1 files changed, 87 insertions, 0 deletions
diff --git a/python/tests/test_cms_spread.py b/python/tests/test_cms_spread.py
new file mode 100644
index 00000000..457d8fbd
--- /dev/null
+++ b/python/tests/test_cms_spread.py
@@ -0,0 +1,87 @@
+import datetime
+import math
+import numpy as np
+import unittest
+from analytics.cms_spread import (
+    build_spread_index, VolatilityType,
+    get_swaption_vol_data, get_swaption_vol_matrix, get_cms_coupons,
+    get_params, h_call, h_put)
+from quantlib.quotes import SimpleQuote
+from quantlib.time.api import (Actual365Fixed, Days, Date, ModifiedFollowing,
+                               Period, Years)
+from yieldcurve import YC
+from quantlib.cashflows.conundrum_pricer import (
+    AnalyticHaganPricer, YieldCurveModel)
+from quantlib.experimental.coupons.cms_spread_coupon import (
+    CappedFlooredCmsSpreadCoupon)
+from quantlib.experimental.coupons.lognormal_cmsspread_pricer import (
+    LognormalCmsSpreadPricer)
+from scipy.special import roots_hermitenorm
+
+
+class TestCmsSpread(unittest.TestCase):
+
+    def setUp(self):
+        self.trade_date = datetime.date(2018, 1, 19)
+        option_tenor = Period(2, Years)
+        maturity = Date.from_datetime(self.trade_date) + Period(2, Years)
+        spread_index, self.yc = build_spread_index(30, 2)
+        fixing_date = (spread_index.
+                       fixing_calendar.
+                       adjust(maturity, ModifiedFollowing))
+        payment_date = (spread_index.
+                        fixing_calendar.
+                        advance(fixing_date, 2, Days))
+        accrued_end_date = payment_date
+        accrued_start_date = accrued_end_date - Period(1, Years)
+
+        self.cap = 0.0075835
+
+        self.notional = 100_000_000
+        self.cms30y2y_cap = CappedFlooredCmsSpreadCoupon(
+            payment_date,
+            self.notional,
+            start_date=accrued_start_date,
+            end_date=accrued_end_date,
+            fixing_days=spread_index.fixing_days,
+            index=spread_index,
+            gearing=1.,
+            spread=-self.cap,
+            floor=0.,
+            day_counter=Actual365Fixed(),
+            is_in_arrears=True)
+
+        self.cms2y, self.cms30y = get_cms_coupons(self.trade_date,
+                                                  self.notional,
+                                                  option_tenor,
+                                                  spread_index)
+
+    def test_black_model(self):
+        evaluation_date = datetime.date(2018, 8, 23)
+        self.yc.link_to(YC(evaluation_date=evaluation_date))
+        self.yc.extrapolation = True
+        date, surf = get_swaption_vol_data(date=evaluation_date,
+                                           vol_type=VolatilityType.ShiftedLognormal)
+        atm_vol = get_swaption_vol_matrix(evaluation_date, surf)
+        μ = SimpleQuote(0.1)
+        ρ = SimpleQuote(0.8)
+        cms_pricer = AnalyticHaganPricer(atm_vol, YieldCurveModel.Standard, μ)
+        params = get_params(self.cms2y, self.cms30y, cms_pricer, atm_vol)
+        x, w = roots_hermitenorm(16)
+        val_call = 1 / math.sqrt(2 * math.pi) * np.dot(w,
+                                                       h_call(x, self.cap, *params, ρ.value))
+        val_put = 1 / math.sqrt(2 * math.pi) * np.dot(w,
+                                                      h_put(x, self.cap, *params, ρ.value))
+        cms_spread_pricer = LognormalCmsSpreadPricer(
+            cms_pricer,
+            ρ,
+            integration_points=20)
+        self.cms30y2y_cap.set_pricer(cms_spread_pricer)
+        self.assertAlmostEqual(self.cms30y2y_cap.rate,
+                               val_call)
+        self.assertAlmostEqual(-self.cms30y2y_cap.underlying.rate, val_put - val_call)
+        self.assertAlmostEqual(self.cms30y.rate - self.cms2y.rate - self.cap,
+                               self.cms30y2y_cap.underlying.rate)
+
+if __name__ == "__main__":
+    unittest.main()