public static void annuityFixedDemo(PrintStream out) {
double[] paymentTimes = fixedPaymentTimes(MATURITY);
AnnuityCouponFixed annuity =
new AnnuityCouponFixed(CCY, paymentTimes, R, LIBOR_CURVE_NAME, false);
out.println(Arrays.deepToString(annuity.getPayments()));
YieldCurveBundle bundle = getBundle();
PresentValueCalculator presentValueCalculator = PresentValueCalculator.getInstance();
double presentValue = presentValueCalculator.visit(annuity, bundle);
out.format("Present Value %f%n", presentValue);
}
@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);
}
/** Tests related to the discounting method for bond security. */
public class BondSecurityFRDiscountingMethodTest {
// Calculators
private static final PresentValueCalculator PVC = PresentValueCalculator.getInstance();
private static final BondSecurityDiscountingMethod METHOD =
BondSecurityDiscountingMethod.getInstance();
private static final double TOLERANCE_PRICE = 1.0E-8;
private static final String REPO_TYPE = "General collateral";
private static final Currency EUR = Currency.EUR;
private static final Calendar TARGET = new MondayToFridayCalendar("TARGET");
private static final DayCount DAY_COUNT_ACTACTICMA =
DayCountFactory.INSTANCE.getDayCount("Actual/Actual ICMA");
private static final BusinessDayConvention BUSINESS_DAY_FOL =
BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Following");
private static final boolean IS_EOM_FIXED = false;
// To derivatives
private static final DayCount ACT_ACT =
DayCountFactory.INSTANCE.getDayCount("Actual/Actual ISDA");
private static final String CREDIT_CURVE_NAME = "Credit";
private static final String REPO_CURVE_NAME = "Repo";
private static final String FORWARD_CURVE_NAME = "Forward";
private static final String[] CURVES_NAME = {
CREDIT_CURVE_NAME, REPO_CURVE_NAME, FORWARD_CURVE_NAME
};
private static final YieldCurveBundle CURVES = TestsDataSetsSABR.createCurvesBond1();
// FRTR 4 1/2 04/25/41 - ISIN: FR0010773192
private static final String ISSUER_FR = "FRANCE (GOVT OF)";
private static final YieldConvention YIELD_CONVENTION_FRANCE =
SimpleYieldConvention.FRANCE_COMPOUND_METHOD;
private static final int SETTLEMENT_DAYS_FR = 3;
private static final Period PAYMENT_TENOR_FR = Period.ofMonths(12);
// private static final int COUPON_PER_YEAR_FR = 1;
private static final ZonedDateTime BOND_START_FR = DateUtils.getUTCDate(2009, 4, 25);
private static final ZonedDateTime BOND_MATURITY_FR = DateUtils.getUTCDate(2041, 4, 25);
private static final ZonedDateTime BOND_FIRSTCPN_FR = DateUtils.getUTCDate(2010, 4, 25);
private static final double RATE_FR = 0.0450;
private static final BondFixedSecurityDefinition BOND_FR_SECURITY_DEFINITION =
BondFixedSecurityDefinition.from(
EUR,
BOND_START_FR,
BOND_FIRSTCPN_FR,
BOND_MATURITY_FR,
PAYMENT_TENOR_FR,
RATE_FR,
SETTLEMENT_DAYS_FR,
TARGET,
DAY_COUNT_ACTACTICMA,
BUSINESS_DAY_FOL,
YIELD_CONVENTION_FRANCE,
IS_EOM_FIXED,
ISSUER_FR);
}
@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);
}
/** Class with methods related to bond transaction valued by discounting. */
public final class BondTransactionDiscountingMethod {
private static final Logger LOGGER =
LoggerFactory.getLogger(BondTransactionDiscountingMethod.class);
/** The unique instance of the class. */
private static final BondTransactionDiscountingMethod INSTANCE =
new BondTransactionDiscountingMethod();
/**
* Return the class instance.
*
* @return The instance.
*/
public static BondTransactionDiscountingMethod getInstance() {
return INSTANCE;
}
/** Constructor */
private BondTransactionDiscountingMethod() {}
/** The present value calculator (for the different parts of the bond transaction). */
private static final PresentValueCalculator PVC = PresentValueCalculator.getInstance();
/** The present value calculator (for the different parts of the bond transaction). */
private static final PresentValueCurveSensitivityCalculator PVSC =
PresentValueCurveSensitivityCalculator.getInstance();
private static final BondSecurityDiscountingMethod METHOD_SECURITY =
BondSecurityDiscountingMethod.getInstance();
/**
* Compute the present value of a fixed coupon bond transaction.
*
* @param bond The bond transaction.
* @param curves The curve bundle.
* @return The present value.
*/
public double presentValue(final BondFixedTransaction bond, final YieldCurveBundle curves) {
final double pvNominal = bond.getBondTransaction().getNominal().accept(PVC, curves);
final double pvCoupon = bond.getBondTransaction().getCoupon().accept(PVC, curves);
final double settlementAmount =
-(bond.getTransactionPrice()
* bond.getBondTransaction().getCoupon().getNthPayment(0).getNotional()
+ bond.getBondTransaction().getAccruedInterest())
* bond.getQuantity();
final PaymentFixed settlement =
new PaymentFixed(
bond.getBondTransaction().getCurrency(),
bond.getBondTransaction().getSettlementTime(),
settlementAmount,
bond.getBondTransaction().getRepoCurveName());
final double pvSettlement = settlement.accept(PVC, curves);
return (pvNominal + pvCoupon) * bond.getQuantity() + pvSettlement;
}
/**
* Compute the present value of a Ibor coupon bond (FRN) transaction.
*
* @param bond The bond transaction.
* @param curves The curve bundle.
* @return The present value.
*/
public double presentValue(final BondIborTransaction bond, final YieldCurveBundle curves) {
final double pvNominal = bond.getBondTransaction().getNominal().accept(PVC, curves);
final double pvCoupon = bond.getBondTransaction().getCoupon().accept(PVC, curves);
final double settlementAmount =
bond.getTransactionPrice()
* bond.getBondTransaction()
.getCoupon()
.getNthPayment(0)
.getNotional(); // FIXME: add accrued.
LOGGER.error("The FRN settlement amount does not include the accrued interests.");
final PaymentFixed settlement =
new PaymentFixed(
bond.getBondTransaction().getCurrency(),
bond.getBondTransaction().getSettlementTime(),
settlementAmount,
bond.getBondTransaction().getRepoCurveName());
final double pvSettlement = settlement.accept(PVC, curves);
return (pvNominal + pvCoupon) * bond.getQuantity() + pvSettlement;
}
/**
* Compute the present value of a bond transaction from its clean price.
*
* @param bond The bond transaction.
* @param curves The curve bundle.
* @param cleanPrice The bond clean price.
* @return The present value.
*/
public double presentValueFromCleanPrice(
final BondTransaction<? extends BondSecurity<? extends Payment, ? extends Coupon>> bond,
final YieldCurveBundle curves,
final double cleanPrice) {
ArgumentChecker.isTrue(
bond instanceof BondFixedTransaction,
"Present value from clean price only for fixed coupon bond");
final BondFixedTransaction bondFixed = (BondFixedTransaction) bond;
final double dfSettle =
curves
.getCurve(bondFixed.getBondStandard().getRepoCurveName())
.getDiscountFactor(bondFixed.getBondTransaction().getSettlementTime());
final double pvPriceStandard =
(cleanPrice * bondFixed.getNotionalStandard()
+ bondFixed.getBondStandard().getAccruedInterest())
* dfSettle;
final double pvNominalStandard = bond.getBondStandard().getNominal().accept(PVC, curves);
final double pvCouponStandard = bond.getBondStandard().getCoupon().accept(PVC, curves);
final double pvDiscountingStandard = (pvNominalStandard + pvCouponStandard);
final double pvNominalTransaction = bond.getBondTransaction().getNominal().accept(PVC, curves);
final double pvCouponTransaction = bond.getBondTransaction().getCoupon().accept(PVC, curves);
final double pvDiscountingTransaction = (pvNominalTransaction + pvCouponTransaction);
return (pvDiscountingTransaction - pvDiscountingStandard + pvPriceStandard)
* bond.getQuantity();
}
/**
* Compute the present value of a bond transaction from its yield-to-maturity.
*
* @param bond The bond transaction.
* @param curves The curve bundle.
* @param yield The bond yield.
* @return The present value.
*/
public double presentValueFromYield(
final BondTransaction<? extends BondSecurity<? extends Payment, ? extends Coupon>> bond,
final YieldCurveBundle curves,
final double yield) {
ArgumentChecker.notNull(bond, "Bond");
ArgumentChecker.isTrue(
bond instanceof BondFixedTransaction,
"Present value from clean price only for fixed coupon bond");
final BondFixedTransaction bondFixed = (BondFixedTransaction) bond;
double cleanPrice = METHOD_SECURITY.cleanPriceFromYield(bondFixed.getBondStandard(), yield);
return presentValueFromCleanPrice(bond, curves, cleanPrice);
}
/**
* Compute the present value sensitivity of a bond transaction.
*
* @param bond The bond transaction.
* @param curves The curve bundle.
* @return The present value sensitivity.
