QuantLib : another implementation for piecewise yield curve builder class

Last year I published one possible implementation using Quantlib library for constructing piecewise yield curves. Within this second implementation, I have done a couple of changes in order to increase configurability. For allowing more flexible curve construction algorithm, Traits and Interpolations are now defined as template parameters. Previously, these were hard-coded inside the class. Secondly, all types of quotes for class methods are now wrapped inside shared pointers. Previously, there was an option to give quotes as rates. After some reconsideration, I have decided to give up this option completely. Finally, I have added a class method for allowing futures prices to be used in curve construction process.

Source data and results

The following source data from the book by Richard Flavell has been used for validation.

Resulting zero-yield curve and discount factors are presented in the graph below. For this data used, the absolute maximum difference between Flavell-constructed and Quantlib-constructed zero yield curves is around one basis point.

The program

// PiecewiseCurveBuilder.h
#pragma once
#include <ql/quantlib.hpp>
//
namespace MJPiecewiseCurveBuilderNamespace
{
 using namespace QuantLib;
 //
 // type alias definitions
 using pQuote = boost::shared_ptr<Quote>;
 using pIndex = boost::shared_ptr<IborIndex>;
 using pHelper = boost::shared_ptr<RateHelper>;
 //
 // T = traits, I = interpolation
 template<typename T, typename I>
 class PiecewiseCurveBuilder
 {
 public:
  PiecewiseCurveBuilder();
  void AddDeposit(const pQuote& quote, const pIndex& index);
  void AddFRA(const pQuote& quote, const Period& periodLengthToStart, const pIndex& index);
  void AddSwap(const pQuote& quote, const Period& periodLength, const Calendar& fixedCalendar, Frequency fixedFrequency,
   BusinessDayConvention fixedConvention, const DayCounter& fixedDayCount, const pIndex& floatIndex);
  //
  void AddFuture(const pQuote& quote, const Date& IMMDate, int lengthInMonths, const Calendar& calendar,
   BusinessDayConvention convention, const DayCounter& dayCounter, bool endOfMonth = true);
  //
  RelinkableHandle<YieldTermStructure> GetCurveHandle(const Date& settlementDate, const DayCounter& dayCounter);
 private:
  std::vector<pHelper> rateHelpers;

 };
}
//
//
//
//
// PiecewiseCurveBuilder.cpp
#pragma once
#include "PiecewiseCurveBuilder.h"
//
namespace MJPiecewiseCurveBuilderNamespace
{
 template<typename T, typename I>
 PiecewiseCurveBuilder<T, I>::PiecewiseCurveBuilder() { }
 //
 template<typename T, typename I>
 void PiecewiseCurveBuilder<T, I>::AddDeposit(const pQuote& quote, const pIndex& index)
 {
  pHelper rateHelper(new DepositRateHelper(Handle<Quote>(quote), index));
  rateHelpers.push_back(rateHelper);
 }
 //
 template<typename T, typename I>
 void PiecewiseCurveBuilder<T, I>::AddFRA(const pQuote& quote, const Period& periodLengthToStart, const pIndex& index)
 {
  pHelper rateHelper(new FraRateHelper(Handle<Quote>(quote),
   periodLengthToStart, pIndex(index)));
  rateHelpers.push_back(rateHelper);
 }
 //
 template<typename T, typename I>
 void PiecewiseCurveBuilder<T, I>::AddSwap(const pQuote& quote, const Period& periodLength, const Calendar& fixedCalendar,
  Frequency fixedFrequency, BusinessDayConvention fixedConvention, const DayCounter& fixedDayCount,
  const pIndex& floatIndex)
 {
  pHelper rateHelper(new SwapRateHelper(Handle<Quote>(quote), periodLength, fixedCalendar, fixedFrequency,
   fixedConvention, fixedDayCount, floatIndex));
  rateHelpers.push_back(rateHelper);
 }
 //
 template<typename T, typename I>
 void PiecewiseCurveBuilder<T, I>::AddFuture(const pQuote& quote, const Date& IMMDate, int lengthInMonths, const Calendar& calendar,
  BusinessDayConvention convention, const DayCounter& dayCounter, bool endOfMonth)
 {
  pHelper rateHelper(new FuturesRateHelper(Handle<Quote>(quote), IMMDate, lengthInMonths, calendar, convention, endOfMonth, dayCounter));
  rateHelpers.push_back(rateHelper);
 }
 //
 template<typename T, typename I>
 RelinkableHandle<YieldTermStructure> PiecewiseCurveBuilder<T, I>::GetCurveHandle(const Date& settlementDate, const DayCounter& dayCounter)
 {
  // T = traits, I = interpolation
  boost::shared_ptr<YieldTermStructure> yieldTermStructure(new PiecewiseYieldCurve<T, I>(settlementDate, rateHelpers, dayCounter));
  return RelinkableHandle<YieldTermStructure>(yieldTermStructure);
 }
}
//
//
//
//
// Tester.cpp
#include "PiecewiseCurveBuilder.cpp"
#include <iostream>
using namespace MJPiecewiseCurveBuilderNamespace;
//
int main()
{
 try
 {
  Date tradeDate(4, February, 2008);
  Settings::instance().evaluationDate() = tradeDate;
  Calendar calendar = TARGET();
  Date settlementDate = calendar.advance(tradeDate, Period(2, Days), ModifiedFollowing);
  DayCounter curveDaycounter = Actual360();
  PiecewiseCurveBuilder<ZeroYield, Linear> builder;
  //
  //
  // cash part of the curve
  pQuote q_1W(new SimpleQuote(0.032175));
  pIndex i_1W(new USDLibor(Period(1, Weeks)));
  builder.AddDeposit(q_1W, i_1W);
  //
  pQuote q_1M(new SimpleQuote(0.0318125));
  pIndex i_1M(new USDLibor(Period(1, Months)));
  builder.AddDeposit(q_1M, i_1M);
  //
  pQuote q_3M(new SimpleQuote(0.03145));
  pIndex i_3M(new USDLibor(Period(3, Months)));
  builder.AddDeposit(q_3M, i_3M);
  //
  //
  // futures part of the curve
  Date IMMDate;
  pQuote q_JUN08(new SimpleQuote(97.41));
  IMMDate = IMM::nextDate(settlementDate + Period(4, Months));
  builder.AddFuture(q_JUN08, IMMDate, 3, calendar, ModifiedFollowing, Actual360());
  //
  pQuote q_SEP08(new SimpleQuote(97.52));
  IMMDate = IMM::nextDate(settlementDate + Period(7, Months));
  builder.AddFuture(q_SEP08, IMMDate, 3, calendar, ModifiedFollowing, Actual360());
  //
  pQuote q_DEC08(new SimpleQuote(97.495));
  IMMDate = IMM::nextDate(settlementDate + Period(10, Months));
  builder.AddFuture(q_DEC08, IMMDate, 3, calendar, ModifiedFollowing, Actual360());
  //
  pQuote q_MAR09(new SimpleQuote(97.395));
  IMMDate = IMM::nextDate(settlementDate + Period(13, Months));
  builder.AddFuture(q_MAR09, IMMDate, 3, calendar, ModifiedFollowing, Actual360());
  //
  //
  // swap part of the curve
  pIndex swapFloatIndex(new USDLibor(Period(3, Months)));
