@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 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
public void testMultipleCashFlowsNoNetting() {
for (final InstrumentDefinition<?> definition : NO_NETTING_MULTIPLE_CASHFLOWS) {
final TreeMap<LocalDate, MultipleCurrencyAmount> pay =
new TreeMap<LocalDate, MultipleCurrencyAmount>(
definition.accept(PAY_CASH_FLOWS, IBOR_FIXING_SERIES));
final TreeMap<LocalDate, MultipleCurrencyAmount> receive =
new TreeMap<LocalDate, MultipleCurrencyAmount>(
definition.accept(RECEIVE_CASH_FLOWS, IBOR_FIXING_SERIES));
final TreeMap<LocalDate, MultipleCurrencyAmount> netted =
new TreeMap<LocalDate, MultipleCurrencyAmount>(
definition.accept(VISITOR, IBOR_FIXING_SERIES));
final Set<LocalDate> combinedDates = new HashSet<LocalDate>();
combinedDates.addAll(pay.keySet());
combinedDates.addAll(receive.keySet());
assertEquals(combinedDates.size(), netted.size());
for (final Map.Entry<LocalDate, MultipleCurrencyAmount> entry : netted.entrySet()) {
final LocalDate date = entry.getKey();
final MultipleCurrencyAmount payAmount = pay.get(date);
final MultipleCurrencyAmount receiveAmount = receive.get(date);
MultipleCurrencyAmount combinedAmountForDate = null;
if (payAmount != null) {
combinedAmountForDate = payAmount.multipliedBy(-1);
if (receiveAmount != null) {
combinedAmountForDate = combinedAmountForDate.plus(receiveAmount);
}
} else {
if (receiveAmount != null) {
combinedAmountForDate = receiveAmount;
}
}
assertNotNull(combinedAmountForDate);
assertEquals(combinedAmountForDate, entry.getValue());
}
}
}