/**
* @param date The valuation date, not null
* @param indexFixingTS The index fixing time series, not null
* @param settlementDate The settlement date, not null
* @param yieldCurveNames The yield curve names, not null, must have at least two entries
* @return The security
* @deprecated Use the version that does not take curve names
*/
@Deprecated
public BondIborSecurity toDerivative(
final ZonedDateTime date,
final DoubleTimeSeries<ZonedDateTime> indexFixingTS,
final ZonedDateTime settlementDate,
final String... yieldCurveNames) {
// Implementation note: First yield curve used for coupon and notional (credit), the second for
// risk free settlement.
ArgumentChecker.notNull(date, "date");
ArgumentChecker.notNull(indexFixingTS, "fixing time series");
ArgumentChecker.notNull(settlementDate, "settlement date");
ArgumentChecker.notNull(yieldCurveNames, "yield curve names");
ArgumentChecker.isTrue(yieldCurveNames.length > 1, "at least two curves required");
final String creditCurveName = yieldCurveNames[0];
final String riskFreeCurveName = yieldCurveNames[1];
double settlementTime;
if (settlementDate.isBefore(date)) {
settlementTime = 0.0;
} else {
settlementTime = TimeCalculator.getTimeBetween(date, settlementDate);
}
final AnnuityPaymentFixed nominal =
(AnnuityPaymentFixed) getNominal().toDerivative(date, creditCurveName);
final Annuity<Coupon> coupon =
(Annuity<Coupon>) getCoupons().toDerivative(date, indexFixingTS, yieldCurveNames);
return new BondIborSecurity(
nominal.trimBefore(settlementTime),
coupon.trimBefore(settlementTime),
settlementTime,
riskFreeCurveName);
}
@Test
/** Test the present value. */
public void presentValueExplicit() {
final MultipleCurrencyAmount pv = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final double timeToExpiry = SWAPTION_LONG_PAYER.getTimeToExpiry();
final AnnuityPaymentFixed cfe =
CFEC.visitSwap(SWAPTION_LONG_PAYER.getUnderlyingSwap(), MULTICURVES);
final int numberOfPayments = cfe.getNumberOfPayments();
final double alpha[] = new double[numberOfPayments];
final double disccf[] = new double[numberOfPayments];
for (int loopcf = 0; loopcf < numberOfPayments; loopcf++) {
alpha[loopcf] =
MODEL.alpha(
HW_PARAMETERS,
0.0,
timeToExpiry,
timeToExpiry,
cfe.getNthPayment(loopcf).getPaymentTime());
disccf[loopcf] =
MULTICURVES.getDiscountFactor(EUR, cfe.getNthPayment(loopcf).getPaymentTime())
* cfe.getNthPayment(loopcf).getAmount();
}
final double kappa = MODEL.kappa(disccf, alpha);
double pvExpected = 0.0;
for (int loopcf = 0; loopcf < numberOfPayments; loopcf++) {
pvExpected += disccf[loopcf] * NORMAL.getCDF(-kappa - alpha[loopcf]);
}
assertEquals(
"Swaption physical - Hull-White - present value", pvExpected, pv.getAmount(EUR), 1E-2);
final MultipleCurrencyAmount pv2 =
METHOD_HW.presentValue(SWAPTION_LONG_PAYER, cfe, HW_MULTICURVES);
assertEquals("Swaption physical - Hull-White - present value", pv, pv2);
}
@Override
public DecisionSchedule visitSwaptionCashFixedIbor(
final SwaptionCashFixedIbor swaption, final MulticurveProviderInterface multicurves) {