*/
public InterestRateCurveSensitivity presentValueSensitivity(
final BondFixedTransaction bond, final YieldCurveBundle curves) {
final InterestRateCurveSensitivity pvsNominal =
new InterestRateCurveSensitivity(
bond.getBondTransaction().getNominal().accept(PVSC, curves));
final InterestRateCurveSensitivity pvsCoupon =
new InterestRateCurveSensitivity(
bond.getBondTransaction().getCoupon().accept(PVSC, curves));
final double settlementAmount =
-(bond.getTransactionPrice()
* bond.getBondTransaction().getCoupon().getNthPayment(0).getNotional()
+ bond.getBondTransaction().getAccruedInterest())
* bond.getQuantity();
final PaymentFixed settlement =
new PaymentFixed(
bond.getBondTransaction().getCurrency(),
bond.getBondTransaction().getSettlementTime(),
settlementAmount,
bond.getBondTransaction().getRepoCurveName());
final InterestRateCurveSensitivity pvsSettlement =
new InterestRateCurveSensitivity(settlement.accept(PVSC, curves));
return pvsNominal.plus(pvsCoupon).multipliedBy(bond.getQuantity()).plus(pvsSettlement);
}
public InterestRateCurveSensitivity presentValueSensitivity(
final BondIborTransaction bond, final YieldCurveBundle curves) {
final InterestRateCurveSensitivity pvsNominal =
new InterestRateCurveSensitivity(
bond.getBondTransaction().getNominal().accept(PVSC, curves));
final InterestRateCurveSensitivity pvsCoupon =
new InterestRateCurveSensitivity(
bond.getBondTransaction().getCoupon().accept(PVSC, curves));
final double settlementAmount =
bond.getTransactionPrice()
* bond.getBondTransaction()
.getCoupon()
.getNthPayment(0)
.getNotional(); // FIXME: add accrued.
LOGGER.error("The FRN settlement amount does not include the accrued interests.");
final PaymentFixed settlement =
new PaymentFixed(
bond.getBondTransaction().getCurrency(),
bond.getBondTransaction().getSettlementTime(),
settlementAmount,
bond.getBondTransaction().getRepoCurveName());
final InterestRateCurveSensitivity pvsSettlement =
new InterestRateCurveSensitivity(settlement.accept(PVSC, curves));
return pvsNominal.plus(pvsCoupon).multipliedBy(bond.getQuantity()).plus(pvsSettlement);
}
}
/** Unit tests for USD deals */
@Test(groups = TestGroup.UNIT)
public class USDTest extends AbstractMockSourcesTest {
private static final Logger s_logger = LoggerFactory.getLogger(USDTest.class);
private static final String CURRENCY = "USD";
private static final ZonedDateTime TODAY = DateUtils.getUTCDate(2013, 10, 14);
private static final String ON_NAME = "USD_FEDFUNDS_1D_ERS";
private static final String ONE_MONTH_NAME = "USD_LIBOR_1M_ERS";
private static final String THREE_MONTH_NAME = "USD_LIBOR_3M_ERS";
private static final String SIX_MONTH_NAME = "USD_LIBOR_6M_ERS";
static final String discountingCurvename = "Discounting";
static final String forward1MCurveName = "Forward 1M";
static final String forward3MCurveName = "Forward 3M";
static final String forward6MCurveName = "Forward 6M";
static final Currency ccy = Currency.USD;
private static final String PAY_CURRENCY = "LEG1_CCY";
private static final PresentValueCalculator PVC = PresentValueCalculator.getInstance();
public void test() throws Exception {
IRSwapTradeParser tradeParser = new IRSwapTradeParser();
Resource resource =
ResourceUtils.createResource(
"classpath:com/opengamma/financial/analytics/test/Trades14Oct.csv");
List<IRSwapSecurity> trades = tradeParser.parseCSVFile(resource.getURL());
List<IRSwapSecurity> tradesClean = Lists.newArrayList();
for (IRSwapSecurity irSwapSecurity : trades) {
String currency = irSwapSecurity.getRawInput().getString(PAY_CURRENCY);
if (currency.equals(CURRENCY)) {
tradesClean.add(irSwapSecurity);
}
}
// Build the curve bundle
final HashMap<String, Currency> ccyMap = new HashMap<>();
ccyMap.put(discountingCurvename, ccy);
ccyMap.put(forward3MCurveName, ccy);
ccyMap.put(forward6MCurveName, ccy);
final FXMatrix fx = new FXMatrix(ccy);
final YieldCurveBundle curvesClean = new YieldCurveBundle(fx, ccyMap);
IRCurveParser curveParser = new IRCurveParser();
Resource resourceCurve =
ResourceUtils.createResource(
"classpath:com/opengamma/financial/analytics/test/Base_Curves_20131014_Clean.csv");
List<InterpolatedDoublesCurve> curves = curveParser.parseCSVFile(resourceCurve.getURL());
for (InterpolatedDoublesCurve interpolatedDoublesCurve : curves) {
String name = interpolatedDoublesCurve.getName();
if (name.equals(ON_NAME)) {
curvesClean.setCurve(discountingCurvename, DiscountCurve.from(interpolatedDoublesCurve));
}
if (name.equals(ONE_MONTH_NAME)) {
curvesClean.setCurve(forward1MCurveName, DiscountCurve.from(interpolatedDoublesCurve));
}
if (name.equals(THREE_MONTH_NAME)) {
curvesClean.setCurve(forward3MCurveName, DiscountCurve.from(interpolatedDoublesCurve));
}
if (name.equals(SIX_MONTH_NAME)) {
curvesClean.setCurve(forward6MCurveName, DiscountCurve.from(interpolatedDoublesCurve));
}
}
// Convert the swap security into a swap definition
final SwapSecurityConverterDeprecated swapConverter =
new SwapSecurityConverterDeprecated(
_holidaySource, _conventionBundleSource, _regionSource, false);
final FRASecurityConverterDeprecated fraConverter =
new FRASecurityConverterDeprecated(_holidaySource, _regionSource, _conventionBundleSource);
final ZeroDepositConverter ZeroCouponConverter =
new ZeroDepositConverter(_conventionBundleSource, _holidaySource);
List<SwapDefinition> swapsDefinition = Lists.newArrayList();
List<ForwardRateAgreementDefinition> frasDefinition = Lists.newArrayList();
List<DepositZeroDefinition> zcsDefinition = Lists.newArrayList();
/*for (IRSwapSecurity irSwapSecurity : tradesClean) {
switch (irSwapSecurity.getRawInput().getString("PRODUCT_TYPE")) {
case "SWAP":
swapsDefinition.add((SwapDefinition) swapConverter.visitSwapSecurity(irSwapSecurity.getSwapSecurity()));
// we don't treat the fra case at the moment
case "FRA":
frasDefinition.add((ForwardRateAgreementDefinition) fraConverter.visitSwapSecurity(irSwapSecurity.getSwapSecurity()));
case "OIS":
swapsDefinition.add((SwapDefinition) swapConverter.visitSwapSecurity(irSwapSecurity.getSwapSecurity()));
// we don't treat the fra case at the moment
case "ZCS":
zcsDefinition.add((DepositZeroDefinition) ZeroCouponConverter.visitSwapSecurity(irSwapSecurity.getSwapSecurity()));
}
}
*/
// Load the historical time series from a csv file
/* NonVersionedRedisHistoricalTimeSeriesSource source = new NonVersionedRedisHistoricalTimeSeriesSource(getJedisPool(), getRedisPrefix());
CMECurveFixingTSLoader loader = new CMECurveFixingTSLoader(source);*/
/* loader.loadCurveFixingCSVFile("/vols/ogdev/CME/curve-fixing/sample-cme-curve-fixing.csv");
HistoricalTimeSeries historicalTimeSeries = source.getHistoricalTimeSeries(UniqueId.of(ExternalSchemes.ISDA.getName(), "CHF-LIBOR-BBA-6M"));
assertNotNull(historicalTimeSeries);
LocalDateDoubleTimeSeries timeSeries = historicalTimeSeries.getTimeSeries();
assertNotNull(timeSeries);
assertEquals(5996, timeSeries.size());*/
// convert the definition into a derivative
/* List<Swap> swapDerivatives = Lists.newArrayList();
for (SwapDefinition swapDefinition : swapsDefinition) {
swapDerivatives.add(swapDefinition.toDerivative(TODAY, data, curvesClean));
}
List<Swap> frasDerivatives = Lists.newArrayList();
for (ForwardRateAgreementDefinition fraDefinition : frasDefinition) {
frasDerivatives.add(fraDefinition.toDerivative(TODAY, data, curvesClean));
}
List<Swap> zcsDerivatives = Lists.newArrayList();
for (DepositZeroDefinition zcDefinition : zcsDefinition) {
zcsDerivatives.add(zcDefinition.toDerivative(TODAY, data, curvesClean));
}*/
// Check the npv
s_logger.warn("Got {} trades", trades.size());
}
}
@Override
protected InstrumentDerivativeVisitorAdapter<YieldCurveBundle, Double> getCalculator() {
return PresentValueCalculator.getInstance();
}
/**
* Test related to the pricing and sensitivity of the Ibor cap/floor with the SABR model and
* extrapolation for high strikes.
*
* @deprecated This class tests deprecated functionality.
