams, coupon, process, dateparams)



#this follow an example in test-suite/convertiblebond.cpp 
params <- list(tradeDate=Sys.Date()-2,
               settleDate=Sys.Date(),
               dt=.25,
               interpWhat="discount",
               interpHow="loglinear")
times <- seq(0,10,.1)


dividendYield <- DiscountCurve(params, list(flat=0.02), times)
riskFreeRate <- DiscountCurve(params, list(flat=0.05), times)

dividendSchedule <- data.frame(Type=character(0), Amount=numeric(0),
                            Rate = numeric(0), Date = as.Date(character(0)))
callabilitySchedule <- data.frame(Price = numeric(0), Type=character(0),
                          Date = as.Date(character(0)))

process <- list(underlying=50, divYield = dividendYield,
                rff = riskFreeRate, volatility=0.15)

today <- Sys.Date()
bondparams <- list(exercise="am", faceAmount=100, divSch = dividendSchedule, 
                   callSch = callabilitySchedule, redemption=100, 
                   creditSpread=0.005, conversionRatio = 0.0000000001, 
                   issueDate=as.Date(today+2), 
                   maturityDate=as.Date(today+3650))
dateparams <- list(settlementDays=3, 
                   dayCounter="Actual360", 
                   period = "Once", calendar = "us", 
                   businessDayConvention="Following"
                   )

ConvertibleZeroCouponBond(bondparams, process, dateparams)

#example with default values
ConvertibleZeroCouponBond(bondparams, process)


bondparams <- list(creditSpread=0.005,
                   conversionRatio=0.0000000001, 
                   issueDate=as.Date(today+2),
                   maturityDate=as.Date(today+3650))

dateparams <- list(settlementDays=3, dayCounter='Actual360')                   
ConvertibleZeroCouponBond(bondparams, process, dateparams)
ConvertibleZeroCouponBond(bondparams, process)

RQuantLib documentation built on May 2, 2019, 4:48 p.m.