@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 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);
}
}