*/
@Deprecated
public class CapFloorIborSABRExtrapolationRightMethodTest {
// Details
private static final Period TENOR = Period.ofMonths(3);
private static final int SETTLEMENT_DAYS = 2;
private static final Calendar CALENDAR = new MondayToFridayCalendar("A");
private static final DayCount DAY_COUNT_INDEX =
DayCountFactory.INSTANCE.getDayCount("Actual/360");
private static final BusinessDayConvention BUSINESS_DAY =
BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Modified Following");
private static final boolean IS_EOM = true;
private static final Currency CUR = Currency.EUR;
private static final IborIndex INDEX =
new IborIndex(CUR, TENOR, SETTLEMENT_DAYS, DAY_COUNT_INDEX, BUSINESS_DAY, IS_EOM, "Ibor");
private static final ZonedDateTime FIXING_DATE = DateUtils.getUTCDate(2011, 1, 3);
private static final double NOTIONAL = 1000000; // 1m
private static final double STRIKE = 0.04;
private static final double STRIKE_HIGH = 0.09;
private static final boolean IS_CAP = true;
// Definition description
private static final CapFloorIborDefinition CAP_LONG_DEFINITION =
CapFloorIborDefinition.from(NOTIONAL, FIXING_DATE, INDEX, STRIKE, IS_CAP, CALENDAR);
private static final CapFloorIborDefinition CAP_HIGH_LONG_DEFINITION =
CapFloorIborDefinition.from(NOTIONAL, FIXING_DATE, INDEX, STRIKE_HIGH, IS_CAP, CALENDAR);
private static final CouponIborDefinition COUPON_IBOR_DEFINITION =
CouponIborDefinition.from(NOTIONAL, FIXING_DATE, INDEX, CALENDAR);
private static final CouponFixedDefinition COUPON_STRIKE_DEFINITION =
new CouponFixedDefinition(COUPON_IBOR_DEFINITION, STRIKE);
private static final CouponFixedDefinition COUPON_STRIKE_HIGH_DEFINITION =
new CouponFixedDefinition(COUPON_IBOR_DEFINITION, STRIKE_HIGH);
private static final CapFloorIborDefinition CAP_SHORT_DEFINITION =
CapFloorIborDefinition.from(-NOTIONAL, FIXING_DATE, INDEX, STRIKE, IS_CAP, CALENDAR);
private static final CapFloorIborDefinition CAP_HIGH_SHORT_DEFINITION =
CapFloorIborDefinition.from(-NOTIONAL, FIXING_DATE, INDEX, STRIKE_HIGH, IS_CAP, CALENDAR);
private static final CapFloorIborDefinition FLOOR_SHORT_DEFINITION =
CapFloorIborDefinition.from(-NOTIONAL, FIXING_DATE, INDEX, STRIKE, !IS_CAP, CALENDAR);
private static final CapFloorIborDefinition FLOOR_HIGH_SHORT_DEFINITION =
CapFloorIborDefinition.from(-NOTIONAL, FIXING_DATE, INDEX, STRIKE_HIGH, !IS_CAP, CALENDAR);
// Methods and calculator
private static final double CUT_OFF_STRIKE = 0.08;
private static final double MU = 2.50;
private static final CapFloorIborSABRExtrapolationRightMethod METHOD =
new CapFloorIborSABRExtrapolationRightMethod(CUT_OFF_STRIKE, MU);
private static final ParRateCalculator PRC = ParRateCalculator.getInstance();
private static final PresentValueCalculator PVC = PresentValueCalculator.getInstance();
private static final PresentValueCurveSensitivitySABRExtrapolationCalculator PVSC =
new PresentValueCurveSensitivitySABRExtrapolationCalculator(CUT_OFF_STRIKE, MU);
// To derivative
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2008, 8, 18);
private static final String FUNDING_CURVE_NAME = "Funding";
private static final String FORWARD_CURVE_NAME = "Forward";
private static final String[] CURVES_NAME = {FUNDING_CURVE_NAME, FORWARD_CURVE_NAME};
private static final CapFloorIbor CAP_LONG =
(CapFloorIbor) CAP_LONG_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final CapFloorIbor CAP_HIGH_LONG =
(CapFloorIbor) CAP_HIGH_LONG_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final CouponIbor COUPON_IBOR =
(CouponIbor) COUPON_IBOR_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final CouponFixed COUPON_STRIKE =
COUPON_STRIKE_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final CouponFixed COUPON_STRIKE_HIGH =
COUPON_STRIKE_HIGH_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final CapFloorIbor CAP_SHORT =
(CapFloorIbor) CAP_SHORT_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final CapFloorIbor CAP_HIGH_SHORT =
(CapFloorIbor) CAP_HIGH_SHORT_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final CapFloorIbor FLOOR_SHORT =
(CapFloorIbor) FLOOR_SHORT_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final CapFloorIbor FLOOR_HIGH_SHORT =
(CapFloorIbor) FLOOR_HIGH_SHORT_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
// Data
private static final YieldCurveBundle CURVES = TestsDataSetsSABR.createCurves1();
private static final SABRInterestRateParameters SABR_PARAMETERS = TestsDataSetsSABR.createSABR1();
private static final SABRInterestRateDataBundle SABR_BUNDLE =
new SABRInterestRateDataBundle(SABR_PARAMETERS, CURVES);
@Test
/** Test the present value using the method with the direct formula with extrapolation. */
public void presentValueBelowCutOff() {
final CurrencyAmount methodPrice = METHOD.presentValue(CAP_LONG, SABR_BUNDLE);
final double df =
CURVES.getCurve(FUNDING_CURVE_NAME).getDiscountFactor(CAP_LONG.getPaymentTime());
final double forward = CAP_LONG.accept(PRC, CURVES);
final double maturity = CAP_LONG.getFixingPeriodEndTime() - CAP_LONG.getFixingPeriodStartTime();
final DoublesPair expiryMaturity = new DoublesPair(CAP_LONG.getFixingTime(), maturity);
final double alpha = SABR_PARAMETERS.getAlpha(expiryMaturity);
final double beta = SABR_PARAMETERS.getBeta(expiryMaturity);
final double rho = SABR_PARAMETERS.getRho(expiryMaturity);
final double nu = SABR_PARAMETERS.getNu(expiryMaturity);
final SABRFormulaData sabrParam = new SABRFormulaData(alpha, beta, rho, nu);
final SABRExtrapolationRightFunction sabrExtrapolation =
new SABRExtrapolationRightFunction(
forward, sabrParam, CUT_OFF_STRIKE, CAP_LONG.getFixingTime(), MU);
final EuropeanVanillaOption option =
new EuropeanVanillaOption(CAP_LONG.getStrike(), CAP_LONG.getFixingTime(), CAP_LONG.isCap());
final double expectedPrice =
sabrExtrapolation.price(option)
* CAP_LONG.getNotional()
* CAP_LONG.getPaymentYearFraction()
* df;
assertEquals(
"Cap/floor: SABR with extrapolation pricing", expectedPrice, methodPrice.getAmount(), 1E-2);
}
@Test
/** Test the present value using the method with the direct formula with extrapolation. */
public void presentValueAboveCutOff() {
CurrencyAmount methodPrice = METHOD.presentValue(CAP_HIGH_LONG, SABR_BUNDLE);
final double df =
CURVES.getCurve(FUNDING_CURVE_NAME).getDiscountFactor(CAP_HIGH_LONG.getPaymentTime());
final double forward = CAP_HIGH_LONG.accept(PRC, CURVES);
final double maturity =
CAP_HIGH_LONG.getFixingPeriodEndTime() - CAP_LONG.getFixingPeriodStartTime();
final DoublesPair expiryMaturity = new DoublesPair(CAP_HIGH_LONG.getFixingTime(), maturity);
final double alpha = SABR_PARAMETERS.getAlpha(expiryMaturity);
final double beta = SABR_PARAMETERS.getBeta(expiryMaturity);
final double rho = SABR_PARAMETERS.getRho(expiryMaturity);
final double nu = SABR_PARAMETERS.getNu(expiryMaturity);
final SABRFormulaData sabrParam = new SABRFormulaData(alpha, beta, rho, nu);
final SABRExtrapolationRightFunction sabrExtrapolation =
new SABRExtrapolationRightFunction(
forward, sabrParam, CUT_OFF_STRIKE, CAP_HIGH_LONG.getFixingTime(), MU);
final EuropeanVanillaOption option =
new EuropeanVanillaOption(
CAP_HIGH_LONG.getStrike(), CAP_HIGH_LONG.getFixingTime(), CAP_HIGH_LONG.isCap());
final double expectedPrice =
sabrExtrapolation.price(option)
* CAP_HIGH_LONG.getNotional()
* CAP_HIGH_LONG.getPaymentYearFraction()
* df;
assertEquals(
"Cap/floor: SABR with extrapolation pricing", expectedPrice, methodPrice.getAmount(), 1E-2);
