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Situation: I would like to make a small script which prices loans (fe annuities or fixed payment) for the ALM purposes. However, I am stuck in the amount of classes existing in Quantlib and would like to understand how to do it properly.

Say I have a simple loan with calendar and fixed interest, which yields monthly principal and interest payments. All of them are trivially calculated using school maths, and making such a calendar is also very easy in pandas. I wrote additional custom class for yield curve to get discounts, so my pandas output looks like this:

pic 1

However, I want to use Quantlib functionality. As far as I understand, there is no built-in loan or mortgage class. The "Bond" class is not applicable for the case. I tried to use FixedRateLeg class for the stream of the principal repayments:

leg = FixedRateLeg(schedule, dayCount, [nominal], [rate])

but it also didn't work due to daycount issues.

So, the question is:

  1. What built-in class am I supposed to use for such a cashflow stream? I am fine with calculating the required values of payments by myself and providing zip(Schedule, Payments) , but if there is a class that calculates such payments by itself, it is also great.
  2. Given such class, how do I merge it with a yield curve to obtain discounts and npv? Assume I already have a yc = ZeroCurve(*args).
  3. Is there a way to perform such calculation with a floating interest rate (apart of merging pre-calculated schedule and payments like in 1)?
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  • $\begingroup$ You could use the ‘Leg’ constructor which accepts an array of cash flows as argument. quantlib-python-docs.readthedocs.io/en/latest/… $\endgroup$ Jul 30 at 14:35
  • $\begingroup$ So, basicaslly, I do: 1) create schedule 2) iterate over schedule creating SimpleCashFlow and append them to list 3) create Leg passing this list and curve handle 4) use CashFlows built-in functions Okay, I got it, it makes sense. Thank you. $\endgroup$
    – egor_zhev
    Jul 30 at 14:48
  • $\begingroup$ That sounds doable. But I’d recommend you to wait a bit for better answers / comments; there are people in here who are more experienced with QuantLib’s cash flow features than I am. $\endgroup$ Jul 30 at 17:17
  • $\begingroup$ I think you're saying that QL's fixed-coupon bond code assumes that the coupon is always 1/frequency, but in reality fixed-coupon loans, loan participation notes, and even a few bonds daycount the coupon - similar to a fixed leg of an interest rate swap. I suggest that you add a flag to Quantlib's fixed-coupon bond constructor (see github.com/lballabio/QuantLib @Luigi Ballabio, scroll down to "Contributing") that would indicate that you're setting up such a bond. Then you'd be able to use bond class for your loans. $\endgroup$ Aug 1 at 15:01
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You could build a bond and then add the first cashflow and build a leg:

start = ql.Date(30, 9, 2021)
maturity = ql.Date(30, 9, 2022)
calendar = ql.TARGET()
nominal = 100e3
freq = ql.Period('6M')
dayCount = ql.Actual360()
coupon = 0.07

bond = ql.FixedRateBond(2, calendar, nominal, start, maturity, freq, [coupon], dayCount)
principal = cf = ql.AmortizingPayment(-nominal, start)

leg = ql.Leg([principal, *bond.cashflows()])
for cf in leg:
    print(cf.date().ISO(), cf.amount())

2021-09-30 -100000.0
2022-03-30 3519.444444444453
2022-09-30 3577.7777777777687
2022-09-30 100000.0

If you need amortizations, use the ql.AmortizingFixedRateBond class (Link).

Then you could value it using the Cashflows functions:

yts = ql.YieldTermStructureHandle(ql.FlatForward(0, ql.TARGET(), 0.05, ql.Actual360()))
ql.CashFlows.npv(leg, yts, False)

1874.481604734974

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  • $\begingroup$ Thank you very much David. It worked. $\endgroup$
    – egor_zhev
    Aug 2 at 11:23

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