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example of a bootstrapping and forward curve generation this can be used to build a set of curves for different currencies

Python, 63 lines
 ``` 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63``` ```# # Description: example of a bootstrapping and forward curve generation # script, this can be used to build a set of curves for different currencies # TODO: include some spline smoothing to the zero curve, from first principles! # from sympy.solvers import solve from sympy import Symbol, abs, Real x = Symbol('x', real=True) import pylab as pylab def g(yieldCurve, zeroRates,n, verbose): ''' generates recursively the zero curve expressions eval('(0.06/1.05)+(1.06/(1+x)**2)-1') solves these expressions to get the new rate for that period ''' if len(zeroRates) >= len(yieldCurve): print "\n\n\t+zero curve boot strapped [%d iterations]" % (n) return else: legn = '' for i in range(0,len(zeroRates),1): if i == 0: legn = '%2.6f/(1+%2.6f)**%d'%(yieldCurve[n], zeroRates[i],i+1) else: legn = legn + ' +%2.6f/(1+%2.6f)**%d'%(yieldCurve[n], zeroRates[i],i+1) legn = legn + '+ (1+%2.6f)/(1+x)**%d-1'%(yieldCurve[n], n+1) # solve the expression for this iteration if verbose: print "-[%d] %s" % (n, legn.strip()) rate1 = solve(eval(legn), x) # Abs here since some solutions can be complex rate1 = min([Real(abs(r)) for r in rate1]) if verbose: print "-[%d] solution %2.6f" % (n, float(rate1)) # stuff the new rate in the results, will be # used by the next iteration zeroRates.append(rate1) g(yieldCurve, zeroRates,n+1, verbose) verbose = True tenors = [.1,.25,0.5,1,2,3,5,7,10,20,30] # # money market, futures, swap rates # yieldCurve = [0.07, 0.09, 0.15, 0.21, 0.37, 0.57, 1.13, 1.70, 2.31, 3.08 ,3.41] #yieldCurve = [0.05, 0.06, 0.07, 0.08 ,0.085 ,0.0857 ,0.0901,0.0915,0.0925,0.0926,0.0934,0.0937] zeroRates = [yieldCurve[0]] # TODO: check that this is the correct rate print "\n\n\tAlexander Baker, March 2012\n\tYield Curve Bootstrapper\n\tAlexander Baker\n\n" # kick off the recursive code g(yieldCurve, zeroRates, 1, verbose) print "\tZeroRate Array",zeroRates pylab.plot(tenors,yieldCurve) pylab.plot(tenors,zeroRates) pylab.show() ```
 Created by alexander baker on Mon, 10 Sep 2012 (MIT)