methodPrice = METHOD.presentValue(CAP_HIGH_LONG, SABR_BUNDLE);
assertEquals(
"Cap/floor: SABR with extrapolation pricing", expectedPrice, methodPrice.getAmount(), 1E-2);
}
@Test
/** Test the present value using the method with the direct formula with extrapolation. */
public void presentValueLongShortParityBelowCutOff() {
final CurrencyAmount priceLong = METHOD.presentValue(CAP_LONG, SABR_BUNDLE);
final CurrencyAmount priceShort = METHOD.presentValue(CAP_SHORT, SABR_BUNDLE);
assertEquals(
"Cap/floor: SABR with extrapolation pricing: long/short parity",
priceLong.getAmount(),
-priceShort.getAmount(),
1E-2);
}
@Test
/** Test the present value using the method with the direct formula with extrapolation. */
public void presentValueLongShortParityAboveCutOff() {
final CurrencyAmount priceLong = METHOD.presentValue(CAP_HIGH_LONG, SABR_BUNDLE);
final CurrencyAmount priceShort = METHOD.presentValue(CAP_HIGH_SHORT, SABR_BUNDLE);
assertEquals(
"Cap/floor: SABR with extrapolation pricing: long/short parity",
priceLong.getAmount(),
-priceShort.getAmount(),
1E-2);
}
@Test
/** Test the cap/floor/forward parity below the cut-off strike. */
public void presentValueCapFloorParityBelowCutOff() {
final CurrencyAmount priceCap = METHOD.presentValue(CAP_LONG, SABR_BUNDLE);
final CurrencyAmount priceFloor = METHOD.presentValue(FLOOR_SHORT, SABR_BUNDLE);
final double priceCouponStrike = COUPON_STRIKE.accept(PVC, CURVES);
final double priceCouponIbor = COUPON_IBOR.accept(PVC, CURVES);
assertEquals(
"Cap/floor: SABR with extrapolation pricing: cap/floor parity",
priceCouponIbor - priceCouponStrike,
priceCap.getAmount() + priceFloor.getAmount(),
1E-2);
}
@Test
/** Test the cap/floor/forward parity above the cut-off strike. */
public void presentValueCapFloorParityAboveCutOff() {
final CurrencyAmount priceCap = METHOD.presentValue(CAP_HIGH_LONG, SABR_BUNDLE);
final CurrencyAmount priceFloor = METHOD.presentValue(FLOOR_HIGH_SHORT, SABR_BUNDLE);
final double priceCouponStrike = COUPON_STRIKE_HIGH.accept(PVC, CURVES);
final double priceCouponIbor = COUPON_IBOR.accept(PVC, CURVES);
assertEquals(
"Cap/floor: SABR with extrapolation pricing: cap/floor parity",
priceCouponIbor - priceCouponStrike,
priceCap.getAmount() + priceFloor.getAmount(),
1E-2);
}
@Test
/** Test the present value using the method with the direct formula with extrapolation. */
public void presentValueMethodVsCalculator() {
final SABRInterestRateDataBundle sabrExtraBundle =
new SABRInterestRateDataBundle(SABR_PARAMETERS, CURVES);
final CurrencyAmount pvMethod = METHOD.presentValue(CAP_LONG, SABR_BUNDLE);
final PresentValueSABRExtrapolationCalculator pvc =
new PresentValueSABRExtrapolationCalculator(CUT_OFF_STRIKE, MU);
final double pvCalculator = CAP_LONG.accept(pvc, sabrExtraBundle);
assertEquals(
"Cap/floor: SABR with extrapolation pricing - Method vs Calculator",
pvMethod.getAmount(),
pvCalculator,
1E-2);
}
@Test
/**
* Test the present value rate sensitivity against a finite difference computation; strike below
* the cut-off strike. Test sensitivity long/short parity.
*/
public void testPresentValueSensitivityBelowCutOff() {
final YieldCurveBundle curves = TestsDataSetsSABR.createCurves1();
final SABRInterestRateParameters sabrParameter = TestsDataSetsSABR.createSABR1();
final SABRInterestRateDataBundle sabrBundle =
new SABRInterestRateDataBundle(sabrParameter, curves);
InterestRateCurveSensitivity pvsCapLong = METHOD.presentValueSensitivity(CAP_LONG, sabrBundle);
final InterestRateCurveSensitivity pvsCapShort =
METHOD.presentValueSensitivity(CAP_SHORT, sabrBundle);
// Long/short parity
final InterestRateCurveSensitivity pvsCapShort_1 = pvsCapShort.multipliedBy(-1);
assertEquals(pvsCapLong.getSensitivities(), pvsCapShort_1.getSensitivities());
// Present value sensitivity comparison with finite difference.
final double deltaTolerancePrice = 1.0E-1;
// Testing note: Sensitivity is for a movement of 1. 1E+2 = 1 cent for a 1 bp move.
final double deltaShift = 1.0E-7;
pvsCapLong = pvsCapLong.cleaned();
final String bumpedCurveName = "Bumped Curve";
// 1. Forward curve sensitivity
final String[] CurveNameBumpedForward = {FUNDING_CURVE_NAME, bumpedCurveName};
final CapFloorIbor capBumpedForward =
(CapFloorIbor) CAP_LONG_DEFINITION.toDerivative(REFERENCE_DATE, CurveNameBumpedForward);
final double[] nodeTimesForward =
new double[] {
capBumpedForward.getFixingPeriodStartTime(), capBumpedForward.getFixingPeriodEndTime()
};
final double[] sensiForwardMethod =
SensitivityFiniteDifference.curveSensitivity(
capBumpedForward,
SABR_BUNDLE,
FORWARD_CURVE_NAME,
bumpedCurveName,
nodeTimesForward,
deltaShift,
METHOD);
assertEquals(
"Sensitivity finite difference method: number of node", 2, sensiForwardMethod.length);
final List<DoublesPair> sensiPvForward = pvsCapLong.getSensitivities().get(FORWARD_CURVE_NAME);
for (int loopnode = 0; loopnode < sensiForwardMethod.length; loopnode++) {
final DoublesPair pairPv = sensiPvForward.get(loopnode);
assertEquals(
"Sensitivity cap/floor pv to forward curve: Node " + loopnode,
nodeTimesForward[loopnode],
pairPv.getFirst(),
1E-8);
assertEquals(
"Sensitivity finite difference method: node sensitivity",
pairPv.second,
sensiForwardMethod[loopnode],
deltaTolerancePrice);
}
// 2. Discounting curve sensitivity
final String[] CurveNameBumpedDisc = {bumpedCurveName, FORWARD_CURVE_NAME};
final CapFloorIbor capBumpedDisc =
(CapFloorIbor) CAP_LONG_DEFINITION.toDerivative(REFERENCE_DATE, CurveNameBumpedDisc);
final double[] nodeTimesDisc = new double[] {capBumpedDisc.getPaymentTime()};
final double[] sensiDiscMethod =
SensitivityFiniteDifference.curveSensitivity(
capBumpedDisc,
SABR_BUNDLE,
FUNDING_CURVE_NAME,
bumpedCurveName,
nodeTimesDisc,
deltaShift,
METHOD);
assertEquals("Sensitivity finite difference method: number of node", 1, sensiDiscMethod.length);
final List<DoublesPair> sensiPvDisc = pvsCapLong.getSensitivities().get(FUNDING_CURVE_NAME);
for (int loopnode = 0; loopnode < sensiDiscMethod.length; loopnode++) {
final DoublesPair pairPv = sensiPvDisc.get(loopnode);
assertEquals(
"Sensitivity cap/floor pv to forward curve: Node " + loopnode,
nodeTimesDisc[loopnode],
pairPv.getFirst(),
1E-8);
assertEquals(
"Sensitivity finite difference method: node sensitivity",
pairPv.second,
sensiDiscMethod[loopnode],
deltaTolerancePrice);
}
}
@Test
/**
* Test the present value rate sensitivity against a finite difference computation; strike above
* the cut-off strike. Test sensitivity long/short parity.
*/
public void testPresentValueSensitivityAboveCutOff() {
final YieldCurveBundle curves = TestsDataSetsSABR.createCurves1();
final SABRInterestRateParameters sabrParameter = TestsDataSetsSABR.createSABR1();
final SABRInterestRateDataBundle sabrBundle =
new SABRInterestRateDataBundle(sabrParameter, curves);
InterestRateCurveSensitivity pvsCapLong =
METHOD.presentValueSensitivity(CAP_HIGH_LONG, sabrBundle);
final InterestRateCurveSensitivity pvsCapShort =
METHOD.presentValueSensitivity(CAP_HIGH_SHORT, sabrBundle);
// Long/short parity
final InterestRateCurveSensitivity pvsCapShort_1 = pvsCapShort.multipliedBy(-1);
assertEquals(pvsCapLong.getSensitivities(), pvsCapShort_1.getSensitivities());
// Present value sensitivity comparison with finite difference.
final double deltaTolerancePrice = 1.0E-1;
// Testing note: Sensitivity is for a movement of 1. 1E+2 = 1 cent for a 1 bp move.