  pQuote q_2Y(new SimpleQuote(0.02795));
  builder.AddSwap(q_2Y, Period(2, Years), calendar, Annual,
   ModifiedFollowing, Actual360(), swapFloatIndex);
  //
  pQuote q_3Y(new SimpleQuote(0.03035));
  builder.AddSwap(q_3Y, Period(3, Years), calendar, Annual,
   ModifiedFollowing, Actual360(), swapFloatIndex);
  //
  pQuote q_4Y(new SimpleQuote(0.03275));
  builder.AddSwap(q_4Y, Period(4, Years), calendar, Annual,
   ModifiedFollowing, Actual360(), swapFloatIndex);
  //
  pQuote q_5Y(new SimpleQuote(0.03505));
  builder.AddSwap(q_5Y, Period(5, Years), calendar, Annual,
   ModifiedFollowing, Actual360(), swapFloatIndex);
  //
  pQuote q_6Y(new SimpleQuote(0.03715));
  builder.AddSwap(q_6Y, Period(6, Years), calendar, Annual,
   ModifiedFollowing, Actual360(), swapFloatIndex);
  //
  pQuote q_7Y(new SimpleQuote(0.03885));
  builder.AddSwap(q_7Y, Period(7, Years), calendar, Annual,
   ModifiedFollowing, Actual360(), swapFloatIndex);
  //
  pQuote q_8Y(new SimpleQuote(0.04025));
  builder.AddSwap(q_8Y, Period(8, Years), calendar, Annual,
   ModifiedFollowing, Actual360(), swapFloatIndex);
  //
  pQuote q_9Y(new SimpleQuote(0.04155));
  builder.AddSwap(q_9Y, Period(9, Years), calendar, Annual,
   ModifiedFollowing, Actual360(), swapFloatIndex);
  //
  pQuote q_10Y(new SimpleQuote(0.04265));
  builder.AddSwap(q_10Y, Period(10, Years), calendar, Annual,
   ModifiedFollowing, Actual360(), swapFloatIndex);
  //
  pQuote q_12Y(new SimpleQuote(0.04435));
  builder.AddSwap(q_12Y, Period(12, Years), calendar, Annual,
   ModifiedFollowing, Actual360(), swapFloatIndex);
  //
  //
  // get curve handle and print out discount factors
  RelinkableHandle<YieldTermStructure> curve = builder.GetCurveHandle(settlementDate, curveDaycounter);
  std::cout << curve->discount(Date(11, February, 2008)) << std::endl;
  std::cout << curve->discount(Date(4, March, 2008)) << std::endl;
  std::cout << curve->discount(Date(4, May, 2008)) << std::endl;
  std::cout << curve->discount(Date(6, August, 2008)) << std::endl;
  std::cout << curve->discount(Date(6, November, 2008)) << std::endl;
  std::cout << curve->discount(Date(6, February, 2009)) << std::endl;
  std::cout << curve->discount(Date(8, February, 2010)) << std::endl;
  std::cout << curve->discount(Date(7, February, 2011)) << std::endl;
  std::cout << curve->discount(Date(6, February, 2012)) << std::endl;
  std::cout << curve->discount(Date(6, February, 2013)) << std::endl;
  std::cout << curve->discount(Date(6, February, 2014)) << std::endl;
  std::cout << curve->discount(Date(6, February, 2015)) << std::endl;
  std::cout << curve->discount(Date(8, February, 2016)) << std::endl;
  std::cout << curve->discount(Date(6, February, 2017)) << std::endl;
  std::cout << curve->discount(Date(6, February, 2018)) << std::endl;
 }
 catch (std::exception& e)
 {
  std::cout << e.what() << std::endl;
 }
 return 0;
}

Data updating

Since all rates have been wrapped inside quotes (which have been wrapped inside handles), those can be accessed only by using dynamic pointer casting. Below is an example for updating 3M cash quote.

boost::dynamic_pointer_cast<SimpleQuote>(q_3M)->setValue(0.03395);

After this quote updating shown above, a new requested value (zero rate, forward rate or discount factor) from constructed curve object will be re-calculated by using updated quote.

For those readers who are completely unfamiliar with this stuff presented, there are three extremely well-written slides available in Quantlib documentation page, written by Dimitri Reiswich. These slides are offering excellent way to get very practical hands-on overview on QuantLib library. Also, Luigi Ballabio has finally been finishing his book on QuantLib implementation, which can be purchased from Leanpub. This book is offering deep diving experience into the abyss of Quantlib architechture.

Finally, as usual, thanks for spending your precious time here and reading this blog.
-Mike