@Test
/** Test the price computed from the curves */
public void price() {
final YieldCurveBundle curves = TestsDataSets.createCurves1();
final double price = METHOD.price(ERU2, curves);
final YieldAndDiscountCurve forwardCurve = curves.getCurve(FORWARD_CURVE_NAME);
final double forward =
(forwardCurve.getDiscountFactor(FIXING_START_TIME)
/ forwardCurve.getDiscountFactor(FIXING_END_TIME)
- 1)
/ FIXING_ACCRUAL;
final double factor = MODEL.futureConvexityFactor(ERU2, MODEL_PARAMETERS);
final double expectedPrice = 1.0 - factor * forward + (1 - factor) / FIXING_ACCRUAL;
assertEquals("Future price from curves in Hull-White one factor model", expectedPrice, price);
}
/**
* Computes the price of a future from the curves using an estimation of the future rate without
* convexity adjustment.
*
* @param future The future.
* @param curves The Hull-White parameters and the curves.
* @return The price.
*/
public double price(
final InterestRateFuture future, final HullWhiteOneFactorPiecewiseConstantDataBundle curves) {
Validate.notNull(future, "Future");
Validate.notNull(curves, "Curves");
final YieldAndDiscountCurve forwardCurve = curves.getCurve(future.getForwardCurveName());
double dfForwardStart = forwardCurve.getDiscountFactor(future.getFixingPeriodStartTime());
double dfForwardEnd = forwardCurve.getDiscountFactor(future.getFixingPeriodEndTime());
double forward = (dfForwardStart / dfForwardEnd - 1) / future.getFixingPeriodAccrualFactor();
double futureConvexityFactor =
MODEL.futureConvexityFactor(
future.getLastTradingTime(),
future.getFixingPeriodStartTime(),
future.getFixingPeriodEndTime(),
curves.getHullWhiteParameter());
double price =
1.0
- futureConvexityFactor * forward
+ (1 - futureConvexityFactor) / future.getFixingPeriodAccrualFactor();
return price;
}
/**
* Compute the price sensitivity to rates of a interest rate future by discounting.
*
* @param future The future.
* @param curves The Hull-White parameters and the curves.
* @return The price rate sensitivity.
*/
public InterestRateCurveSensitivity priceCurveSensitivity(
final InterestRateFuture future, final HullWhiteOneFactorPiecewiseConstantDataBundle curves) {
Validate.notNull(future, "Future");
Validate.notNull(curves, "Curves");
final YieldAndDiscountCurve forwardCurve = curves.getCurve(future.getForwardCurveName());
double dfForwardStart = forwardCurve.getDiscountFactor(future.getFixingPeriodStartTime());
double dfForwardEnd = forwardCurve.getDiscountFactor(future.getFixingPeriodEndTime());
double futureConvexityFactor =
MODEL.futureConvexityFactor(
future.getLastTradingTime(),
future.getFixingPeriodStartTime(),
future.getFixingPeriodEndTime(),
curves.getHullWhiteParameter());
// Backward sweep
double priceBar = 1.0;
double forwardBar = -futureConvexityFactor * priceBar;
double dfForwardEndBar =
-dfForwardStart
/ (dfForwardEnd * dfForwardEnd)
/ future.getFixingPeriodAccrualFactor()
* forwardBar;
double dfForwardStartBar =
1.0 / (future.getFixingPeriodAccrualFactor() * dfForwardEnd) * forwardBar;
Map<String, List<DoublesPair>> resultMap = new HashMap<String, List<DoublesPair>>();
List<DoublesPair> listForward = new ArrayList<DoublesPair>();
listForward.add(
new DoublesPair(
future.getFixingPeriodStartTime(),
-future.getFixingPeriodStartTime() * dfForwardStart * dfForwardStartBar));
listForward.add(
new DoublesPair(
future.getFixingPeriodEndTime(),
-future.getFixingPeriodEndTime() * dfForwardEnd * dfForwardEndBar));
resultMap.put(future.getForwardCurveName(), listForward);
InterestRateCurveSensitivity result = new InterestRateCurveSensitivity(resultMap);
return result;
}