final double deltaShift = 1.0E-7;
pvsCapLong = pvsCapLong.cleaned();
final String bumpedCurveName = "Bumped Curve";
// 1. Forward curve sensitivity
final String[] CurveNameBumpedForward = {FUNDING_CURVE_NAME, bumpedCurveName};
final CapFloorIbor capBumpedForward =
(CapFloorIbor)
CAP_HIGH_LONG_DEFINITION.toDerivative(REFERENCE_DATE, CurveNameBumpedForward);
final double[] nodeTimesForward =
new double[] {
capBumpedForward.getFixingPeriodStartTime(), capBumpedForward.getFixingPeriodEndTime()
};
final double[] sensiForwardMethod =
SensitivityFiniteDifference.curveSensitivity(
capBumpedForward,
SABR_BUNDLE,
FORWARD_CURVE_NAME,
bumpedCurveName,
nodeTimesForward,
deltaShift,
METHOD);
assertEquals(
"Sensitivity finite difference method: number of node", 2, sensiForwardMethod.length);
final List<DoublesPair> sensiPvForward = pvsCapLong.getSensitivities().get(FORWARD_CURVE_NAME);
for (int loopnode = 0; loopnode < sensiForwardMethod.length; loopnode++) {
final DoublesPair pairPv = sensiPvForward.get(loopnode);
assertEquals(
"Sensitivity cap/floor pv to forward curve: Node " + loopnode,
nodeTimesForward[loopnode],
pairPv.getFirst(),
1E-8);
// assertEquals("Sensitivity finite difference method: node sensitivity: Node " +
// loopnode, pairPv.second, sensiForwardMethod[loopnode], deltaTolerancePrice);
}
// 2. Discounting curve sensitivity
final String[] CurveNameBumpedDisc = {bumpedCurveName, FORWARD_CURVE_NAME};
final CapFloorIbor capBumpedDisc =
(CapFloorIbor) CAP_HIGH_LONG_DEFINITION.toDerivative(REFERENCE_DATE, CurveNameBumpedDisc);
final double[] nodeTimesDisc = new double[] {capBumpedDisc.getPaymentTime()};
final double[] sensiDiscMethod =
SensitivityFiniteDifference.curveSensitivity(
capBumpedDisc,
SABR_BUNDLE,
FUNDING_CURVE_NAME,
bumpedCurveName,
nodeTimesDisc,
deltaShift,
METHOD);
assertEquals("Sensitivity finite difference method: number of node", 1, sensiDiscMethod.length);
final List<DoublesPair> sensiPvDisc = pvsCapLong.getSensitivities().get(FUNDING_CURVE_NAME);
for (int loopnode = 0; loopnode < sensiDiscMethod.length; loopnode++) {
final DoublesPair pairPv = sensiPvDisc.get(loopnode);
assertEquals(
"Sensitivity cap/floor pv to forward curve: Node " + loopnode,
nodeTimesDisc[loopnode],
pairPv.getFirst(),
1E-8);
assertEquals(
"Sensitivity finite difference method: node sensitivity",
pairPv.second,
sensiDiscMethod[loopnode],
deltaTolerancePrice);
}
}
@Test
/** Test the present value using the method with the direct formula with extrapolation. */
public void presentValueCurveSensitivityMethodVsCalculator() {
final SABRInterestRateDataBundle sabrExtraBundle =
new SABRInterestRateDataBundle(SABR_PARAMETERS, CURVES);
final InterestRateCurveSensitivity pvsMethod =
METHOD.presentValueSensitivity(CAP_HIGH_LONG, SABR_BUNDLE);
final InterestRateCurveSensitivity pvsCalculator =
new InterestRateCurveSensitivity(CAP_HIGH_LONG.accept(PVSC, sabrExtraBundle));
assertEquals(
"Cap/floor: SABR with extrapolation pv curve sensitivity - Method vs Calculator",
pvsMethod,
pvsCalculator);
}
@Test
/**
* Test the present value SABR parameters sensitivity against a finite difference computation;
* strike below the cut-off strike.
*/
public void testPresentValueSABRSensitivityBelowCutOff() {
final YieldCurveBundle curves = TestsDataSetsSABR.createCurves1();
final SABRInterestRateParameters sabrParameter = TestsDataSetsSABR.createSABR1();
final SABRInterestRateDataBundle sabrBundle =
new SABRInterestRateDataBundle(sabrParameter, curves);
final CurrencyAmount pv = METHOD.presentValue(CAP_LONG, sabrBundle);
final PresentValueSABRSensitivityDataBundle pvsCapLong =
METHOD.presentValueSABRSensitivity(CAP_LONG, sabrBundle);
PresentValueSABRSensitivityDataBundle pvsCapShort =
METHOD.presentValueSABRSensitivity(CAP_SHORT, sabrBundle);
// Long/short parity
pvsCapShort = pvsCapShort.multiplyBy(-1.0);
assertEquals(pvsCapShort.getAlpha(), pvsCapLong.getAlpha());
// SABR sensitivity vs finite difference
final double shift = 0.0001;
final double shiftAlpha = 0.00001;
final DoublesPair expectedExpiryTenor =
new DoublesPair(
CAP_LONG.getFixingTime(),
CAP_LONG.getFixingPeriodEndTime() - CAP_LONG.getFixingPeriodStartTime());
// Alpha sensitivity vs finite difference computation
final SABRInterestRateParameters sabrParameterAlphaBumped =
TestsDataSetsSABR.createSABR1AlphaBumped(shiftAlpha);
final SABRInterestRateDataBundle sabrBundleAlphaBumped =
new SABRInterestRateDataBundle(sabrParameterAlphaBumped, curves);
final CurrencyAmount pvLongPayerAlphaBumped =
METHOD.presentValue(CAP_LONG, sabrBundleAlphaBumped);
final double expectedAlphaSensi =
(pvLongPayerAlphaBumped.getAmount() - pv.getAmount()) / shiftAlpha;
assertEquals("Number of alpha sensitivity", pvsCapLong.getAlpha().getMap().keySet().size(), 1);
assertEquals(
"Alpha sensitivity expiry/tenor",
pvsCapLong.getAlpha().getMap().keySet().contains(expectedExpiryTenor),
true);
assertEquals(
"Alpha sensitivity value",
expectedAlphaSensi,
pvsCapLong.getAlpha().getMap().get(expectedExpiryTenor),
2.0E-1);
// Rho sensitivity vs finite difference computation
final SABRInterestRateParameters sabrParameterRhoBumped =
TestsDataSetsSABR.createSABR1RhoBumped();
final SABRInterestRateDataBundle sabrBundleRhoBumped =
new SABRInterestRateDataBundle(sabrParameterRhoBumped, curves);
final CurrencyAmount pvLongPayerRhoBumped = METHOD.presentValue(CAP_LONG, sabrBundleRhoBumped);
final double expectedRhoSensi = (pvLongPayerRhoBumped.getAmount() - pv.getAmount()) / shift;
assertEquals("Number of rho sensitivity", pvsCapLong.getRho().getMap().keySet().size(), 1);
assertEquals(
"Rho sensitivity expiry/tenor",
pvsCapLong.getRho().getMap().keySet().contains(expectedExpiryTenor),
true);
assertEquals(
"Rho sensitivity value",
pvsCapLong.getRho().getMap().get(expectedExpiryTenor),
expectedRhoSensi,
1.0E-2);
// Alpha sensitivity vs finite difference computation
final SABRInterestRateParameters sabrParameterNuBumped =
TestsDataSetsSABR.createSABR1NuBumped();
final SABRInterestRateDataBundle sabrBundleNuBumped =
new SABRInterestRateDataBundle(sabrParameterNuBumped, curves);
final CurrencyAmount pvLongPayerNuBumped = METHOD.presentValue(CAP_LONG, sabrBundleNuBumped);
final double expectedNuSensi = (pvLongPayerNuBumped.getAmount() - pv.getAmount()) / shift;
assertEquals("Number of nu sensitivity", pvsCapLong.getNu().getMap().keySet().size(), 1);
assertEquals(
"Nu sensitivity expiry/tenor",
pvsCapLong.getNu().getMap().keySet().contains(expectedExpiryTenor),
true);
assertEquals(
"Nu sensitivity value",
pvsCapLong.getNu().getMap().get(expectedExpiryTenor),
expectedNuSensi,
3.0E-2);
}
@Test
/**
* Test the present value SABR parameters sensitivity against a finite difference computation;
* strike above the cut-off strike.