final double[] decisionTime = new double[] {swaption.getTimeToExpiry()};
final AnnuityPaymentFixed cfeIbor =
swaption.getUnderlyingSwap().getSecondLeg().accept(CFEC, multicurves);
final int nbCfeIbor = cfeIbor.getNumberOfPayments();
final int nbCpnFixed = swaption.getUnderlyingSwap().getFixedLeg().getNumberOfPayments();
final double[][] impactTime = new double[1][nbCpnFixed + nbCfeIbor];
final double[][] impactAmount = new double[1][nbCpnFixed + nbCfeIbor];
// Fixed leg
for (int loopcf = 0; loopcf < nbCpnFixed; loopcf++) {
impactTime[0][loopcf] =
swaption.getUnderlyingSwap().getFixedLeg().getNthPayment(loopcf).getPaymentTime();
impactAmount[0][loopcf] =
swaption.getUnderlyingSwap().getFixedLeg().getNthPayment(loopcf).getPaymentYearFraction()
* swaption.getUnderlyingSwap().getFixedLeg().getNthPayment(loopcf).getNotional();
}
// Ibor leg
for (int loopcf = 0; loopcf < nbCfeIbor; loopcf++) {
impactTime[0][nbCpnFixed + loopcf] = cfeIbor.getNthPayment(loopcf).getPaymentTime();
impactAmount[0][nbCpnFixed + loopcf] = cfeIbor.getNthPayment(loopcf).getAmount();
}
final DecisionSchedule decision = new DecisionSchedule(decisionTime, impactTime, impactAmount);
return decision;
}
/**
* @param date The valuation date, not null
* @param indexFixingTS The index fixing time series, not null
* @param settlementDate The settlement date, not null
* @return The security
*/
public BondIborSecurity toDerivative(
final ZonedDateTime date,
final DoubleTimeSeries<ZonedDateTime> indexFixingTS,
final ZonedDateTime settlementDate) {
ArgumentChecker.notNull(date, "date");
ArgumentChecker.notNull(indexFixingTS, "fixing time series");
ArgumentChecker.notNull(settlementDate, "settlement date");
double settlementTime;
if (settlementDate.isBefore(date)) {
settlementTime = 0.0;
} else {
settlementTime = TimeCalculator.getTimeBetween(date, settlementDate);
}
final AnnuityPaymentFixed nominal = (AnnuityPaymentFixed) getNominal().toDerivative(date);
final Annuity<Coupon> coupon = (Annuity<Coupon>) getCoupons().toDerivative(date, indexFixingTS);
return new BondIborSecurity(
nominal.trimBefore(settlementTime), coupon.trimBefore(settlementTime), settlementTime);
}
/**
* Computes the present value of the Physical delivery swaption.
*
* @param swaption The swaption.
* @param hwData The Hull-White parameters and the curves.
* @return The present value.
*/
public CurrencyAmount presentValue(
final SwaptionPhysicalFixedIbor swaption,
final HullWhiteOneFactorPiecewiseConstantDataBundle hwData) {
Validate.notNull(swaption);
Validate.notNull(hwData);
final double expiryTime = swaption.getTimeToExpiry();
final AnnuityPaymentFixed cfe = swaption.getUnderlyingSwap().accept(CFEC, hwData);
final double[] alpha = new double[cfe.getNumberOfPayments()];
final double[] df = new double[cfe.getNumberOfPayments()];
final double[] discountedCashFlow = new double[cfe.getNumberOfPayments()];
for (int loopcf = 0; loopcf < cfe.getNumberOfPayments(); loopcf++) {
alpha[loopcf] =
MODEL.alpha(
