spotcurvefit.m

clear all; clc; close all;

% 1) Building a bootstrapped spot curve from downloaded CNNFN data on Treasury Notes and Bonds.

[A, B] = xlsread('bonddata.xls');

Bonds = [datenum(A(:,4))+693960 A(:,3)/100 100*ones(length(A(:,3)),1) 2*ones(length(A(:,3)),1) 2*ones(length(A(:,3)),1) 0*ones(length(A(:,3)),1)];
Prices = A(:,6);
Settle = datenum('04-Sep-2002');

OutputCompoundingZERO = 2;
OutputCompoundingFWD = 2;
warning off MATLAB:break_outside_of_loop
[ZeroRates, CurveDates, FWDRates, DISCRates] = zbtprice(Bonds, Prices, Settle, OutputCompoundingZERO, OutputCompoundingFWD);

pause;

% 2) A use of spline to get a "smooth" forward curve

Smoothing = 0.95;

BreakDates = round(linspace(datenum(Settle), max(datenum(A(:,4))+693960), 30));

[ZeroRates, CurveDates, BootZeros, BootDates, BreakDates] = ...
    termfit(Smoothing, Bonds, Prices, Settle, OutputCompoundingZERO, 1, CurveDates, BreakDates');

figure;

fwdratesplined = zero2fwd(ZeroRates,CurveDates,Settle);
plot(CurveDates, FWDRates, 'ro-', CurveDates, fwdratesplined, 'b-'); grid;
title('Calculated Forward Curve') 
ylabel('Rate');
xlabel('Maturity in Serial date')
legend('Bootstrapped', 'Fitted')

% 3) Further illustration, using MOVIE to visualize effects of smoothing parameters.

pause;

% for i = 1:20
%     Smoothing = 0.05*(i-1);
%     [ZeroRates, CurveDates, BootZeros, BootDates, BreakDates] = ...
%         termfit(Smoothing, Bonds, Prices, Settle, OutputCompoundingZERO, 1, CurveDates, BreakDates');
%     fwdratesplined = zero2fwd(ZeroRates,CurveDates,Settle);
%     plot(CurveDates, fwdratesplined*100);
%     xlim([7.31e5 7.42e5]);
%     ylim([-2 8]);
%     legend(['Smoothing Factor = ', num2str(Smoothing)]);
%     xlabel('Serial Date Beginning on Settle');
%     ylabel('Forward Rate [%]');
%     grid on;
%     F(i) = getframe;
%     %close gcf - XP related bug needs this line;
% end

load splinemovie
movie(F,-1)

pause;    

% 4) A further use of the bootstrapped spot curve to obtain term structure of spread, for...
% WALT DISNEY's bonds! The benchmark was the non-smoothed spotcurve.

[C D] = XLSREAD('disneybond.xls');

BondsWD = [datenum(C(:,2))+693960 C(:,1)/100 100*ones(length(C(:,3)),1) 2*ones(length(C(:,3)),1) 2*ones(length(C(:,3)),1) 0*ones(length(C(:,3)),1)];

Prices = C(:,3);
Settle = datenum('09-Sep-2002');

% Snuff out some of data less than 3 months, seem like noise to me ...
idx = find(BootZeros > 0.015);
BootZeros  = BootZeros(idx);
ZeroRates  = ZeroRates(idx);
CurveDates = CurveDates(idx);

ZeroMatrix = [CurveDates, BootZeros, 2*ones(length(CurveDates),1)];

CouponRate   = BondsWD(:,2);
Maturity     = BondsWD(:,1);
Period       = BondsWD(:,4);
Basis        = BondsWD(:,5);
EndMonthRule = BondsWD(:,6);


staticspread_nsmooth = bondprice2spread(ZeroMatrix, Prices, CouponRate, Settle, Maturity, ...
    Period, Basis, EndMonthRule);

ZeroMatrix = [CurveDates, ZeroRates, 2*ones(length(CurveDates),1)];

staticspread_smooth = bondprice2spread(ZeroMatrix, Prices, CouponRate, Settle, Maturity, ...
    Period, Basis, EndMonthRule);

figure;
plot(Maturity, staticspread_nsmooth,'ob-', Maturity, staticspread_smooth, 'dr-');
title('Calculated static spread of Disney noncallable bonds to treasury on 09/09/2002') 
ylabel('bp');
xlabel('Maturity in Serial date')
legend('to bootstrapped', 'to fitted')
grid;