*/
public void testPresentValueSABRSensitivityAboveCutOff() {
final YieldCurveBundle curves = TestsDataSetsSABR.createCurves1();
final SABRInterestRateParameters sabrParameter = TestsDataSetsSABR.createSABR1();
final SABRInterestRateDataBundle sabrBundle =
new SABRInterestRateDataBundle(sabrParameter, curves);
final CurrencyAmount pv = METHOD.presentValue(CAP_HIGH_LONG, sabrBundle);
final PresentValueSABRSensitivityDataBundle pvsCapLong =
METHOD.presentValueSABRSensitivity(CAP_HIGH_LONG, sabrBundle);
PresentValueSABRSensitivityDataBundle pvsCapShort =
METHOD.presentValueSABRSensitivity(CAP_HIGH_SHORT, sabrBundle);
// Long/short parity
pvsCapShort = pvsCapShort.multiplyBy(-1.0);
assertEquals(pvsCapShort.getAlpha(), pvsCapLong.getAlpha());
// SABR sensitivity vs finite difference
final double shift = 0.0001;
final double shiftAlpha = 0.00001;
final DoublesPair expectedExpiryTenor =
new DoublesPair(
CAP_HIGH_LONG.getFixingTime(),
CAP_HIGH_LONG.getFixingPeriodEndTime() - CAP_HIGH_LONG.getFixingPeriodStartTime());
// Alpha sensitivity vs finite difference computation
final SABRInterestRateParameters sabrParameterAlphaBumped =
TestsDataSetsSABR.createSABR1AlphaBumped(shiftAlpha);
final SABRInterestRateDataBundle sabrBundleAlphaBumped =
new SABRInterestRateDataBundle(sabrParameterAlphaBumped, curves);
final CurrencyAmount pvLongPayerAlphaBumped =
METHOD.presentValue(CAP_HIGH_LONG, sabrBundleAlphaBumped);
final double expectedAlphaSensi =
(pvLongPayerAlphaBumped.getAmount() - pv.getAmount()) / shiftAlpha;
assertEquals("Number of alpha sensitivity", pvsCapLong.getAlpha().getMap().keySet().size(), 1);
assertEquals(
"Alpha sensitivity expiry/tenor",
pvsCapLong.getAlpha().getMap().keySet().contains(expectedExpiryTenor),
true);
assertEquals(
"Alpha sensitivity value",
expectedAlphaSensi,
pvsCapLong.getAlpha().getMap().get(expectedExpiryTenor),
1.0E-0);
// Rho sensitivity vs finite difference computation
final SABRInterestRateParameters sabrParameterRhoBumped =
TestsDataSetsSABR.createSABR1RhoBumped();
final SABRInterestRateDataBundle sabrBundleRhoBumped =
new SABRInterestRateDataBundle(sabrParameterRhoBumped, curves);
final CurrencyAmount pvLongPayerRhoBumped =
METHOD.presentValue(CAP_HIGH_LONG, sabrBundleRhoBumped);
final double expectedRhoSensi = (pvLongPayerRhoBumped.getAmount() - pv.getAmount()) / shift;
assertEquals("Number of rho sensitivity", pvsCapLong.getRho().getMap().keySet().size(), 1);
assertEquals(
"Rho sensitivity expiry/tenor",
pvsCapLong.getRho().getMap().keySet().contains(expectedExpiryTenor),
true);
assertEquals(
"Rho sensitivity value",
pvsCapLong.getRho().getMap().get(expectedExpiryTenor),
expectedRhoSensi,
1.0E-1);
// Alpha sensitivity vs finite difference computation
final SABRInterestRateParameters sabrParameterNuBumped =
TestsDataSetsSABR.createSABR1NuBumped();
final SABRInterestRateDataBundle sabrBundleNuBumped =
new SABRInterestRateDataBundle(sabrParameterNuBumped, curves);
final CurrencyAmount pvLongPayerNuBumped =
METHOD.presentValue(CAP_HIGH_LONG, sabrBundleNuBumped);
final double expectedNuSensi = (pvLongPayerNuBumped.getAmount() - pv.getAmount()) / shift;
assertEquals("Number of nu sensitivity", pvsCapLong.getNu().getMap().keySet().size(), 1);
assertEquals(
"Nu sensitivity expiry/tenor",
pvsCapLong.getNu().getMap().keySet().contains(expectedExpiryTenor),
true);
assertEquals(
"Nu sensitivity value",
pvsCapLong.getNu().getMap().get(expectedExpiryTenor),
expectedNuSensi,
2.0E-1);
}
}
/**
* Tests related to the pricing of bills security by discounting.
*
* @deprecated This class tests deprecated functionality
*/
@Deprecated
public class BillSecurityDiscountingMethodTest {
private static final Currency EUR = Currency.EUR;
private static final Calendar CALENDAR = new MondayToFridayCalendar("TARGET");
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2012, 1, 17);
private static final DayCount ACT360 = DayCountFactory.INSTANCE.getDayCount("Actual/360");
private static final int SETTLEMENT_DAYS = 2;
private static final YieldConvention YIELD_IAM =
YieldConventionFactory.INSTANCE.getYieldConvention("INTEREST@MTY");
private static final YieldConvention YIELD_DSC =
YieldConventionFactory.INSTANCE.getYieldConvention("DISCOUNT");
// ISIN: BE0312677462
private static final String ISSUER_BEL = "BELGIUM GOVT";
private static final String ISSUER_US = "US GOVT";
private static final ZonedDateTime END_DATE = DateUtils.getUTCDate(2012, 3, 15);
private static final double NOTIONAL = 1000;
private static final double YIELD = 0.00185; // External source
private static final double PRICE = 0.99971; // External source
private static final ZonedDateTime SETTLE_DATE =
ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, SETTLEMENT_DAYS, CALENDAR);
private static final String[] NAME_CURVES = TestsDataSetsSABR.nameCurvesBond3();
private static final BillSecurityDefinition BILL_IAM_SEC_DEFINITION =
new BillSecurityDefinition(
EUR, END_DATE, NOTIONAL, SETTLEMENT_DAYS, CALENDAR, YIELD_IAM, ACT360, ISSUER_BEL);
private static final BillSecurityDefinition BILL_DSC_SEC_DEFINITION =
new BillSecurityDefinition(
EUR, END_DATE, NOTIONAL, SETTLEMENT_DAYS, CALENDAR, YIELD_DSC, ACT360, ISSUER_US);
// Should not be in EUR, but this is only a test
private static final BillSecurity BILL_IAM_SEC =
BILL_IAM_SEC_DEFINITION.toDerivative(REFERENCE_DATE, SETTLE_DATE, NAME_CURVES);
private static final BillSecurity BILL_DSC_SEC =
BILL_DSC_SEC_DEFINITION.toDerivative(REFERENCE_DATE, SETTLE_DATE, NAME_CURVES);
private static final YieldCurveBundle CURVE_BUNDLE = TestsDataSetsSABR.createCurvesBond3();
private static final BillSecurityDiscountingMethod METHOD_SECURITY =
BillSecurityDiscountingMethod.getInstance();
private static final PresentValueCalculator PVC = PresentValueCalculator.getInstance();
private static final PresentValueCurveSensitivityCalculator PVCSC =
PresentValueCurveSensitivityCalculator.getInstance();
private static final YieldFromCurvesCalculator YFCC = YieldFromCurvesCalculator.getInstance();
private static final YieldFromPriceCalculator YFPC = YieldFromPriceCalculator.getInstance();
private static final double TOLERANCE_PV = 1.0E-2;
private static final double TOLERANCE_PRICE = 1.0E-8;
private static final double TOLERANCE_PRICE_EXTERNAL = 1.0E-5;
private static final double TOLERANCE_YIELD = 1.0E-8;
private static final double TOLERANCE_YIELD_EXTERNAL = 1.0E-4;
private static final double TOLERANCE_YIELD_DERIVATIVE = 1.0E-6;
@Test
/** Tests the present value against explicit computation. */
public void presentValue() {
final CurrencyAmount pvComputed = METHOD_SECURITY.presentValue(BILL_IAM_SEC, CURVE_BUNDLE);
final double pvExpected =
NOTIONAL
* CURVE_BUNDLE.getCurve(NAME_CURVES[1]).getDiscountFactor(BILL_IAM_SEC.getEndTime());
assertEquals(
"Bill Security: discounting method - present value",
pvExpected,
pvComputed.getAmount(),
TOLERANCE_PV);
}
@Test
/** Tests the present value: Method vs Calculator */
public void presentValueMethodVsCalculator() {
final CurrencyAmount pvMethod = METHOD_SECURITY.presentValue(BILL_IAM_SEC, CURVE_BUNDLE);
final double pvCalculator = BILL_IAM_SEC.accept(PVC, CURVE_BUNDLE);
assertEquals(
"Bill Security: discounting method - present value",
pvMethod.getAmount(),
pvCalculator,
TOLERANCE_PV);
}
@Test
public void priceFromYield() {
final double[] yields = new double[] {0.0010, 0.0, -0.0010};
for (final double yield2 : yields) {
final double priceComputed = METHOD_SECURITY.priceFromYield(BILL_IAM_SEC, yield2);
final double priceExpected = 1.0 / (1 + BILL_IAM_SEC.getAccrualFactor() * yield2);
assertEquals(
"Bill Security: discounting method - price",
priceExpected,
priceComputed,
TOLERANCE_PRICE);
}
}
@Test
public void priceFromYieldExternal() {
final double priceComputed = METHOD_SECURITY.priceFromYield(BILL_IAM_SEC, YIELD);
assertEquals(
"Bill Security: discounting method - price",
PRICE,
priceComputed,
TOLERANCE_PRICE_EXTERNAL);
}
@Test
public void yieldFromPrice() {
final double yieldComputedIAM = METHOD_SECURITY.yieldFromPrice(BILL_IAM_SEC, PRICE);
final double yieldExpectedIAM = (1.0 / PRICE - 1.0) / BILL_IAM_SEC.getAccrualFactor();
assertEquals(
"Bill Security: discounting method - yield",
yieldExpectedIAM,
yieldComputedIAM,
TOLERANCE_YIELD);
final double yieldComputedDSC = METHOD_SECURITY.yieldFromPrice(BILL_DSC_SEC, PRICE);
final double yieldExpectedDSC = (1.0 - PRICE) / BILL_DSC_SEC.getAccrualFactor();
assertEquals(
"Bill Security: discounting method - yield",
yieldExpectedDSC,
yieldComputedDSC,
TOLERANCE_YIELD);
}
@Test
public void yieldFromPriceDerivative() {
final double shift = 1.0E-8;
final double yieldIAM = METHOD_SECURITY.yieldFromPrice(BILL_IAM_SEC, PRICE);
final double yieldPIAM = METHOD_SECURITY.yieldFromPrice(BILL_IAM_SEC, PRICE + shift);
final double yieldDerivativeExpectedIAM = (yieldPIAM - yieldIAM) / shift;
final double yieldDerivativeComputedIAM =
METHOD_SECURITY.yieldFromPriceDerivative(BILL_IAM_SEC, PRICE);
assertEquals(
