4.3 Curve.help

Octarisk Class: object = Curve(id)

Octarisk Class: object = Curve()

Class for setting up Curve objects.

This class contains all attributes and methods related to the following Curve types:

• Discount Curve: specify discount rates. Can be used as underlying for aggregated curves.
• Spread Curve: specify spread rates. Can be used as underlying for aggregated curves.
• Dummy Curve: used as default curve with no special meaning
• Aggregated Curve: stacked curve which combines underlying curves by aggregation functions (e.g. sum, factor)
• Prepayment Curve: specify prepayment rates per node (e.g. PSA curves).
• Call Schedule: curve used for Bonds with embedded call options
• Put Schedule: curve used for Bonds with embedded put options
• Hazard Curve: curve used for CDS. Gives default probability per cf date
• Historical Curve: curve with historical rates of index levels. Used for inflation linked or averaging instruments
• Inflation Expectation Curve: specify inflation expectation rates used for inflation linked instrument pricing
• Shock Curve: specify absolute or relative shocks per node, which can then be applied to other Curve types.

In the following, all methods and attributes are explained and a code example is given.

Methods for Curve object obj:

• Curve(id) or Curve(): Constructor of a Curve object. id is optional and specifies id and name of new object.
• obj.set(attribute,value): Setter method. Provide pairs of attributes and values. Values are checked for format and constraints.
• obj.get(attribute): Getter method. Query the value of specified attribute.
• obj.getRate(scenario,node): Return scenario curve values at given node (in days). Interpolation or Extrapolation is performed according to specified methods. scenario can be ’base’, ’stress’ or a certain MC timestep like ’250d’.
• obj.getValue(scenario): Return all scenario curve values. scenario can be ’base’, ’stress’ or a certain MC timestep like ’250d’.
• obj.apply_rf_shocks(scenario,riskfactor_object): Set shock curve values for scenario Scenario shocks from provided riskfactor_object are used
• obj.isProp(attribute): Return true, if attribute is a property of Curve class. Return false otherwise.
• Curve.help(format,returnflag): show this message. Format can be [plain text, html or texinfo]. If empty, defaults to plain text. Returnflag is boolean: True returns documentation string, false (default) returns empty string. [static method]

Attributes of Curve objects:

• id: Curve id. Has to be unique identifier. Default: empty string.
• name: Curve name. Default: empty string.
• description: Curve description. Default: empty string.
• type: Curve type. Can be [Discount Curve (default), Spread Curve, Dummy Curve, Aggregated Curve, Prepayment Curve, Call Schedule, Put Schedule, Historical Curve, Inflation Expectation Curve, Shock Curve]
• day_count_convention: Day count convention of curve. See ’help get_basis’ for details. Default: ’act/365’\n
• basis: Basis belonging to day count convention. Value is set automatically.
• compounding_type: Compounding type. Can be continuous, discrete or simple. Default: ’cont’
• compounding_freq: Compounding frequency used for discrete compounding. Can be [daily, weekly, monthly, quarterly, semi-annual, annual]. Default: ’annual’
• curve_function: Type Aggregated Curve only: specifies how to aggregated curves, which are specified in attribute increments. Can be [sum, product, divide, factor]. [sum, product, divide] specifies mathematical operation applied on all curve increments. [factor] allows only one increment and uses curve_parameter for multiplication. Default: ’sum’
• curve_parameter: Type Aggregated Curve only: used as multiplication parameter for factor curve_function.
• increments: Type Aggregated Curve only: List of IDs of all underlying curves. Use curve_function to specify how to aggregated curves.
• method_extrapolation: Extrapolation method. Can be ’constant’ (default) or ’linear’.
• method_interpolation: Interpolation method. See ’help interpolate_curve’ for details. Default: ’linear’.
• ufr: Smith-Wilson Ultimate Forward Rate. Used for Smith-Wilson interpolation and extrapolation. Defaults to 0.042.
• alpha: Smith-Wilson Reversion parameter. Used for Smith-Wilson interpolation and extrapolation. Defaults to 0.19.
• cap: Cap rate. Cap rate is enforced on all set rates. Set to empty string for no cap rate. Default: empty string.
• floor: Floor rate. Floor rate is enforced on all existing and future rates. Set to empty string for no floor rate. Default: empty string.
• nodes: Vector with curve nodes.
• rates_base: Vector with curve rates. Has to be of same column size as nodes.
• rates_mc: Matrix with curve rates. Has to be of same column size as nodes. Columns: nodes, Lines: scenarios. MC rates for several MC timesteps are stored in layers.
• rates_stress: Matrix with curve rates. Has to be of same as nodes. Columns correspond to nodes, lines correspond to scenarios.
• timestep_mc: String Cell array with MC timesteps. Automatically appended if values for new timesteps are set.
• shocktype_mc: Specify how to apply risk factor shocks in Monte Carlo scenarios and for method apply_rf_shocks. Can be [absolute, relative, sln_relative]. Automatically set by scripts. Default: absolute
• shocktype_stress: Specify Stress risk factor shocks for method apply_rf_shocks. Can be [absolute, relative] by stree scenario configuration.
• sln_level: Vector with term specific shift level for risk factors modelled with shifted log-normal model. Automatically set by script during curve setup.
• american_flag: Flag for American (true) or European (false) call feature on bonds. Valid only if Curve type is call or put schedule. Default: false.

For illustration see the following example: A discount curve c is specified. A shock curve s provides absolute shocks for stress and relative shocks for MC scenarios, which are linearly interpolated and subsequently applied to the discount curve c. In the end, stress and MC discount rates are interpolated for given nodes with method getRate, while all curve rates are extracted with getValue.

c = Curve();
c = c.set('id','Discount_Curve','type','Discount Curve', ...
'nodes',[365,3650,7300],'rates_base',[0.01,0.02,0.04], ...
'method_interpolation','linear','compounding_type','continuous', ...
'day_count_convention','act/365');
s = Curve();
s = s.set('id','IR Shock','type','Shock Curve','nodes',[365,7300], ...
'rates_base',[],'rates_stress',[0.01,0.01;0.02,0.02;-0.01,-0.01;-0.01,0.01], ...
'rates_mc',[1.1,1.1;0.9,0.9;1.2,0.8;0.8,1.2],'timestep_mc','250d', ...
'method_interpolation','linear','shocktype_stress','absolute', ...
'shocktype_mc','relative');
c = c.apply_rf_shock('stress',s);
c = c.apply_rf_shock('250d',s);
c_base = c.getRate('base',1825)
c_rate_stress = c.getRate('stress',1825)
c_rate_250d = c.getRate('250d',1825)
c_rates_250d = c.getValue('250d')

Dependencies of class: