@Test
/** Tests the present value curve sensitivity. */
public void presentValueCurveSensitivity() {
double spread = 0.0001; // Relative spread.
double strikeM = STRIKE * (1 - spread);
double strikeP = STRIKE * (1 + spread);
Forex forexM =
new Forex(
FOREX.getPaymentCurrency1().withAmount(1.0),
FOREX.getPaymentCurrency2().withAmount(-strikeM));
Forex forexP =
new Forex(
FOREX.getPaymentCurrency1().withAmount(1.0),
FOREX.getPaymentCurrency2().withAmount(-strikeP));
ForexOptionVanilla vanillaM =
new ForexOptionVanilla(forexM, FOREX_CALL_OPTION.getExpirationTime(), IS_CALL, IS_LONG);
ForexOptionVanilla vanillaP =
new ForexOptionVanilla(forexP, FOREX_CALL_OPTION.getExpirationTime(), IS_CALL, IS_LONG);
MultipleCurrencyInterestRateCurveSensitivity pvcsP =
METHOD_VANILLA_BLACK.presentValueCurveSensitivity(vanillaP, SMILE_BUNDLE);
MultipleCurrencyInterestRateCurveSensitivity pvcsM =
METHOD_VANILLA_BLACK.presentValueCurveSensitivity(vanillaM, SMILE_BUNDLE);
MultipleCurrencyInterestRateCurveSensitivity pvcsExpected =
pvcsM
.plus(pvcsP.multipliedBy(-1.0))
.multipliedBy(
1.0 / (strikeP - strikeM) * Math.abs(FOREX.getPaymentCurrency2().getAmount()));
MultipleCurrencyInterestRateCurveSensitivity pvcsComputed =
METHOD_DIGITAL_SPREAD.presentValueCurveSensitivity(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertTrue(
"Forex Digital option: call spread method - present value",
MultipleCurrencyInterestRateCurveSensitivity.compare(
pvcsExpected, pvcsComputed, TOLERANCE_DELTA));
}
@Test
/** Tests put call parity. */
public void presentValuePutCallParity() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate =
ScheduleCalculator.getAdjustedDate(
REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate =
ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition =
new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionDigitalDefinition callDefinition =
new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionDigitalDefinition putDefinition =
new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong);
final ForexOptionDigital call = callDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
final ForexOptionDigital put = putDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
final MultipleCurrencyAmount pvCall = METHOD_DIGITAL_SPREAD.presentValue(call, SMILE_BUNDLE);
final MultipleCurrencyAmount pvPut = METHOD_DIGITAL_SPREAD.presentValue(put, SMILE_BUNDLE);
final Double pvCash = PVC.visit(put.getUnderlyingForex().getPaymentCurrency2(), CURVES);
assertEquals(
"Forex Digital option: call spread method - present value",
pvCall.getAmount(USD) + pvPut.getAmount(USD),
Math.abs(pvCash),
TOLERANCE_PRICE_FLAT);
}
@Test
/** Tests the present value with an explicit computation. */
public void presentValue() {
double strikeM = STRIKE * (1 - STANDARD_SPREAD);
double strikeP = STRIKE * (1 + STANDARD_SPREAD);
Forex forexM =
new Forex(
FOREX.getPaymentCurrency1().withAmount(1.0),
FOREX.getPaymentCurrency2().withAmount(-strikeM));
Forex forexP =
new Forex(
FOREX.getPaymentCurrency1().withAmount(1.0),
FOREX.getPaymentCurrency2().withAmount(-strikeP));
ForexOptionVanilla vanillaM =
new ForexOptionVanilla(forexM, FOREX_CALL_OPTION.getExpirationTime(), IS_CALL, IS_LONG);
ForexOptionVanilla vanillaP =
new ForexOptionVanilla(forexP, FOREX_CALL_OPTION.getExpirationTime(), IS_CALL, IS_LONG);
MultipleCurrencyAmount pvP = METHOD_VANILLA_BLACK.presentValue(vanillaP, SMILE_BUNDLE);
MultipleCurrencyAmount pvM = METHOD_VANILLA_BLACK.presentValue(vanillaM, SMILE_BUNDLE);
MultipleCurrencyAmount pvExpected =
pvM.plus(pvP.multipliedBy(-1.0))
.multipliedBy(
1.0 / (strikeP - strikeM) * Math.abs(FOREX.getPaymentCurrency2().getAmount()));
MultipleCurrencyAmount pvComputed =
METHOD_DIGITAL_SPREAD.presentValue(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertEquals(
"Forex Digital option: call spread method - present value",
pvExpected.getAmount(USD),
pvComputed.getAmount(USD),
TOLERANCE_PRICE);
}
@Test
/** Tests the put/call parity currency exposure. */
public void currencyExposurePutCallParity() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate =
ScheduleCalculator.getAdjustedDate(
REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate =
ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition =
new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionDigitalDefinition forexOptionDefinitionCall =
new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionDigitalDefinition forexOptionDefinitionPut =
new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong);
final ForexOptionDigital forexOptionCall =
forexOptionDefinitionCall.toDerivative(REFERENCE_DATE, CURVES_NAME);
final ForexOptionDigital forexOptionPut =
forexOptionDefinitionPut.toDerivative(REFERENCE_DATE, CURVES_NAME);
final MultipleCurrencyAmount currencyExposureCall =
METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionCall, SMILE_BUNDLE);
final MultipleCurrencyAmount currencyExposurePut =
METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionPut, SMILE_BUNDLE);
final Double pvCash =
PVC.visit(forexOptionPut.getUnderlyingForex().getPaymentCurrency2(), CURVES);
assertEquals(
"Forex Digital option: currency exposure put/call parity foreign",
0,
currencyExposureCall.getAmount(EUR) + currencyExposurePut.getAmount(EUR),
TOLERANCE_PRICE);
assertEquals(
"Forex Digital option: currency exposure put/call parity domestic",
Math.abs(pvCash),
currencyExposureCall.getAmount(USD) + currencyExposurePut.getAmount(USD),
TOLERANCE_PRICE);
}
@Test
/** Tests the present value curve sensitivity. */
public void presentValueVolatilitySensitivity() {
double strikeM = STRIKE * (1 - STANDARD_SPREAD);
double strikeP = STRIKE * (1 + STANDARD_SPREAD);
Forex forexM =
new Forex(
FOREX.getPaymentCurrency1().withAmount(1.0),
FOREX.getPaymentCurrency2().withAmount(-strikeM));
Forex forexP =
new Forex(
FOREX.getPaymentCurrency1().withAmount(1.0),
FOREX.getPaymentCurrency2().withAmount(-strikeP));
ForexOptionVanilla vanillaM =
new ForexOptionVanilla(forexM, FOREX_CALL_OPTION.getExpirationTime(), IS_CALL, IS_LONG);
ForexOptionVanilla vanillaP =
new ForexOptionVanilla(forexP, FOREX_CALL_OPTION.getExpirationTime(), IS_CALL, IS_LONG);
PresentValueForexBlackVolatilitySensitivity pvbvP =
METHOD_VANILLA_BLACK.presentValueVolatilitySensitivity(vanillaP, SMILE_BUNDLE);
PresentValueForexBlackVolatilitySensitivity pvbvM =
METHOD_VANILLA_BLACK.presentValueVolatilitySensitivity(vanillaM, SMILE_BUNDLE);
PresentValueForexBlackVolatilitySensitivity pvbvExpected =
pvbvM
.plus(pvbvP.multipliedBy(-1.0))
.multipliedBy(
1.0 / (strikeP - strikeM) * Math.abs(FOREX.getPaymentCurrency2().getAmount()));
PresentValueForexBlackVolatilitySensitivity pvbvComputed =
METHOD_DIGITAL_SPREAD.presentValueVolatilitySensitivity(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertEquals(
"Forex Digital option: call spread method - present value volatility sensitivity",
pvbvComputed.getVega().getMap().size(),
2);
assertTrue(
"Forex Digital option: call spread method - present value volatility sensitivity",
PresentValueForexBlackVolatilitySensitivity.compare(
pvbvExpected, pvbvComputed, TOLERANCE_DELTA));
}
@Test
/** Tests the currency exposure with an explicit computation. */
public void currencyExposure() {
double spread = 0.0001; // Relative spread.
double strikeM = STRIKE * (1 - spread);
double strikeP = STRIKE * (1 + spread);
Forex forexM =
new Forex(
FOREX.getPaymentCurrency1().withAmount(1.0),
FOREX.getPaymentCurrency2().withAmount(-strikeM));
Forex forexP =
new Forex(
FOREX.getPaymentCurrency1().withAmount(1.0),
FOREX.getPaymentCurrency2().withAmount(-strikeP));
ForexOptionVanilla vanillaM =
new ForexOptionVanilla(forexM, FOREX_CALL_OPTION.getExpirationTime(), IS_CALL, IS_LONG);
ForexOptionVanilla vanillaP =
new ForexOptionVanilla(forexP, FOREX_CALL_OPTION.getExpirationTime(), IS_CALL, IS_LONG);
MultipleCurrencyAmount ceP = METHOD_VANILLA_BLACK.currencyExposure(vanillaP, SMILE_BUNDLE);
MultipleCurrencyAmount ceM = METHOD_VANILLA_BLACK.currencyExposure(vanillaM, SMILE_BUNDLE);
MultipleCurrencyAmount ceExpected =
ceM.plus(ceP.multipliedBy(-1.0))
.multipliedBy(
1.0 / (strikeP - strikeM) * Math.abs(FOREX.getPaymentCurrency2().getAmount()));
MultipleCurrencyAmount ceComputed =
METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertEquals(
"Forex Digital option: call spread method - currency exposure",
ceExpected.getAmount(USD),
ceComputed.getAmount(USD),
TOLERANCE_PRICE);
assertEquals(
"Forex Digital option: call spread method - currency exposure",
ceExpected.getAmount(EUR),
ceComputed.getAmount(EUR),
TOLERANCE_PRICE);
}
