@Test
/** Tests the present value: Method vs Calculator. */
public void presentValueMethodVsCalculator() {
final MultipleCurrencyAmount pvMethod = METHOD.presentValue(ZERO_COUPON_CAP, BLACK_INFLATION);
final MultipleCurrencyAmount pvCalculator = ZERO_COUPON_CAP.accept(PVIC, BLACK_INFLATION);
assertEquals("Zero-coupon inflation DiscountingMethod: Present value", pvMethod, pvCalculator);
}
@Test
/** Tests the present value. */
public void presentValueNoNotional() {
final MultipleCurrencyAmount pv = METHOD.presentValue(ZERO_COUPON_CAP, BLACK_INFLATION);
final double timeToMaturity =
ZERO_COUPON_CAP.getReferenceEndTime() - ZERO_COUPON_CAP.getLastKnownFixingTime();
final double df =
MARKET
.getCurve(ZERO_COUPON_CAP.getCurrency())
.getDiscountFactor(ZERO_COUPON_CAP.getPaymentTime());
final double finalIndex =
MARKET.getCurve(PRICE_INDEX_EUR).getPriceIndex(ZERO_COUPON_CAP.getReferenceEndTime());
final double forward = finalIndex / INDEX_1MAY_2008;
final EuropeanVanillaOption option =
new EuropeanVanillaOption(
Math.pow(1 + ZERO_COUPON_CAP.getStrike(), ZERO_COUPON_CAP.getMaturity()),
timeToMaturity,
ZERO_COUPON_CAP.isCap());
final double volatility =
BLACK_INFLATION
.getBlackParameters()
.getVolatility(ZERO_COUPON_CAP.getReferenceEndTime(), ZERO_COUPON_CAP.getStrike());
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final Function1D<BlackFunctionData, Double> func = BLACK_FUNCTION.getPriceFunction(option);
final double pvExpected =
df
* func.evaluate(dataBlack)
* ZERO_COUPON_CAP.getNotional()
* ZERO_COUPON_CAP.getPaymentYearFraction();
assertEquals(
"Zero-coupon inflation DiscountingMethod: Present value",
pvExpected,
pv.getAmount(ZERO_COUPON_CAP.getCurrency()),
TOLERANCE_PV);
}
@Test
public void presentValueMarketSensitivityMethodVsCalculator() {
final MultipleCurrencyInflationSensitivity pvcisMethod =
METHOD.presentValueCurveSensitivity(ZERO_COUPON_CAP, BLACK_INFLATION);
final MultipleCurrencyInflationSensitivity pvcisCalculator =
ZERO_COUPON_CAP.accept(PVCSDC, BLACK_INFLATION);
AssertSensivityObjects.assertEquals(
"Zero-coupon inflation DiscountingMethod: presentValueMarketSensitivity",
pvcisMethod,
pvcisCalculator,
TOLERANCE_PV_DELTA);
}
/**
* Tests the present value and its sensitivities for zero-coupon cap/floor with reference index on
* the first of the month.
*/
public class CapFloorInflationZeroCouponMonthlyBlackSmileMethodTest {
private static final InflationIssuerProviderDiscount MARKET =
MulticurveProviderDiscountDataSets.createMarket1();
private static final IndexPrice[] PRICE_INDEXES =
MARKET.getPriceIndexes().toArray(new IndexPrice[MARKET.getPriceIndexes().size()]);
private static final IndexPrice PRICE_INDEX_EUR = PRICE_INDEXES[0];
private static final Calendar CALENDAR_EUR = MulticurveProviderDiscountDataSets.getEURCalendar();
private static final BusinessDayConvention BUSINESS_DAY =
BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Modified Following");
private static final ZonedDateTime START_DATE = DateUtils.getUTCDate(2008, 8, 18);
private static final int MATURITY = 10;
private static final Period COUPON_TENOR = Period.ofYears(MATURITY);
private static final ZonedDateTime PAYMENT_DATE =
ScheduleCalculator.getAdjustedDate(START_DATE, COUPON_TENOR, BUSINESS_DAY, CALENDAR_EUR);
private static final double NOTIONAL = 98765432;
private static final int MONTH_LAG = 3;
private static final double INDEX_1MAY_2008 =
108.23; // 3 m before Aug: May / 1 May index = May index: 108.23
private static final double STRIKE = .02;
private static final boolean IS_CAP = true;
private static final ZonedDateTime LAST_KNOWN_FIXING_DATE = DateUtils.getUTCDate(2008, 7, 01);
private static final double SHIFT_FD = 1.0E-7;
private static final double TOLERANCE_PV = 1.0E-2;
private static final double TOLERANCE_PV_DELTA = 1.0E+2;
private static final InterpolatedDoublesSurface BLACK_SURF =
TestsDataSetsBlack.createBlackSurfaceExpiryStrike();
private static final BlackSmileCapInflationZeroCouponParameters BLACK_PARAM =
new BlackSmileCapInflationZeroCouponParameters(BLACK_SURF, PRICE_INDEX_EUR);
private static final BlackSmileCapInflationZeroCouponProviderDiscount BLACK_INFLATION =
new BlackSmileCapInflationZeroCouponProviderDiscount(
MARKET.getInflationProvider(), BLACK_PARAM);
private static final ZonedDateTime PRICING_DATE = DateUtils.getUTCDate(2011, 8, 3);
