/**
* Computes the option security price curve sensitivity. The future price is computed without
* convexity adjustment.
*
* @param security The future option security.
* @param sabrData The SABR data bundle.
* @return The security price curve sensitivity.
*/
public InterestRateCurveSensitivity priceCurveSensitivity(
final InterestRateFutureOptionMarginSecurity security,
final SABRInterestRateDataBundle sabrData) {
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), sabrData);
final double rateStrike = 1.0 - security.getStrike();
final EuropeanVanillaOption option =
new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double delay =
security.getUnderlyingFuture().getLastTradingTime() - security.getExpirationTime();
final double[] volatilityAdjoint =
sabrData
.getSABRParameter()
.getVolatilityAdjoint(security.getExpirationTime(), delay, rateStrike, forward);
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatilityAdjoint[0]);
final double[] priceAdjoint = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
// Backward sweep
final double priceBar = 1.0;
final double volatilityBar = priceAdjoint[2] * priceBar;
final double forwardBar = priceAdjoint[1] * priceBar + volatilityAdjoint[1] * volatilityBar;
final double priceFutureBar = -forwardBar;
final InterestRateCurveSensitivity priceFutureDerivative =
METHOD_FUTURE.priceCurveSensitivity(security.getUnderlyingFuture(), sabrData);
return priceFutureDerivative.multipliedBy(priceFutureBar);
}
/**
* Computes the option security price curve sensitivity. The future price is computed without
* convexity adjustment.
*
* @param security The future option security.
* @param sabrData The SABR data bundle.
* @return The security price curve sensitivity.
*/
public PresentValueSABRSensitivityDataBundle priceSABRSensitivity(
final InterestRateFutureOptionMarginSecurity security,
final SABRInterestRateDataBundle sabrData) {
final PresentValueSABRSensitivityDataBundle sensi = new PresentValueSABRSensitivityDataBundle();
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), sabrData);
final double rateStrike = 1.0 - security.getStrike();
final EuropeanVanillaOption option =
new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double delay =
security.getUnderlyingFuture().getLastTradingTime() - security.getExpirationTime();
final double[] volatilityAdjoint =
sabrData
.getSABRParameter()
.getVolatilityAdjoint(security.getExpirationTime(), delay, rateStrike, forward);
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatilityAdjoint[0]);
final double[] priceAdjoint = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
// Backward sweep
final double priceBar = 1.0;
final double volatilityBar = priceAdjoint[2] * priceBar;
final DoublesPair expiryDelay = new DoublesPair(security.getExpirationTime(), delay);
sensi.addAlpha(expiryDelay, volatilityAdjoint[3] * volatilityBar);
sensi.addBeta(expiryDelay, volatilityAdjoint[4] * volatilityBar);
sensi.addRho(expiryDelay, volatilityAdjoint[5] * volatilityBar);
sensi.addNu(expiryDelay, volatilityAdjoint[6] * volatilityBar);
return sensi;
}
public void delta() {
final double priceFutures =
METHOD_FUTURE.price(CALL_JB_147.getUnderlyingFuture(), ISSUER_SPECIFIC_MULTICURVES);
final EuropeanVanillaOption option =
new EuropeanVanillaOption(
STRIKE_147, CALL_JB_147.getExpirationTime(), CALL_JB_147.isCall());
final double expiry = CALL_JB_147.getExpirationTime();
final double volatility = BLACK_SURFACE_EXP_STRIKE.getZValue(expiry, STRIKE_147);
double df =
ISSUER_SPECIFIC_MULTICURVES
.getMulticurveProvider()
.getDiscountFactor(JBM5_DEFINITION.getCurrency(), CALL_JB_147.getExpirationTime());
final BlackFunctionData dataBlack = new BlackFunctionData(priceFutures, df, volatility);
final double[] priceAD = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
final double deltaCallExpected = priceAD[1];
final double deltaCallComputed = METHOD_OPT.delta(CALL_JB_147, BLACK_EXP_STRIKE_BNDFUT);
assertEquals(
"BondFuturesOptionPremiumSecurityBlackBondFuturesMethod: delta",
deltaCallExpected,
deltaCallComputed,
TOLERANCE_DELTA);
final double deltaPutComputed = METHOD_OPT.delta(PUT_JB_147, BLACK_EXP_STRIKE_BNDFUT);
assertEquals(
"BondFuturesOptionPremiumSecurityBlackBondFuturesMethod: delta",
deltaCallExpected - deltaPutComputed,
df,
TOLERANCE_DELTA);
}