hwData.getHullWhiteParameter(),
0.0,
expiryTime,
expiryTime,
cfe.getNthPayment(loopcf).getPaymentTime());
df[loopcf] =
hwData
.getCurve(cfe.getDiscountCurve())
.getDiscountFactor(cfe.getNthPayment(loopcf).getPaymentTime());
discountedCashFlow[loopcf] = df[loopcf] * cfe.getNthPayment(loopcf).getAmount();
}
// Integration
final SwaptionIntegrant integrant = new SwaptionIntegrant(discountedCashFlow, alpha);
final double limit = 10.0;
final double absoluteTolerance = 1.0E-2;
final double relativeTolerance = 1.0E-6;
final RungeKuttaIntegrator1D integrator =
new RungeKuttaIntegrator1D(absoluteTolerance, relativeTolerance, NB_INTEGRATION);
double pv = 0.0;
try {
pv =
1.0
/ Math.sqrt(2.0 * Math.PI)
* integrator.integrate(integrant, -limit, limit)
* (swaption.isLong() ? 1.0 : -1.0);
} catch (final Exception e) {
throw new RuntimeException(e);
}
return CurrencyAmount.of(swaption.getCurrency(), pv);
}
@Override
public DecisionSchedule visitSwaptionPhysicalFixedIbor(
final SwaptionPhysicalFixedIbor swaption, final MulticurveProviderInterface multicurves) {
final double[] decisionTime = new double[] {swaption.getTimeToExpiry()};
final AnnuityPaymentFixed cfe = swaption.getUnderlyingSwap().accept(CFEC, multicurves);
final double[][] impactTime = new double[1][cfe.getNumberOfPayments()];
final double[][] impactAmount = new double[1][cfe.getNumberOfPayments()];
for (int loopcf = 0; loopcf < cfe.getNumberOfPayments(); loopcf++) {
impactTime[0][loopcf] = cfe.getNthPayment(loopcf).getPaymentTime();
impactAmount[0][loopcf] = cfe.getNthPayment(loopcf).getAmount();
}
final DecisionSchedule decision = new DecisionSchedule(decisionTime, impactTime, impactAmount);
return decision;
}
@Override
public DecisionSchedule visitAnnuityCouponIborRatchet(
final AnnuityCouponIborRatchet annuity, final MulticurveProviderInterface multicurves) {
final int nbCpn = annuity.getNumberOfPayments();
final double[] decisionTime = new double[nbCpn];
final double[][] impactTime = new double[nbCpn][];
final double[][] impactAmount = new double[nbCpn][];
for (int loopcpn = 0; loopcpn < nbCpn; loopcpn++) {
final AnnuityPaymentFixed cfe = annuity.getNthPayment(loopcpn).accept(CFEC, multicurves);
decisionTime[loopcpn] =
annuity.isFixed()[loopcpn]
? 0.0
: ((CouponFloating) annuity.getNthPayment(loopcpn)).getFixingTime();
impactTime[loopcpn] = new double[cfe.getNumberOfPayments()];
impactAmount[loopcpn] = new double[cfe.getNumberOfPayments()];
for (int loopcf = 0; loopcf < cfe.getNumberOfPayments(); loopcf++) {
impactTime[loopcpn][loopcf] = cfe.getNthPayment(loopcf).getPaymentTime();
impactAmount[loopcpn][loopcf] = cfe.getNthPayment(loopcf).getAmount();
}
}
final DecisionSchedule decision = new DecisionSchedule(decisionTime, impactTime, impactAmount);
return decision;
}
/**
* Computes the present value of the Physical delivery swaption through approximation..
*
* @param swaption The swaption.
* @param cfe The swaption cash flow equiovalent.
* @param g2Data The G2++ parameters and the curves.
* @return The present value.