private static final CouponInflationZeroCouponMonthlyDefinition ZERO_COUPON_DEFINITION =
CouponInflationZeroCouponMonthlyDefinition.from(
START_DATE,
PAYMENT_DATE,
NOTIONAL,
PRICE_INDEX_EUR,
INDEX_1MAY_2008,
MONTH_LAG,
MONTH_LAG,
false);
private static final CapFloorInflationZeroCouponMonthlyDefinition ZERO_COUPON_DEFINITION_CAP =
CapFloorInflationZeroCouponMonthlyDefinition.from(
ZERO_COUPON_DEFINITION, LAST_KNOWN_FIXING_DATE, MATURITY, STRIKE, IS_CAP);
private static final CapFloorInflationZeroCouponMonthly ZERO_COUPON_CAP =
ZERO_COUPON_DEFINITION_CAP.toDerivative(PRICING_DATE, "not used");
private static final CapFloorInflationZeroCouponMonthlyBlackSmileMethod METHOD =
CapFloorInflationZeroCouponMonthlyBlackSmileMethod.getInstance();
private static final PresentValueBlackSmileInflationZeroCouponCalculator PVIC =
PresentValueBlackSmileInflationZeroCouponCalculator.getInstance();
private static final PresentValueCurveSensitivityBlackSmileInflationZeroCouponCalculator PVCSDC =
PresentValueCurveSensitivityBlackSmileInflationZeroCouponCalculator.getInstance();
private static final ParameterInflationSensitivityParameterCalculator<
BlackSmileCapInflationZeroCouponProviderInterface>
PSC = new ParameterInflationSensitivityParameterCalculator<>(PVCSDC);
private static final ParameterSensitivityBlackSmileZeroCouponCapDiscountInterpolatedFDCalculator
PS_PV_FDC =
new ParameterSensitivityBlackSmileZeroCouponCapDiscountInterpolatedFDCalculator(
PVIC, SHIFT_FD);
/** The Black function used in the pricing. */
private static final BlackPriceFunction BLACK_FUNCTION = new BlackPriceFunction();
@Test
/** Tests the present value. */
public void presentValueNoNotional() {
final MultipleCurrencyAmount pv = METHOD.presentValue(ZERO_COUPON_CAP, BLACK_INFLATION);
final double timeToMaturity =
ZERO_COUPON_CAP.getReferenceEndTime() - ZERO_COUPON_CAP.getLastKnownFixingTime();
final double df =
MARKET
.getCurve(ZERO_COUPON_CAP.getCurrency())
.getDiscountFactor(ZERO_COUPON_CAP.getPaymentTime());
final double finalIndex =
MARKET.getCurve(PRICE_INDEX_EUR).getPriceIndex(ZERO_COUPON_CAP.getReferenceEndTime());
final double forward = finalIndex / INDEX_1MAY_2008;
final EuropeanVanillaOption option =
new EuropeanVanillaOption(
Math.pow(1 + ZERO_COUPON_CAP.getStrike(), ZERO_COUPON_CAP.getMaturity()),
timeToMaturity,
ZERO_COUPON_CAP.isCap());
final double volatility =
BLACK_INFLATION
.getBlackParameters()
.getVolatility(ZERO_COUPON_CAP.getReferenceEndTime(), ZERO_COUPON_CAP.getStrike());
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final Function1D<BlackFunctionData, Double> func = BLACK_FUNCTION.getPriceFunction(option);
final double pvExpected =
df
* func.evaluate(dataBlack)
* ZERO_COUPON_CAP.getNotional()
* ZERO_COUPON_CAP.getPaymentYearFraction();
assertEquals(
"Zero-coupon inflation DiscountingMethod: Present value",
pvExpected,
pv.getAmount(ZERO_COUPON_CAP.getCurrency()),
TOLERANCE_PV);
}
@Test
/** Tests the present value: Method vs Calculator. */
public void presentValueMethodVsCalculator() {
final MultipleCurrencyAmount pvMethod = METHOD.presentValue(ZERO_COUPON_CAP, BLACK_INFLATION);
final MultipleCurrencyAmount pvCalculator = ZERO_COUPON_CAP.accept(PVIC, BLACK_INFLATION);
assertEquals("Zero-coupon inflation DiscountingMethod: Present value", pvMethod, pvCalculator);
}
@Test
/** Test the present value curves sensitivity. */
public void presentValueCurveSensitivity() {
final MultipleCurrencyParameterSensitivity pvicsFD =
PS_PV_FDC.calculateSensitivity(ZERO_COUPON_CAP, BLACK_INFLATION);
final MultipleCurrencyParameterSensitivity pvicsExact =
PSC.calculateSensitivity(ZERO_COUPON_CAP, BLACK_INFLATION, MARKET.getAllNames());
AssertSensivityObjects.assertEquals(
"Zero-coupon inflation DiscountingMethod: presentValueCurveSensitivity ",
pvicsExact,
pvicsFD,
TOLERANCE_PV_DELTA);
}
@Test
public void presentValueMarketSensitivityMethodVsCalculator() {
final MultipleCurrencyInflationSensitivity pvcisMethod =
METHOD.presentValueCurveSensitivity(ZERO_COUPON_CAP, BLACK_INFLATION);
final MultipleCurrencyInflationSensitivity pvcisCalculator =
ZERO_COUPON_CAP.accept(PVCSDC, BLACK_INFLATION);
AssertSensivityObjects.assertEquals(
"Zero-coupon inflation DiscountingMethod: presentValueMarketSensitivity",
pvcisMethod,
pvcisCalculator,
TOLERANCE_PV_DELTA);
}
}
