BUG: ZeroFixedLeg.spread now factors final_exchange into the calc…

python/rateslib/legs/fixed.py

@@ -1066,8 +1066,22 @@ def spread(
         settlement: datetime_ = NoInput(0),
         forward: datetime_ = NoInput(0),
     ) -> DualTypes:
-        disc_curve_ = _disc_required_maybe_from_curve(rate_curve, disc_curve)
+        # scale target_npv accounting for notional exchanges
+        _ = self.fixed_rate
+        self.fixed_rate = 0.0
+        local_npv = self.local_npv(
+            rate_curve=rate_curve,
+            disc_curve=disc_curve,
+            index_curve=index_curve,
+            fx=fx,
+            forward=forward,
+            settlement=settlement,
+        )
+        self.fixed_rate = _
+        rate_target_npv = target_npv - local_npv
 
+        # evaluate settlement relative to ex-div
+        disc_curve_ = _disc_required_maybe_from_curve(rate_curve, disc_curve)
         if not isinstance(settlement, NoInput):
             if settlement > self.settlement_params.ex_dividend:
                 raise ZeroDivisionError(
@@ -1082,19 +1096,22 @@ def spread(
             else:
                 w_fwd = disc_curve_[forward]
 
-        immediate_target_npv = target_npv * w_fwd
+        immediate_target_npv = rate_target_npv * w_fwd
         unindexed_target_npv = immediate_target_npv / self._regular_periods[0].index_up(
             1.0, index_curve=index_curve
         )
         unindexed_reference_target_npv = unindexed_target_npv / self._regular_periods[
             0
         ].convert_deliverable(1.0, fx=fx)
+        target_cashflow = (
+            unindexed_reference_target_npv / disc_curve_[self.settlement_params.payment]
+        )
 
         f = self.schedule.periods_per_annum
         d = self._regular_periods[0].dcf
         N = self.settlement_params.notional
-        w = disc_curve_[self.settlement_params.payment]
-        R = ((-unindexed_reference_target_npv / (N * w) + 1) ** (1 / (d * f)) - 1) * f * 10000.0
+
+        R = ((-target_cashflow / N + 1) ** (1 / (d * f)) - 1) * f * 10000.0
         return R
 
 

python/tests/legs/test_legs_legacy.py

@@ -1363,6 +1363,30 @@ def test_zero_fixed_spread(self, settlement, forward, exp, curve) -> None:
         )
         assert abs(result / 100 - exp) < 1e-3
 
+    @pytest.mark.parametrize("final_exchange", [False, True])
+    def test_zero_fixed_spread_exchanges(self, curve, final_exchange) -> None:
+        zfl = ZeroFixedLeg(
+            schedule=Schedule(
+                effective=dt(2022, 1, 5),
+                termination="8m",
+                payment_lag=0,
+                frequency="M",
+            ),
+            notional=-1e8,
+            convention="ActAct",
+            final_exchange=final_exchange,
+            fixed_rate=NoInput(0),
+        )
+        result = zfl.spread(
+            target_npv=50000.0 + 1e8 * curve[dt(2022, 9, 5)] * final_exchange, rate_curve=curve
+        )
+        expected = 7.718420018560934  # bps
+        assert abs(result - expected) < 1e-8
+
+        zfl.fixed_rate = expected / 100.0
+        result = zfl.npv(rate_curve=curve)
+        assert abs(result - (50000.0 + 1e8 * curve[dt(2022, 9, 5)] * final_exchange)) < 1e-7
+
     def test_zero_fixed_spread_raises_settlement(self, curve) -> None:
         zfl = ZeroFixedLeg(
             schedule=Schedule(
@@ -1384,7 +1408,8 @@ def test_zero_fixed_spread_raises_settlement(self, curve) -> None:
                 forward=NoInput(0),
             )
 
-    def test_zero_fixed_spread_indexed(self, curve) -> None:
+    @pytest.mark.parametrize("final_exchange", [False, True])
+    def test_zero_fixed_spread_indexed(self, curve, final_exchange) -> None:
         zfl = ZeroFixedLeg(
             schedule=Schedule(
                 effective=dt(2022, 1, 1),
@@ -1395,17 +1420,24 @@ def test_zero_fixed_spread_indexed(self, curve) -> None:
             notional=-1e8,
             convention="ActAct",
             fixed_rate=NoInput(0),
+            final_exchange=final_exchange,
             index_base=100.0,
             index_fixings=110.0,
         )
+        target_npv = (13140821.29 + 1e8 * 1.1 * final_exchange) * curve[dt(2027, 1, 1)]
         result = zfl.spread(
-            target_npv=13140821.29 * curve[dt(2027, 1, 1)],
+            target_npv=target_npv,
             rate_curve=NoInput(0),
             disc_curve=curve,
         )
         assert abs(result / 100 - 2.2826266057484057) < 1e-3
 
-    def test_zero_fixed_spread_non_deliverable(self, curve) -> None:
+        zfl.fixed_rate = result / 100.0
+        result = zfl.npv(rate_curve=curve)
+        assert abs(result - target_npv) < 1e-7
+
+    @pytest.mark.parametrize("final_exchange", [False, True])
+    def test_zero_fixed_spread_non_deliverable(self, curve, final_exchange) -> None:
         zfl = ZeroFixedLeg(
             schedule=Schedule(
                 effective=dt(2022, 1, 1),
@@ -1417,16 +1449,22 @@ def test_zero_fixed_spread_non_deliverable(self, curve) -> None:
             convention="ActAct",
             fixed_rate=NoInput(0),
             currency="usd",
+            final_exchange=final_exchange,
             pair="eurusd",
             fx_fixings=2.0,
         )
+        target_npv = (13140821.29 + 1e8 * 2.0 * final_exchange) * curve[dt(2027, 1, 1)]
         result = zfl.spread(
-            target_npv=13140821.29 * curve[dt(2027, 1, 1)],
+            target_npv=target_npv,
             rate_curve=NoInput(0),
             disc_curve=curve,
         )
         assert abs(result / 100 - 1.2808477472765924) < 1e-3
 
+        zfl.fixed_rate = result / 100.0
+        result = zfl.npv(rate_curve=curve)
+        assert abs(result - target_npv) < 1e-7
+
     def test_amortization_raises(self) -> None:
         with pytest.raises(TypeError, match="unexpected keyword argument 'amortization'"):
             ZeroFixedLeg(

rust/scheduling/frequency/imm.rs

@@ -146,7 +146,7 @@ impl Imm {
                 let date = NaiveDate::from_ymd_opt(year, month, 1);
                 match date {
                     Some(d) => Ok(d.and_hms_opt(0, 0, 0).unwrap()),
-                    None => {return Err(PyValueError::new_err("`year` or `month` out of range."))}
+                    None => return Err(PyValueError::new_err("`year` or `month` out of range.")),
                 }
             }
             Imm::Leap => {