[Uwgarp-commits] r200 - pkg/GARPFRM/demo

[noreply at r-forge.r-project.org]

Author: tfillebeen
Date: 2014-06-30 02:27:39 +0200 (Mon, 30 Jun 2014)
New Revision: 200

Added:
   pkg/GARPFRM/demo/Fixed.R
Log:
fixedIN demo draft

Added: pkg/GARPFRM/demo/Fixed.R
===================================================================
--- pkg/GARPFRM/demo/Fixed.R	                        (rev 0)
+++ pkg/GARPFRM/demo/Fixed.R	2014-06-30 00:27:39 UTC (rev 200)
@@ -0,0 +1,123 @@
+# The Cash Flows from Fixed-Rate Government Coupon Bonds
+# Discount Factors and the Law of One Price
+
+# Read in the data file
+suppressMessages(library(GARPFRM))
+options(digits=3)
+data(bonds)
+
+# Create the Cash Flows from Fixed-Rate: treasury bonds ticking in quarters
+# Example from Tuckman
+cashFlow = rbind(c(100+(1+1/4)/2,0,0),c((4 +7/8)/2,100+(4+7/8)/2,0),c((4+1/2)/2,(4+1/2)/2,100+(4+1/2)/2))
+# Initialize: Price of the bond
+price = matrix(c(100.550, 104.513, 105.856), ncol=1)
+DF = discountFactor(price, cashFlow)
+
+# Additional Example
+cashFlow = rbind(c(100, 0, 0, 0), c(2 + 7/8, 102 + 7/8, 0, 0), c(3 + 3/4, 3 + 3/4, 103 + 3/4, 0), c(3 + 3/4, 3 + 3/4, 3 + 3/4, 103 + 3/4))
+# Initialize: Price of the bond
+price = matrix(c(96.8, 99.56, 100.86, 101.22), ncol=1)
+
+# Estimate the Discount Factors (DF)
+DF = discountFactor(price , cashFlow)
+# To confirm solution check that price is replicable
+(cashFlow%*%price)/100
+
+
+# Estimate bondPrice
+# Choose a 2 year bond with semiannual payments to match number of bond prices and CFs
+time = seq(from=0.5, to=2, by=0.5)
+# First define a bond object to be used throughout the analysis, where m is the compound frequency
+bond = bondSpec(time, face=100, m=2, couponRate = 0.0475)
+# Estimate price, yield, convexity and duration
+price = bondPrice(bond,DF)
+# Yield-to-maturity is often quoted when describing a security in terms of arates rather than price.
+# Estimate yied to maturity
+bondYTM(bond,DF)
+
+# Duration measures the effect of a small parallel shift in the yield curve
+# if rate goes up 10 basis points the relative P&L will change by mDuration*0.1%
+mDuration = bondDuration(bond,DF)
+# Duration plus convexity measure the effect of a larger parallel shift in the yield curve
+# Note however, they do not measure the effect of non-parallel shifts
+convexity = bondConvexity(bond,DF)
+
+# Example with a longer compounding time sequence:
+# Yields of bond with varying coupons over  Estimation and Plot
+# Utilizing a discount factor trable rewrite DF 10 years semiannually
+DF = rbind( 0.9615, 0.94305, 0.9246, 0.90591, 0.889, 0.87019, 0.8548, 0.8358825, 0.8219, 0.80294,
+            0.7903, 0.7713, 0.7599, 0.74092, 0.7307, 0.7117325, 0.7026, 0.70059, 0.6756)
+time = seq(0.5,10,0.5)
+# estimate bond specs using a 4% coupon rate
+bond = bondSpec(time, face=100, m=2, couponRate = 0.04)
+bondYTM(bond,DF)
+
+# Illustrating elasticity of YTM: measure 1% and 10% increase in yield on duration
+DF = rbind(0.95434,0.9434,0.917232,0.89,0.85678,0.8396,0.81242,0.7921,0.7693,0.7473,0.7298,0.7050)
+# Choose a 2 year bond with semiannual payments to match number of bond prices and CFs
+time = seq(from=0.5, to=6, by=0.5)
+# First define a bond object to be used throughout the analysis, where m is the compound frequency
+bond = bondSpec(time, face=100, m=2, couponRate = 0.0475)
+# Duration measures the effect of a small parallel shift in the yield curve
+mDuration = bondDuration(bond,DF)
+mDuration = bondDuration(bond,DF,0.01)
+mDuration = bondDuration(bond,DF,0.1)
+
+
+# Valuation and Risk Model Section- Yield Curve Shapes
+# Vasicek Modeling to illustrate different yield curve calibrations
+# Initialize Model
+theta = 0.10
+k = 0.8
+sigma = 0.08
+# Seven Yield Curves to estimate
+r = seq(0, 0.15, 0.025)
+length(r)
+maturity = 10
+# Illustration #1 for standard theta and initial r estimate yield path
+yieldCurves = yieldCurveVasicek(r, k, theta, sigma, maturity)
+# Plot using matplot-plot the columns of one matrix against the columns of another
+maturity = seq(1,maturity,1)
+matplot(maturity, yieldCurves, type="l", lty=1, main="Yield Curves")
+# choose h = theta for y horizontal line
+abline(h = theta, col="red", lty=2)
+
+# Illustration #2 for high theta and low initial r estimate yield path
+theta = 0.45
+maturity = 10
+yieldCurves = yieldCurveVasicek(r, k, theta, sigma, maturity)
+# Plot using matplot-plot the columns of one matrix against the columns of another
+maturity = seq(1,maturity,1)
+matplot(maturity, yieldCurves, type="l", lty=1, main="Yield Curves")
+# choose h = theta for y horizontal line
+abline(h = theta, col="red", lty=2)
+
+
+# Appliation: Idiosyncratic Pricing of US Treasury Notes and Bonds
+t0 = as.Date("2013-08-15")
+t1 = as.Date("2014-02-15")
+tn = as.Date("2013-10-04")
+currentDate = tn
+# Apply a coupon rate of 4.75% bond and create a bond object
+bond = bondSpec(face=100, m=2, couponRate = 0.0475)
+y1 = 0.00961
+bondFullPrice(bond, y1, 8, t0, t1, tn)$clean
+bondFullPrice(bond, y1, 8, t0, t1, tn)$dirty
+bondFullPrice(bond, y1, 8, t0, t1, tn)$accruedInterest
+
+
+# Estimating the term structure: compounded rates from discount factors
+# Ulitzing data in the following format: Cusip,	IssueDate,	MaturityDate,	Name,	Coupon,	Bid/Ask
+head(dat)
+ccRate = compoundingRate(dat, initialDate=as.Date("2000-05-15"), m=4, face=100)
+
+years = ccRate$years
+rate = ccRate$ccRate
+# Plot of continuously compounded spot rates
+plot(x=years, y=rate, type="l", ylab="Rate", xlab="Time to Maturity", main="Term Structure: Spot Rates")
+
+# Spot, Forward Rates
+DF = c(0.996489, 0.991306, 0.984484, 0.975616, 0.964519)
+time = seq(from=0.5, to=2.5, by=0.5)
+rates = spotForwardRates(time,DF)
+rates
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