Bond Z-Spread in QuantLib

Article Quant Q&A · Author: cpage

Summary

This document addresses a Python interface issue encountered when calculating the z-spread of a fixed-rate corporate bond against a zero curve built from swap rates. The supplied example constructs a curve, bond schedule, and bond, then passes them to QuantLib’s bond z-spread function; the call fails with an overload type error.

The accepted explanation identifies the relevant argument mismatch: the function expects a term structure, while the example wraps the curve in a yield-term-structure handle. Passing the underlying curve directly is suggested as the fix. This is a narrow implementation note based on the cited QuantLib interface and version context; it does not explain z-spread theory, validate the input curve construction, or discuss bond pricing conventions beyond the example.

Key ideas

QuantLib’s bond z-spread function expects a term structure argument in the shown interface.
Wrapping the zero curve in a yield-term-structure handle can cause the overload type error described.
The suggested resolution is to pass the curve itself to the function.
The example concerns a fixed-rate corporate bond valued against a zero curve derived from swap rates.

Tags

Fixed income Derivatives pricing Statistics

Full text

# QuantLib Python: Calculate ZSpread


# QuantLib Python: Calculate ZSpread












I am trying to use `quantlib-python` to calculate the z-spread of a fixed rate US corporate bond using a zero curve from swap rates provided.

Here is the provided curve with dates, zeroes and discount factors.

```
{'date': {0: Timestamp('2020-01-16 00:00:00'),
  1: Timestamp('2020-01-23 00:00:00'),
  2: Timestamp('2020-02-18 00:00:00'),
  3: Timestamp('2020-03-16 00:00:00'),
  4: Timestamp('2020-04-16 00:00:00'),
  5: Timestamp('2020-06-17 00:00:00'),
  6: Timestamp('2020-09-16 00:00:00'),
  7: Timestamp('2020-12-16 00:00:00'),
  8: Timestamp('2021-03-17 00:00:00'),
  9: Timestamp('2021-06-16 00:00:00'),
  10: Timestamp('2021-09-15 00:00:00'),
  11: Timestamp('2021-12-15 00:00:00'),
  12: Timestamp('2022-01-18 00:00:00'),
  13: Timestamp('2022-07-18 00:00:00'),
  14: Timestamp('2023-01-17 00:00:00'),
  15: Timestamp('2023-07-17 00:00:00'),
  16: Timestamp('2024-01-16 00:00:00'),
  17: Timestamp('2024-07-16 00:00:00')},
 'rate': {0: 1.5730452119529836,
  1: 1.5730452119025795,
  2: 1.7279111508652356,
  3: 1.7913216016440803,
  4: 1.8674426107576636,
  5: 1.8294634933805565,
  6: 1.7852819839324852,
  7: 1.740006104698466,
  8: 1.707636622424058,
  9: 1.6797318490155533,
  10: 1.6591129486236866,
  11: 1.6405257638334003,
  12: 1.6361045982494105,
  13: 1.622831403886238,
  14: 1.6095006947274282,
  15: 1.6096802648009056,
  16: 1.6098318250594712,
  17: 1.6176504630707633},
 'df': {0: 1.0,
  1: 0.9996953731036011,
  2: 0.9984718446661575,
  3: 0.9970321675811668,
  4: 0.9953638349734837,
  5: 0.9923904015148071,
  6: 0.988220850440741,
  7: 0.9842443665336315,
  8: 0.9803113137907096,
  9: 0.9765817360374307,
  10: 0.9728825409783471,
  11: 0.9692140750801099,
  12: 0.9678487049444453,
  13: 0.9603121753425592,
  14: 0.9530038843473384,
  15: 0.9453899093059526,
  16: 0.9378779089627198,
  17: 0.930064389274982}}
```

Here is the code I have after I load the curve as `df`.

```
df.columns = ['date', 'rate', 'df']
day_count = ql.Thirty360(ql.Thirty360.USA)
dates = [ql.Date(d.day, d.month, d.year) for d in df['date']]
crv = ql.ZeroCurve(dates, df['rate'], day_count, ql.UnitedStates(ql.UnitedStates.GovernmentBond))

crv = ql.YieldTermStructureHandle(crv)

start = ql.Date(1,11,2013)
maturity = ql.Date(1,11,2023)
schedule = ql.MakeSchedule(start, maturity, ql.Period('6M'))
settlement_days = 2

interest = ql.FixedRateLeg(schedule, day_count, [100.], [0.0345])
bond = ql.Bond(settlement_days, ql.TARGET(), start, interest)

today = ql.Date(14, 1, 2020)
ql.Settings.instance().evaluationDate = today

ql.BondFunctions.zSpread(bond,86.22,crv,day_count,ql.Compounded,ql.Annual)
```

I am receiving the error `TypeError: Wrong number or type of arguments for overloaded function 'BondFunctions_zSpread` and am not sure which input is causing the error or how to resolve.

## Answer by Luigi Ballabio (score 3, accepted)

https://quant.stackexchange.com/a/79024

You can see the interface of `zSpread` declared at https://github.com/lballabio/QuantLib-SWIG/blob/v1.33/SWIG/bondfunctions.i#L146.

It takes a shared_ptr to term structure (which in Python means a term structure), not a handle. If you avoid the `crv = ql.YieldTermStructureHandle(crv)`, it should work.

## Answer by Sane (score -1)

https://quant.stackexchange.com/a/79021

The error message suggests that there may be an issue with the number or type of arguments you are passing to the `BondFunctions.zSpread` function.

The `BondFunctions.zSpread` function typically takes the following arguments:

`Bond object` the bond for which you want to calculate the z-spread. `cleanPrice` the clean price of the bond. `curve` the yield term structure handle. `dayCount` the day count convention. `compounding` the compounding frequency. `frequency`: the coupon frequency.

Make sure that you are passing the correct arguments in the correct order.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.

Calculating a Bond Z-Spread with QuantLib and a Zero Curve

Summary

Key ideas

Tags