*/
public CurrencyAmount presentValue(
final SwaptionPhysicalFixedIbor swaption,
final AnnuityPaymentFixed cfe,
final G2ppPiecewiseConstantDataBundle g2Data) {
YieldAndDiscountCurve dsc =
g2Data.getCurve(swaption.getUnderlyingSwap().getFixedLeg().getDiscountCurve());
int nbCf = cfe.getNumberOfPayments();
double[] cfa = new double[nbCf];
double[] t = new double[nbCf];
for (int loopcf = 0; loopcf < nbCf; loopcf++) {
cfa[loopcf] =
-Math.signum(cfe.getNthPayment(0).getAmount()) * cfe.getNthPayment(loopcf).getAmount();
t[loopcf] = cfe.getNthPayment(loopcf).getPaymentTime();
}
double rhog2pp = g2Data.getG2ppParameter().getCorrelation();
double[][] ht0 = MODEL_G2PP.volatilityMaturityPart(g2Data.getG2ppParameter(), t[0], t);
double[] dfswap = new double[nbCf];
double[] p0 = new double[nbCf];
double[] cP = new double[nbCf];
for (int loopcf = 0; loopcf < nbCf; loopcf++) {
dfswap[loopcf] = dsc.getDiscountFactor(t[loopcf]);
p0[loopcf] = dfswap[loopcf] / dfswap[0];
cP[loopcf] = cfa[loopcf] * p0[loopcf];
}
double k = -cfa[0];
double b0 = 0.0;
for (int loopcf = 1; loopcf < nbCf; loopcf++) {
b0 += cP[loopcf];
}
double[] alpha0 = new double[nbCf - 1];
double[] beta0 = new double[2];
for (int loopcf = 0; loopcf < nbCf - 1; loopcf++) {
alpha0[loopcf] = cfa[loopcf + 1] * p0[loopcf + 1] / b0;
beta0[0] += alpha0[loopcf] * ht0[0][loopcf + 1];
beta0[1] += alpha0[loopcf] * ht0[1][loopcf + 1];
}
double[][] gamma = MODEL_G2PP.gamma(g2Data.getG2ppParameter(), 0, swaption.getTimeToExpiry());
double[] tau = new double[nbCf];
for (int loopcf = 0; loopcf < nbCf; loopcf++) {
tau[loopcf] =
gamma[0][0] * ht0[0][loopcf] * ht0[0][loopcf]
+ gamma[1][1] * ht0[1][loopcf] * ht0[1][loopcf]
+ 2 * rhog2pp * gamma[0][1] * ht0[0][loopcf] * ht0[1][loopcf];
}
double xbarnum = 0.0;
double xbarde = 0.0;
for (int loopcf = 0; loopcf < nbCf; loopcf++) {
xbarnum += cP[loopcf] - cP[loopcf] * tau[loopcf] * tau[loopcf] / 2.0;
xbarde += cP[loopcf] * tau[loopcf];
}
double xbar = xbarnum / xbarde;
double[] pK = new double[nbCf];
for (int loopcf = 0; loopcf < nbCf; loopcf++) {
pK[loopcf] = p0[loopcf] * (1.0 - tau[loopcf] * xbar - tau[loopcf] * tau[loopcf] / 2.0);
}
double[] alphaK = new double[nbCf - 1];
double[] betaK = new double[2];
for (int loopcf = 0; loopcf < nbCf - 1; loopcf++) {
alphaK[loopcf] = cfa[loopcf + 1] * pK[loopcf + 1] / k;
betaK[0] += alphaK[loopcf] * ht0[0][loopcf + 1];
betaK[1] += alphaK[loopcf] * ht0[1][loopcf + 1];
}
double[] betaBar = new double[] {(beta0[0] + betaK[0]) / 2.0, (beta0[1] + betaK[1]) / 2.0};
double sigmaBar2 =
gamma[0][0] * betaBar[0] * betaBar[0]
+ gamma[1][1] * betaBar[1] * betaBar[1]
+ 2 * rhog2pp * gamma[0][1] * betaBar[0] * betaBar[1];
double sigmaBar = Math.sqrt(sigmaBar2);
EuropeanVanillaOption option = new EuropeanVanillaOption(k, 1, !swaption.isCall());
final BlackPriceFunction blackFunction = new BlackPriceFunction();
final BlackFunctionData dataBlack = new BlackFunctionData(b0, dfswap[0], sigmaBar);
final Function1D<BlackFunctionData, Double> func = blackFunction.getPriceFunction(option);
final double price = func.evaluate(dataBlack) * (swaption.isLong() ? 1.0 : -1.0);
return CurrencyAmount.of(swaption.getCurrency(), price);
}
