stack/tests/lead/test_stop_loss.py

"""lead.stop_loss reproduces Box 5.3.3: the charge calculation, the payout
illustration, and the application of Stop-Loss to PY expenditure."""

from __future__ import annotations

import pytest

from lead.money import cents
from lead.params import STOP_LOSS_ATTACHMENT_PAYOUT_SHARE, STOP_LOSS_BANDS
from lead.stop_loss import (
    adjusted_payout,
    apply_stop_loss,
    average_payout_percentage,
    band_status,
    charge_pbpm,
    neutrality_factor,
    payout_percentage,
    predicted_expenditure,
    reference_years,
    residual_expenditure,
    stop_loss_charge,
    stop_loss_payout,
    trended_attachment_point,
    without_stop_loss,
)
from tests.lead.paper import STOP_LOSS_CHARGE, STOP_LOSS_PAYOUT


def test_box_5_3_3_charge_calculation():
    pct = average_payout_percentage(STOP_LOSS_CHARGE["RY"])
    charge = stop_loss_charge(
        STOP_LOSS_CHARGE["1"], STOP_LOSS_CHARGE["2"], STOP_LOSS_CHARGE["3"], pct
    )
    assert charge.trended_risk_adjusted_reference_expenditure == STOP_LOSS_CHARGE["4"]
    assert round(charge.average_payout_percentage, 4) == STOP_LOSS_CHARGE["5"]
    assert charge.stop_loss_charge == STOP_LOSS_CHARGE["6"]


def test_box_5_3_3_charge_uses_the_unrounded_average_payout_percentage():
    # Line 5 prints 2.03%; multiplying line 4 by the printed rate misses line 6.
    assert cents(STOP_LOSS_CHARGE["4"] * STOP_LOSS_CHARGE["5"]) == 2_943_500.94
    assert cents(STOP_LOSS_CHARGE["4"] * STOP_LOSS_CHARGE["5"]) != STOP_LOSS_CHARGE["6"]


def test_box_5_3_3_payout_illustration():
    residual = residual_expenditure(
        STOP_LOSS_PAYOUT["actual"], STOP_LOSS_PAYOUT["predicted"]
    )
    assert residual == STOP_LOSS_PAYOUT["residual"]
    payout = stop_loss_payout(residual, STOP_LOSS_PAYOUT["attachment_point"])
    band_1, band_2 = payout.bands
    assert payout.below_attachment_point == STOP_LOSS_PAYOUT["below_attachment_point"]
    assert (band_1.exposure, band_2.exposure) == (
        STOP_LOSS_PAYOUT["band_1_exposure"],
        STOP_LOSS_PAYOUT["band_2_exposure"],
    )
    assert (band_1.payout, band_2.payout) == (
        STOP_LOSS_PAYOUT["band_1_payout"],
        STOP_LOSS_PAYOUT["band_2_payout"],
    )
    assert payout.total_payout == STOP_LOSS_PAYOUT["total_payout"]


@pytest.mark.parametrize(
    "residual,status,total",
    [
        (-5_000.0, "below_attachment_point", 0.0),
        (150_000.0, "below_attachment_point", 0.0),
        (150_000.01, "band_1", 0.01),
        (300_000.0, "band_1", 120_000.0),
        (300_000.01, "band_2", 120_000.01),
    ],
)
def test_band_boundaries(residual, status, total):
    assert band_status(residual, 150_000.0) == status
    assert stop_loss_payout(residual, 150_000.0).total_payout == total


def test_negative_residual_is_nothing_below_the_attachment_point():
    assert stop_loss_payout(-5_000.0, 150_000.0).below_attachment_point == 0.0


def test_payment_schedule_and_attachment_share():
    assert [
        (b.start_multiple, b.end_multiple, b.payout_rate) for b in STOP_LOSS_BANDS
    ] == [
        (1.0, 2.0, 0.80),
        (2.0, None, 1.00),
    ]
    assert STOP_LOSS_ATTACHMENT_PAYOUT_SHARE == 0.02


def test_reference_years_leave_a_one_year_gap():
    assert reference_years(2027) == (2023, 2024, 2025)
    assert reference_years(2030) == (2026, 2027, 2028)


def test_predicted_expenditure_and_trended_attachment_point():
    assert predicted_expenditure(1_000.0, 1.2, 12) == 14_400.00
    assert trended_attachment_point(150_000.0, 1.05) == 157_500.00


def test_payout_percentages():
    assert payout_percentage(196.0, 10_000.0) == 0.0196
    assert payout_percentage(1.0, 0.0) is None
    assert average_payout_percentage([0.02, None, 0.03]) is None
    assert average_payout_percentage([]) is None


def test_charge_pbpm_and_neutrality_factor():
    assert charge_pbpm(2_948_334.28, 132_000) == pytest.approx(22.3359, abs=1e-4)
    assert charge_pbpm(1.0, 0) is None
    assert neutrality_factor(93.0, 100.0) == 0.93
    # No payouts model-wide: the ratio is undefined, not 1.0.
    assert neutrality_factor(93.0, 0.0) is None


def test_application_of_stop_loss_lines_16_to_22():
    applied = apply_stop_loss(135_793_983.00, 2_948_334.28, 2_900_000.00, 0.930)
    assert applied.adjusted_stop_loss_payout == 2_697_000.00
    assert applied.net_stop_loss_impact == 251_334.28
    assert applied.py_expenditure_after_stop_loss == 136_045_317.28


def test_adjusted_payout_without_a_factor():
    assert adjusted_payout(0.0, None) == 0.0
    with pytest.raises(ValueError, match="neutrality factor"):
        adjusted_payout(10.0, None)


def test_without_stop_loss():
    applied = without_stop_loss(100.0)
    assert applied.py_expenditure_after_stop_loss == 100.0
    assert applied.stop_loss_neutrality_factor is None