Add FXDiscountCurve for FX-forward-implied discount curves

financepy/market/curves/__init__.py

@@ -10,3 +10,4 @@
 from .bond_bootstrap_discount_curve import *
 from .bond_parametric_discount_curve import *
 from .bond_parametric_yield_curve import *
+from .fx_discount_curve import *

financepy/market/curves/fx_discount_curve.py

@@ -0,0 +1,87 @@
+# Copyright (C) 2018, 2019, 2020 Dominic O'Kane
+
+from typing import Union
+
+import numpy as np
+
+from ...utils.date import Date
+from ...utils.day_count import DayCountTypes
+from ...utils.error import FinError
+from ...utils.helpers import check_argument_types, label_to_string
+from .discount_curve import DiscountCurve
+from .interpolator import InterpTypes
+
+
+########################################################################################
+class FXDiscountCurve(DiscountCurve):
+    """Discount curve implied from FX spot, FX forwards, and a domestic curve."""
+
+    ####################################################################################
+    def __init__(
+        self,
+        value_dt: Date,
+        spot_fx_rate: float,
+        forward_dts: list,
+        forward_fx_rates: Union[list, np.ndarray],
+        domestic_curve: DiscountCurve,
+        interp_type: InterpTypes = InterpTypes.FLAT_FWD_RATES,
+        time_dc_type: DayCountTypes = DayCountTypes.ACT_365F,
+    ):
+        """Create an implied foreign discount curve from FX forward quotes.
+
+        The FX rate convention is domestic currency per unit of foreign currency.
+        Given spot S, forward F(T), and domestic discount factor DF_dom(T), the
+        implied foreign discount factor is:
+
+            DF_for(T) = F(T) / S * DF_dom(T)
+        """
+        check_argument_types(self.__init__, locals())
+
+        if spot_fx_rate <= 0.0:
+            raise FinError("Spot FX rate must be positive.")
+
+        if len(forward_dts) == 0:
+            raise FinError("At least one FX forward date is required.")
+
+        if len(forward_dts) != len(forward_fx_rates):
+            raise FinError("Forward dates and FX forward rates must have same length.")
+
+        if domestic_curve.value_dt != value_dt:
+            raise FinError("Domestic curve value date must match curve value date.")
+
+        for dt in forward_dts:
+            if dt <= value_dt:
+                raise FinError("Forward dates must be after the value date.")
+
+        forward_fx_rates = np.asarray(forward_fx_rates, dtype=float)
+
+        if np.any(~np.isfinite(forward_fx_rates)) or np.any(forward_fx_rates <= 0.0):
+            raise FinError("FX forward rates must be finite and positive.")
+
+        domestic_dfs = domestic_curve.df(forward_dts)
+        foreign_dfs = forward_fx_rates / spot_fx_rate * domestic_dfs
+
+        self.spot_fx_rate = spot_fx_rate
+        self.forward_fx_rates = forward_fx_rates
+        self.domestic_curve = domestic_curve
+
+        super().__init__(
+            value_dt,
+            forward_dts,
+            foreign_dfs,
+            interp_type,
+            time_dc_type,
+        )
+
+    ####################################################################################
+    def __repr__(self):
+        s = label_to_string("OBJECT TYPE", type(self).__name__)
+        s += label_to_string("SPOT FX RATE", self.spot_fx_rate)
+        s += "\n"
+        s += super().__repr__()
+        return s
+
+    ####################################################################################
+    def _print(self):
+        """Simple print function for backward compatibility."""
+        print(self)

regression_tests/TestFinFXDiscountCurve.py

@@ -0,0 +1,56 @@
+# Copyright (C) 2018, 2019, 2020 Dominic O'Kane
+
+import add_fp_to_path
+
+from financepy.utils.date import Date
+from financepy.utils.frequency import FrequencyTypes
+from financepy.market.curves.discount_curve_flat import DiscountCurveFlat
+from financepy.market.curves.fx_discount_curve import FXDiscountCurve
+from FinTestCases import FinTestCases, global_test_case_mode
+
+test_cases = FinTestCases(__file__, global_test_case_mode)
+
+
+########################################################################################
+def test_fin_fx_discount_curve():
+    value_dt = Date(1, 1, 2024)
+
+    spot_fx_rate = 150.0
+    forward_tenors = ["1M", "3M", "6M"]
+    forward_dts = value_dt.add_months([1, 3, 6])
+    forward_fx_rates = [149.8, 149.2, 148.5]
+
+    domestic_curve = DiscountCurveFlat(
+        value_dt,
+        0.05,
+        FrequencyTypes.CONTINUOUS,
+    )
+
+    foreign_curve = FXDiscountCurve(
+        value_dt,
+        spot_fx_rate,
+        forward_dts,
+        forward_fx_rates,
+        domestic_curve,
+    )
+
+    test_cases.header("TENOR", "INPUT_FWD", "IMPLIED_FWD")
+
+    for tenor, forward_dt, forward_fx_rate in zip(
+        forward_tenors,
+        forward_dts,
+        forward_fx_rates,
+    ):
+        implied_forward = (
+            spot_fx_rate
+            * foreign_curve.df(forward_dt)
+            / domestic_curve.df(forward_dt)
+        )
+
+        test_cases.print(tenor, forward_fx_rate, implied_forward)
+
+
+########################################################################################
+
+test_fin_fx_discount_curve()
+test_cases.compare_test_cases()

regression_tests/golden/TestFinFXDiscountCurve_GOLDEN.testLog

@@ -0,0 +1,5 @@
+File Created on:20260711_000000
+HEADER,TENOR,INPUT_FWD,IMPLIED_FWD,
+RESULTS,1M,149.80000000,149.80000000,
+RESULTS,3M,149.20000000,149.20000000,
+RESULTS,6M,148.50000000,148.50000000,