Table Of ContentQuantLib Python Cookbook
Luigi Ballabio and Goutham Balaraman
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ImplementingQuantLib
Contents
Basics
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. QuantlibBasics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Instrumentsandpricingengines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3. NumericalGreekscalculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4. Marketquotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Interest-rate curves
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5. Termstructuresandtheirreferencedates . . . . . . . . . . . . . . . . . . . . . . . . . 36
6. EONIAcurvebootstrapping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7. Euriborcurvebootstrapping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8. ConstructingYieldCurve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
9. Impliedtermstructures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10. Interest-ratesensitivitiesviazerospread . . . . . . . . . . . . . . . . . . . . . . . . . 97
11. Aglitchinforward-ratecurves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Interest-rate models
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
12. SimulatingInterestRatesusingHullWhiteModel . . . . . . . . . . . . . . . . . . . . 111
13. ThoughtsontheConvergenceofHull-WhiteModelMonte-CarloSimulations . . . . 116
14. ShortInterestRateModelCalibration . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
CONTENTS
15. Parversusindexedcoupons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
16. CapsandFloors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Equity models
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
17. ValuingEuropeanOptionUsingtheHestonModel . . . . . . . . . . . . . . . . . . . . 144
18. ValuingEuropeanandAmericanOptions . . . . . . . . . . . . . . . . . . . . . . . . . 147
19. ValuingOptionsonCommodityFuturesUsingTheBlackFormula . . . . . . . . . . . 152
20. DefiningrhofortheBlackprocess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
Bonds
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
21. ModelingFixedRateBonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
22. ModelingCallableBonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
23. Durationoffloating-ratebonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
24. TreasuryFuturesContract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
25. Mischievouspricingconventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
26. Moremischievousconventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
Appendix
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
TranslatingQuantLibPythonexamplestoC++ . . . . . . . . . . . . . . . . . . . . . . . . 198
CONTENTS i
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CONTENTS 1
A note on Python and C++
ThechoiceoftheQuantLibPythonbindingsandtheIPythonNotebookwasduetotheirinteractivity,
whichmakeiteasiertodemonstratefeatures,andthefactthattheplatformprovidesoutofthebox
excellentmoduleslikematplotlibforgraphingandpandasfordataanalysis.
This choice might seem to leave C++ users out in the cold. However, it’s easy enough to translate
the Python code shown here into the corresponding C++ code. An example of such translation is
shownintheappendix.
Basics
1. Quantlib Basics
In this chapter we will introduce some of the basic concepts such as Date, Period, Calendar
and Schedule. These are QuantLib constructs that are used throughout the library in creation
ofinstruments,models,termstructuresetc.
In [1]: from QuantLib import *
DateClass
The Date object can be created using the constructor as Date(day, month, year). It would be
worthwhile to pay attention to the fact thatday is the first argument, followed bymonth and then
theyear.Thisisdifferentfromthepythondatetimeobjectinstantiation.
In [2]: date = Date(31, 3, 2015)
print date
Out[2]: March 31st, 2015
The fields of the Date object can be accessed using the month(), dayOfMonth() and year()
methods.Theweekday()methodcanbeusedtofetchthedayoftheweek.
In [3]: print "%d-%d-%d" %(date.month(),
date.dayOfMonth(),
date.year())
Out[3]: 3-31-2015
In [4]: date.weekday() == Tuesday
Out[4]: True
The Date objects can also be used to perform arithmetic operations such as advancing by days,
weeks,monthsetc.PeriodssuchasweeksormonthscanbedenotedusingthePeriodclass.Period
object constructor signature is Period(num_periods, period_type). The num_periods is an
integerandrepresentsthenumberofperiods.Theperiod_typecanbeWeeks,MonthsandYears.