"Bill Security: discounting method - yield",
yieldDerivativeExpectedIAM,
yieldDerivativeComputedIAM,
TOLERANCE_YIELD_DERIVATIVE);
final double yieldDSC = METHOD_SECURITY.yieldFromPrice(BILL_DSC_SEC, PRICE);
final double yieldPDSC = METHOD_SECURITY.yieldFromPrice(BILL_DSC_SEC, PRICE + shift);
final double yieldDerivativeExpectedDSC = (yieldPDSC - yieldDSC) / shift;
final double yieldDerivativeComputedDSC =
METHOD_SECURITY.yieldFromPriceDerivative(BILL_DSC_SEC, PRICE);
assertEquals(
"Bill Security: discounting method - yield",
yieldDerivativeExpectedDSC,
yieldDerivativeComputedDSC,
TOLERANCE_YIELD_DERIVATIVE);
}
@Test
public void yieldFromPriceExternal() {
final double yieldComputed = METHOD_SECURITY.yieldFromPrice(BILL_IAM_SEC, PRICE);
assertEquals(
"Bill Security: discounting method - yield",
YIELD,
yieldComputed,
TOLERANCE_YIELD_EXTERNAL);
}
@Test
public void yieldFromPriceCoherence() {
final double priceComputed = METHOD_SECURITY.priceFromYield(BILL_IAM_SEC, YIELD);
final double yieldComputed = METHOD_SECURITY.yieldFromPrice(BILL_IAM_SEC, priceComputed);
assertEquals(
"Bill Security: discounting method - yield", YIELD, yieldComputed, TOLERANCE_YIELD);
}
@Test
public void priceFromYieldCoherence() {
final double yieldComputed = METHOD_SECURITY.yieldFromPrice(BILL_IAM_SEC, PRICE);
final double priceComputed = METHOD_SECURITY.priceFromYield(BILL_IAM_SEC, yieldComputed);
assertEquals(
"Bill Security: discounting method - price", PRICE, priceComputed, TOLERANCE_PRICE);
}
@Test
public void presentValueFromPrice() {
final CurrencyAmount pvComputed =
METHOD_SECURITY.presentValueFromPrice(BILL_IAM_SEC, PRICE, CURVE_BUNDLE);
final double pvExpected =
NOTIONAL
* PRICE
* CURVE_BUNDLE
.getCurve(NAME_CURVES[0])
.getDiscountFactor(BILL_IAM_SEC.getSettlementTime());
assertEquals(
"Bill Security: discounting method - present value",
pvExpected,
pvComputed.getAmount(),
TOLERANCE_PV);
}
@Test
public void presentValueFromYield() {
final CurrencyAmount pvComputed =
METHOD_SECURITY.presentValueFromYield(BILL_IAM_SEC, YIELD, CURVE_BUNDLE);
final double price = METHOD_SECURITY.priceFromYield(BILL_IAM_SEC, YIELD);
final double pvExpected =
NOTIONAL
* price
* CURVE_BUNDLE
.getCurve(NAME_CURVES[0])
.getDiscountFactor(BILL_IAM_SEC.getSettlementTime());
assertEquals(
"Bill Security: discounting method - present value",
pvExpected,
pvComputed.getAmount(),
TOLERANCE_PV);
}
@Test
public void priceFromCurves() {
final double priceComputed = METHOD_SECURITY.priceFromCurves(BILL_IAM_SEC, CURVE_BUNDLE);
final CurrencyAmount pvComputed = METHOD_SECURITY.presentValue(BILL_IAM_SEC, CURVE_BUNDLE);
final double priceExpected =
pvComputed.getAmount()
/ (NOTIONAL
* CURVE_BUNDLE
.getCurve(NAME_CURVES[0])
.getDiscountFactor(BILL_IAM_SEC.getSettlementTime()));
assertEquals(
"Bill Security: discounting method - price", priceExpected, priceComputed, TOLERANCE_PRICE);
}
@Test
public void yieldFromCurves() {
final double yieldComputed = METHOD_SECURITY.yieldFromCurves(BILL_IAM_SEC, CURVE_BUNDLE);
final double priceComputed = METHOD_SECURITY.priceFromCurves(BILL_IAM_SEC, CURVE_BUNDLE);
final double yieldExpected = METHOD_SECURITY.yieldFromPrice(BILL_IAM_SEC, priceComputed);
assertEquals(
"Bill Security: discounting method - yield", yieldExpected, yieldComputed, TOLERANCE_YIELD);
}
@Test
public void presentValueCurveSensitivity() {
final InterestRateCurveSensitivity pvcsComputed =
METHOD_SECURITY.presentValueCurveSensitivity(BILL_IAM_SEC, CURVE_BUNDLE);
assertEquals(
"Bill Security: present value curve sensitivity",
1,
pvcsComputed.getSensitivities().size());
assertEquals(
"Bill Security: present value curve sensitivity",
1,
pvcsComputed.getSensitivities().get(NAME_CURVES[1]).size());
final double deltaTolerancePrice = 1.0E+2;
// Testing note: Sensitivity is for a movement of 1. 1E+2 = 0.01 unit for a 1 bp move.
final double deltaShift = 1.0E-6;
// Credit curve sensitivity
final String bumpedCurveName = "Bumped Curve";
final BillSecurity billBumped =
BILL_IAM_SEC_DEFINITION.toDerivative(REFERENCE_DATE, NAME_CURVES[0], bumpedCurveName);
final double[] nodeTimes = new double[] {billBumped.getEndTime()};
final double[] sensi =
SensitivityFiniteDifference.curveSensitivity(
billBumped,
CURVE_BUNDLE,
NAME_CURVES[1],
bumpedCurveName,
nodeTimes,
deltaShift,
METHOD_SECURITY);
final List<DoublesPair> sensiPv = pvcsComputed.getSensitivities().get(NAME_CURVES[1]);
for (int loopnode = 0; loopnode < sensi.length; loopnode++) {
final DoublesPair pairPv = sensiPv.get(loopnode);
assertEquals(
"Bill Security: curve sensitivity - Node " + loopnode,
nodeTimes[loopnode],
pairPv.getFirst(),
1E-8);
AssertJUnit.assertEquals(
"Bill Security: curve sensitivity", pairPv.second, sensi[loopnode], deltaTolerancePrice);
}
}
@Test
public void presentValueCurveSensitivityMethodVsCalculator() {
final InterestRateCurveSensitivity pvcsMethod =
METHOD_SECURITY.presentValueCurveSensitivity(BILL_IAM_SEC, CURVE_BUNDLE);
final InterestRateCurveSensitivity pvcsCalculator =
new InterestRateCurveSensitivity(BILL_IAM_SEC.accept(PVCSC, CURVE_BUNDLE));
AssertSensivityObjects.assertEquals(
"Bill Security: discounting method - curve sensitivity",
pvcsMethod,
pvcsCalculator,
TOLERANCE_PV);
}
@Test
public void methodVsCalculator() {
double yield1 = METHOD_SECURITY.yieldFromCurves(BILL_IAM_SEC, CURVE_BUNDLE);
double yield2 = BILL_IAM_SEC.accept(YFCC, CURVE_BUNDLE);
assertEquals(
"Bill Security: discounting method - yield from curves", yield1, yield2, TOLERANCE_YIELD);
yield1 = METHOD_SECURITY.yieldFromPrice(BILL_IAM_SEC, PRICE);
yield2 = BILL_IAM_SEC.accept(YFPC, PRICE);
assertEquals(
"Bill Security: discounting method - yield from price", yield1, yield2, TOLERANCE_YIELD);
}
}
/**
* Tests related to the pricing method for digital Forex option transactions with Black function and
* a volatility provider.
*/
public class ForexOptionDigitalCallSpreadMethodTest {
// General
private static final Calendar CALENDAR = new MondayToFridayCalendar("A");
private static final BusinessDayConvention BUSINESS_DAY =
BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Modified Following");
private static final int SETTLEMENT_DAYS = 2;
// Smile data
private static final Currency EUR = Currency.EUR;
private static final Currency USD = Currency.USD;
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 6, 13);
private static final FXMatrix FX_MATRIX = TestsDataSetsForex.fxMatrix();
private static final double SPOT = FX_MATRIX.getFxRate(EUR, USD);
private static final SmileDeltaTermStructureParameter SMILE_TERM =
TestsDataSetsForex.smile(REFERENCE_DATE);
private static final SmileDeltaTermStructureParameter SMILE_TERM_FLAT =
TestsDataSetsForex.smileFlat(REFERENCE_DATE);
// Methods and curves
private static final YieldCurveBundle CURVES = TestsDataSetsForex.createCurvesForex();
private static final String[] CURVES_NAME = TestsDataSetsForex.curveNames();
private static final Map<String, Currency> CURVE_CURRENCY = TestsDataSetsForex.curveCurrency();
private static final SmileDeltaTermStructureDataBundle SMILE_BUNDLE =
new SmileDeltaTermStructureDataBundle(
FX_MATRIX, CURVE_CURRENCY, CURVES, SMILE_TERM, Pair.of(EUR, USD));
private static final SmileDeltaTermStructureDataBundle SMILE_BUNDLE_FLAT =
new SmileDeltaTermStructureDataBundle(
FX_MATRIX, CURVE_CURRENCY, CURVES, SMILE_TERM_FLAT, Pair.of(EUR, USD));
private static final ForexOptionVanillaBlackMethod METHOD_VANILLA_BLACK =
ForexOptionVanillaBlackMethod.getInstance();
private static final ForexOptionDigitalBlackMethod METHOD_DIGITAL_BLACK =
ForexOptionDigitalBlackMethod.getInstance();
private static final double STANDARD_SPREAD = 0.0001;
private static final ForexOptionDigitalCallSpreadBlackMethod METHOD_DIGITAL_SPREAD =
new ForexOptionDigitalCallSpreadBlackMethod(STANDARD_SPREAD);
private static final PresentValueCalculator PVC = PresentValueCalculator.getInstance();
// option
private static final double STRIKE = 1.45;
private static final boolean IS_CALL = true;
private static final boolean IS_LONG = true;
private static final double NOTIONAL = 100000000;
private static final ZonedDateTime OPTION_PAY_DATE =
ScheduleCalculator.getAdjustedDate(
REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
private static final ZonedDateTime OPTION_EXP_DATE =
ScheduleCalculator.getAdjustedDate(OPTION_PAY_DATE, -SETTLEMENT_DAYS, CALENDAR);
private static final ForexDefinition FOREX_DEFINITION =
new ForexDefinition(EUR, USD, OPTION_PAY_DATE, NOTIONAL, STRIKE);
private static final Forex FOREX = FOREX_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final ForexOptionDigitalDefinition FOREX_OPTION_CALL_DEFINITION =
new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, IS_LONG);
private static final ForexOptionDigital FOREX_CALL_OPTION =
FOREX_OPTION_CALL_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final double TOLERANCE_PRICE = 1.0E-2;
private static final double TOLERANCE_PRICE_FLAT =
1.0E+1; // The spread size will create a discrepancy.
