/**
* This calculates the sensitivity of the present value (PV) to a unit move in the forward. The
* volatility surface remains unchanged.
*
* @param swap the VarianceSwap
* @param market the VarianceSwapDataBundle
* @param relShift Relative size of shift made in centered-finite difference approximation.
* @return A Double. Currency amount per unit amount change in the black volatility
*/
@SuppressWarnings({})
public Double calcForwardSensitivity(
final VarianceSwap swap, final VarianceSwapDataBundle market, final double relShift) {
Validate.notNull(swap, "null VarianceSwap");
Validate.notNull(market, "null VarianceSwapDataBundle");
final VarianceSwapPresentValueCalculator pricer =
VarianceSwapPresentValueCalculator.getInstance();
// Shift UP
VarianceSwapDataBundle bumpedMarket =
new VarianceSwapDataBundle(
market.getVolatilitySurface(),
market.getDiscountCurve(),
market.getForwardCurve().withFractionalShift(relShift));
final double pvUp = pricer.visitVarianceSwap(swap, bumpedMarket);
// Shift Down
bumpedMarket =
new VarianceSwapDataBundle(
market.getVolatilitySurface(),
market.getDiscountCurve(),
market.getForwardCurve().withFractionalShift(-relShift));
final double pvDown = pricer.visitVarianceSwap(swap, bumpedMarket);
final double t = swap.getTimeToSettlement();
final double fwd = market.getForwardCurve().getForward(t);
// Centered-difference result
return (pvUp - pvDown) / 2.0 / relShift / fwd;
}
/**
* This calculates the sensitivity of the present value (PV) to the lognormal Black implied
* volatities at the knot points of the surface.
*
* <p>Note - the change of the surface due to the movement of a single node is
* interpolator-dependent, so an instrument may have non-local sensitivity
*
* @param swap the VarianceSwap
* @param market the VarianceSwapDataBundle
* @param shift Size of shift made in centered-finite difference approximation. e.g. 1% would be
* 0.01, and 1bp 0.0001
* @return A Double. Currency amount per unit amount change in the black volatility
*/
@SuppressWarnings({})
public Double calcBlackVegaParallel(
final VarianceSwap swap, final VarianceSwapDataBundle market, final double shift) {
Validate.notNull(swap, "null VarianceSwap");
Validate.notNull(market, "null VarianceSwapDataBundle");
final VarianceSwapPresentValueCalculator pricer =
VarianceSwapPresentValueCalculator.getInstance();
// Parallel shift UP
final BlackVolatilitySurface<?> upSurface =
market.getVolatilitySurface().withShift(shift, true);
final double pvUp =
pricer.visitVarianceSwap(
swap,
new VarianceSwapDataBundle(
upSurface, market.getDiscountCurve(), market.getForwardCurve()));
// Parallel shift DOWN
final BlackVolatilitySurface<?> downSurface =
market.getVolatilitySurface().withShift(-shift, true);
final double pvDown =
pricer.visitVarianceSwap(
swap,
new VarianceSwapDataBundle(
downSurface, market.getDiscountCurve(), market.getForwardCurve()));
// Centered-difference result
return (pvUp - pvDown) / (2.0 * shift);
}
/**
* Compute the price sensitivity to a shift of the Black volatility at a given maturity and
* strike.
*
* <p>Note - the change of the surface due to the movement of a single node is
* interpolator-dependent, so an instrument may have non-local sensitivity.
*
* <p>Important!!! If the <i>(x, y)</i> value(s) of the shift(s) are not in the nodal points of
* the original surface, they are added (with shift) to the nodal points of the new surface.
*
* @param swap the VarianceSwap
* @param market the VarianceSwapDataBundle
* @param maturity a double in same unit as VolatilitySurface
* @param strike a double in same unit as VolatilitySurface
* @param shift Size of shift made in centered-finite difference approximation. e.g. 1% would be
* 0.01, and 1bp 0.0001
* @return Currency amount per unit amount change in the black volatility at the point provided
*/
public double calcBlackVegaForSinglePoint(
final VarianceSwap swap,
final VarianceSwapDataBundle market,
final double maturity,
final double strike,
final double shift) {
final VarianceSwapPresentValueCalculator pricer =
VarianceSwapPresentValueCalculator.getInstance();
final Surface<Double, Double, Double> surface = market.getVolatilitySurface().getSurface();
Validate.isTrue(
surface instanceof InterpolatedDoublesSurface,
"Currently will only accept a Equity VolatilitySurfaces based on an InterpolatedDoublesSurface");
final InterpolatedDoublesSurface blackSurf = (InterpolatedDoublesSurface) surface;
final InterpolatedSurfaceAdditiveShiftFunction volShifter =
new InterpolatedSurfaceAdditiveShiftFunction();
// shift UP
final InterpolatedDoublesSurface bumpedVolUp =
volShifter.evaluate(blackSurf, maturity, strike, shift);
VarianceSwapDataBundle bumpedMarket =
new VarianceSwapDataBundle(
market.getVolatilitySurface().withSurface(bumpedVolUp),
market.getDiscountCurve(),
market.getForwardCurve());
final double pvUp = pricer.visitVarianceSwap(swap, bumpedMarket);
// shift DOWN
final InterpolatedDoublesSurface bumpedVolDown =
volShifter.evaluate(blackSurf, maturity, strike, -shift);
bumpedMarket =
new VarianceSwapDataBundle(
market.getVolatilitySurface().withSurface(bumpedVolDown),
market.getDiscountCurve(),
market.getForwardCurve());
final double pvDown = pricer.visitVarianceSwap(swap, bumpedMarket);
// Centered-difference result
return (pvUp - pvDown) / (2.0 * shift);
}
