FixedRateBond: Fixed-Rate bond pricing

In RQuantLib: R interface to the QuantLib library

Description

The FixedRateBond function evaluates a fixed rate bond using discount curve. More specificly, the calculation is done by DiscountingBondEngine from QuantLib. The NPV, clean price, dirty price, accrued interest, yield and cash flows of the bond is returned. 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

## Default S3 method:
FixedRateBond(bond, rates, discountCurve, dateparams )

## Default S3 method:
FixedRateBondPriceByYield( settlementDays=1, yield, faceAmount, 
                                 effectiveDate, maturityDate,
                                 period, calendar="us", 
                                 rates, dayCounter=2,
                                 businessDayConvention=0, compound = 0, redemption=100, 
                                 issueDate)

## Default S3 method:
FixedRateBondYield( settlementDays=1, price, faceAmount, 
                                 effectiveDate, maturityDate,
                                 period, calendar="us", 
                                 rates, dayCounter=2,
                                 businessDayConvention=0, 
                                 compound = 0, redemption=100, 
                                 issueDate)

Arguments

bond	bond parameters, a named list whose elements are: issueDate a Date, the bond's issue date maturityDate a Date, the bond's maturity date 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. effectiveDate (Optinal) a Date, the bond's effective date. Default value is issueDate
rates	a numeric vector, bond's coupon rates
discountCurve	Can be one of the following: a DiscountCurve a object of DiscountCurve class For more detail, see example or the discountCurve function A 2 items list specifies a flat curve in two values "todayDate" and "rate" A 3 items list specifies three values to construct a DiscountCurve object, "params" , "tsQuotes", "times". For more detail, see example or the discountCurve function
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'. terminationDateConvention (Optional) a number or string, termination day convention. See Enum. Default value is 'Following'. endOfMonth (Optional) a numeric with value 1 or 0. End of Month rule. Default value is 0. dateGeneration (Optional) a numeric, date generation method. See Enum. Default value is 'Backward' See example below.
settlementDays	an integer, 1 for T+1, 2 for T+2, etc...
yield	yield of the bond
price	price of the bond
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

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.

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
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

Note

The interface might change in future release as QuantLib stabilises its own API.

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

#Simple call with a flat curve
bond <- list(faceAmount=100,
             issueDate=as.Date("2004-11-30"),
             maturityDate=as.Date("2008-11-30"),
             redemption=100, 
             effectiveDate=as.Date("2004-11-30"))
dateparams <- list(settlementDays=1,
                   calendar="us", dayCounter = 'Thirty360', period=2, 
                   businessDayConvention = 4, terminationDateConvention=4,
                   dateGeneration=1, endOfMonth=1)
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, discountCurve.flat, dateparams)


#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, discountCurve, dateparams)


#example with default dateparams
FixedRateBond(bond, coupon.rate, discountCurve)

##exampe with defaul bond parameter and dateparams
bond <- list(issueDate=as.Date("2004-11-30"),
             maturityDate=as.Date("2008-11-30"))
dateparams <- list(calendar="us",
                   dayCounter = "ActualActual", 
                   period="Annual")
FixedRateBond(bond, coupon.rate, discountCurve, dateparams)


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"))

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