private static final double TOLERANCE_CE_FLAT =
1.0E+2; // The spread size will create a discrepancy.
private static final double TOLERANCE_DELTA = 1.0E+2; // 0.01 currency unit for 1 bp
@Test
/** Tests the present value in a flat smile case. */
public void presentValueFlat() {
MultipleCurrencyAmount pvSpread =
METHOD_DIGITAL_SPREAD.presentValue(FOREX_CALL_OPTION, SMILE_BUNDLE_FLAT);
MultipleCurrencyAmount pvBlack =
METHOD_DIGITAL_BLACK.presentValue(FOREX_CALL_OPTION, SMILE_BUNDLE_FLAT);
assertEquals(
"Forex Digital option: call spread method - present value",
pvBlack.getAmount(USD),
pvSpread.getAmount(USD),
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 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 long/short parity. */
public void presentValueLongShort() {
final ForexOptionDigitalDefinition forexOptionShortDefinition =
new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, !IS_LONG);
final InstrumentDerivative forexOptionShort =
forexOptionShortDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
final MultipleCurrencyAmount pvShort =
METHOD_DIGITAL_SPREAD.presentValue(forexOptionShort, SMILE_BUNDLE);
final MultipleCurrencyAmount pvLong =
METHOD_DIGITAL_SPREAD.presentValue(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertEquals(
"Forex Digital option: present value long/short parity",
pvLong.getAmount(USD),
-pvShort.getAmount(USD),
1E-2);
final MultipleCurrencyAmount ceShort =
METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionShort, SMILE_BUNDLE);
final MultipleCurrencyAmount ceLong =
METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertEquals(
"Forex Digital option: currency exposure long/short parity",
ceLong.getAmount(USD),
-ceShort.getAmount(USD),
1E-2);
assertEquals(
"Forex Digital option: currency exposure long/short parity",
ceLong.getAmount(EUR),
-ceShort.getAmount(EUR),
1E-2);
}
@Test
/** Tests the currency exposure in a flat smile case. */
public void currencyExposureFlat() {
MultipleCurrencyAmount ceSpread =
METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_CALL_OPTION, SMILE_BUNDLE_FLAT);
MultipleCurrencyAmount ceBlack =
METHOD_DIGITAL_BLACK.currencyExposure(FOREX_CALL_OPTION, SMILE_BUNDLE_FLAT);
assertEquals(
"Forex Digital option: call spread method - currency exposure",
ceBlack.getAmount(USD),
ceSpread.getAmount(USD),
TOLERANCE_CE_FLAT);
assertEquals(
"Forex Digital option: call spread method - currency exposure",
ceBlack.getAmount(EUR),
ceSpread.getAmount(EUR),
TOLERANCE_CE_FLAT);
}
@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);
}
@Test
/** Tests the currency exposure against the present value. */
public void currencyExposureVsPresentValue() {
MultipleCurrencyAmount pv = METHOD_DIGITAL_SPREAD.presentValue(FOREX_CALL_OPTION, SMILE_BUNDLE);
MultipleCurrencyAmount ce =
METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertEquals(
"Forex Digital option: call spread method - currency exposure vs present value",
ce.getAmount(USD) + ce.getAmount(EUR) * SPOT,
pv.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 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 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 present value. Spread change. */
public void presentValueSpreadChange() {
double spread1 = 0.0001;
double spread2 = 0.0002;
ForexOptionDigitalCallSpreadBlackMethod methodCallSpreadBlack1 =
new ForexOptionDigitalCallSpreadBlackMethod(spread1);
ForexOptionDigitalCallSpreadBlackMethod methodCallSpreadBlack2 =
new ForexOptionDigitalCallSpreadBlackMethod(spread2);
MultipleCurrencyAmount pv1 =
methodCallSpreadBlack1.presentValue(FOREX_CALL_OPTION, SMILE_BUNDLE);
MultipleCurrencyAmount pv2 =
methodCallSpreadBlack2.presentValue(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertEquals(
"Forex Digital option: call spread method - present value",
pv1.getAmount(USD),
pv2.getAmount(USD),
10.0);
// MultipleCurrencyAmount pvBlack = METHOD_DIGITAL_BLACK.presentValue(FOREX_CALL_OPTION,
// SMILE_BUNDLE);
// assertEquals("Forex Digital option: call spread method - present value",
// pvBlack.getAmount(USD), pv2.getAmount(USD), 10.0); // Should fail
}
@Test
/** Tests the present value. Method vs Calculator. */
public void presentValueMethodVCalculator() {
MultipleCurrencyAmount pv1 =
METHOD_DIGITAL_SPREAD.presentValue(FOREX_CALL_OPTION, SMILE_BUNDLE);
PresentValueCallSpreadBlackForexCalculator calculator =
new PresentValueCallSpreadBlackForexCalculator(STANDARD_SPREAD);
MultipleCurrencyAmount pvCalculator = calculator.visit(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertEquals(
"Forex Digital option: call spread method - present value",
pv1.getAmount(USD),
pvCalculator.getAmount(USD),
TOLERANCE_PRICE);
}
@Test
/** Tests the currency exposure. Method vs Calculator. */
public void currencyExposureMethodVCalculator() {
MultipleCurrencyAmount ceMethod =
METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_CALL_OPTION, SMILE_BUNDLE);
CurrencyExposureCallSpreadBlackForexCalculator calculator =
new CurrencyExposureCallSpreadBlackForexCalculator(STANDARD_SPREAD);
MultipleCurrencyAmount ceCalculator = calculator.visit(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertEquals(
"Forex Digital option: call spread method - currency exposure",
ceMethod.getAmount(USD),
ceCalculator.getAmount(USD),
TOLERANCE_PRICE);
assertEquals(
"Forex Digital option: call spread method - currency exposure",
ceMethod.getAmount(EUR),
ceCalculator.getAmount(EUR),
TOLERANCE_PRICE);
}
@Test
/** Tests the present value curve sensitivity. Method vs Calculator. */
public void presentValueCurveSensitivityMethodVCalculator() {
MultipleCurrencyInterestRateCurveSensitivity pvcsMethod =
METHOD_DIGITAL_SPREAD.presentValueCurveSensitivity(FOREX_CALL_OPTION, SMILE_BUNDLE);
PresentValueCurveSensitivityCallSpreadBlackForexCalculator calculator =
new PresentValueCurveSensitivityCallSpreadBlackForexCalculator(STANDARD_SPREAD);
MultipleCurrencyInterestRateCurveSensitivity pvcsCalculator =
calculator.visit(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertTrue(
"Forex Digital option: call spread method - present value",
MultipleCurrencyInterestRateCurveSensitivity.compare(
pvcsMethod, pvcsCalculator, TOLERANCE_DELTA));
}
@Test
/** Tests the present value volatility sensitivity. Method vs Calculator. */
public void presentValueVolatilitySensitivityMethodVCalculator() {
PresentValueForexBlackVolatilitySensitivity pvbvMethod =
METHOD_DIGITAL_SPREAD.presentValueVolatilitySensitivity(FOREX_CALL_OPTION, SMILE_BUNDLE);
PresentValueVolatilitySensitivityCallSpreadBlackForexCalculator calculator =
new PresentValueVolatilitySensitivityCallSpreadBlackForexCalculator(STANDARD_SPREAD);
PresentValueForexBlackVolatilitySensitivity pvbvCalculator =
calculator.visit(FOREX_CALL_OPTION, SMILE_BUNDLE);
assertTrue(
"Forex Digital option: call spread method - present value volatility sensitivity",
PresentValueForexBlackVolatilitySensitivity.compare(
pvbvMethod, pvbvCalculator, TOLERANCE_DELTA));
}
}