@Test
/** Tests long/short parity. */
public void scaling() {
double scale = 12.3;
SwapFixedIborDefinition scaledSwapDefinition =
SwapFixedIborDefinition.from(
SETTLEMENT_DATE, CMS_INDEX, scale * NOTIONAL, RATE, FIXED_IS_PAYER);
SwaptionCashFixedIborDefinition scaledSwaptionDefinition =
SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, scaledSwapDefinition, IS_LONG);
SwaptionCashFixedIbor scaledSwaption =
scaledSwaptionDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
CurrencyAmount pvOriginal = METHOD_HW_INTEGRATION.presentValue(SWAPTION_PAYER_LONG, BUNDLE_HW);
CurrencyAmount pvScaled = METHOD_HW_INTEGRATION.presentValue(scaledSwaption, BUNDLE_HW);
assertEquals(
"Swaption cash - Hull-White - present value - scaling",
scale * pvOriginal.getAmount(),
pvScaled.getAmount(),
1E-1);
}
@Test(enabled = true)
/** Tests approximation error. "enabled = false" for the standard testing. */
public void errorAnalysis() {
double bp1 = 10000;
double errorLimit = 5.0E-1; // 0.5 bp
ParRateCalculator prc = ParRateCalculator.getInstance();
double forward = prc.visit(SWAP_PAYER, CURVES);
double[] strikeRel = new double[] {-0.0250, -0.0150, -0.0050, 0.0, 0.0050, 0.0150, 0.0250};
double[] pvPayerApproximation = new double[strikeRel.length];
double[] pvPayerIntegration = new double[strikeRel.length];
double[] pvReceiverApproximation = new double[strikeRel.length];
double[] pvReceiverIntegration = new double[strikeRel.length];
for (int loopstrike = 0; loopstrike < strikeRel.length; loopstrike++) {
SwapFixedIborDefinition swapStrikePayerDefinition =
SwapFixedIborDefinition.from(
SETTLEMENT_DATE, CMS_INDEX, bp1, forward + strikeRel[loopstrike], FIXED_IS_PAYER);
SwaptionCashFixedIborDefinition swaptionStrikePayerDefinition =
SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, swapStrikePayerDefinition, IS_LONG);
SwaptionCashFixedIbor swaptionStrikePayer =
swaptionStrikePayerDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
pvPayerApproximation[loopstrike] =
METHOD_HW_APPROXIMATION.presentValue(swaptionStrikePayer, BUNDLE_HW).getAmount();
pvPayerIntegration[loopstrike] =
METHOD_HW_INTEGRATION.presentValue(swaptionStrikePayer, BUNDLE_HW).getAmount();
assertEquals(
"Swaption cash - Hull-White - present value - explicit/numerical integration",
pvPayerApproximation[loopstrike],
pvPayerIntegration[loopstrike],
errorLimit);
SwapFixedIborDefinition swapStrikeReceiverDefinition =
SwapFixedIborDefinition.from(
SETTLEMENT_DATE, CMS_INDEX, bp1, forward + strikeRel[loopstrike], !FIXED_IS_PAYER);
SwaptionCashFixedIborDefinition swaptionStrikeReceiverDefinition =
SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, swapStrikeReceiverDefinition, IS_LONG);
SwaptionCashFixedIbor swaptionStrikeReceiver =
swaptionStrikeReceiverDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
pvReceiverApproximation[loopstrike] =
METHOD_HW_APPROXIMATION.presentValue(swaptionStrikeReceiver, BUNDLE_HW).getAmount();
pvReceiverIntegration[loopstrike] =
METHOD_HW_INTEGRATION.presentValue(swaptionStrikeReceiver, BUNDLE_HW).getAmount();
assertEquals(
"Swaption cash - Hull-White - present value - explicit/numerical integration",
pvReceiverApproximation[loopstrike],
pvReceiverIntegration[loopstrike],
errorLimit);
}
}
/** Tests related to the pricing of cash-settled swaption in Hull-White one factor model. */
public class SwaptionCashFixedIborHullWhiteMethodTest {
private static final Currency CUR = Currency.EUR;
private static final Calendar CALENDAR = new MondayToFridayCalendar("A");
private static final BusinessDayConvention BUSINESS_DAY =
BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Modified Following");
private static final boolean IS_EOM = true;
private static final int SETTLEMENT_DAYS = 2;
private static final Period IBOR_TENOR = Period.ofMonths(6);
private static final DayCount IBOR_DAY_COUNT = DayCountFactory.INSTANCE.getDayCount("Actual/360");
private static final IborIndex IBOR_INDEX =
new IborIndex(
CUR, IBOR_TENOR, SETTLEMENT_DAYS, CALENDAR, IBOR_DAY_COUNT, BUSINESS_DAY, IS_EOM);
private static final int SWAP_TENOR_YEAR = 5;
private static final Period SWAP_TENOR = Period.ofYears(SWAP_TENOR_YEAR);
private static final Period FIXED_PAYMENT_PERIOD = Period.ofMonths(12);
private static final DayCount FIXED_DAY_COUNT = DayCountFactory.INSTANCE.getDayCount("30/360");
private static final IndexSwap CMS_INDEX =
new IndexSwap(FIXED_PAYMENT_PERIOD, FIXED_DAY_COUNT, IBOR_INDEX, SWAP_TENOR);
private static final ZonedDateTime EXPIRY_DATE = DateUtils.getUTCDate(2016, 7, 7);
private static final ZonedDateTime SETTLEMENT_DATE =
ScheduleCalculator.getAdjustedDate(EXPIRY_DATE, SETTLEMENT_DAYS, CALENDAR);
private static final double NOTIONAL = 100000000; // 100m
private static final double RATE = 0.0325;
private static final boolean FIXED_IS_PAYER = true;
private static final SwapFixedIborDefinition SWAP_PAYER_DEFINITION =
SwapFixedIborDefinition.from(SETTLEMENT_DATE, CMS_INDEX, NOTIONAL, RATE, FIXED_IS_PAYER);
private static final SwapFixedIborDefinition SWAP_RECEIVER_DEFINITION =
SwapFixedIborDefinition.from(SETTLEMENT_DATE, CMS_INDEX, NOTIONAL, RATE, !FIXED_IS_PAYER);
private static final boolean IS_LONG = true;
private static final SwaptionCashFixedIborDefinition SWAPTION_PAYER_LONG_DEFINITION =
SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, SWAP_PAYER_DEFINITION, IS_LONG);
private static final SwaptionCashFixedIborDefinition SWAPTION_RECEIVER_LONG_DEFINITION =
SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, SWAP_RECEIVER_DEFINITION, IS_LONG);
private static final SwaptionCashFixedIborDefinition SWAPTION_PAYER_SHORT_DEFINITION =
SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, SWAP_PAYER_DEFINITION, !IS_LONG);
private static final SwaptionCashFixedIborDefinition SWAPTION_RECEIVER_SHORT_DEFINITION =
SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, SWAP_RECEIVER_DEFINITION, !IS_LONG);
// to derivatives
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 7, 7);
private static final String FUNDING_CURVE_NAME = "Funding";
private static final String FORWARD_CURVE_NAME = "Forward";
private static final String[] CURVES_NAME = {FUNDING_CURVE_NAME, FORWARD_CURVE_NAME};
private static final YieldCurveBundle CURVES = TestsDataSetsSABR.createCurves1();
private static final FixedCouponSwap<Coupon> SWAP_PAYER =
SWAP_PAYER_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final SwaptionCashFixedIbor SWAPTION_PAYER_LONG =
SWAPTION_PAYER_LONG_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final SwaptionCashFixedIbor SWAPTION_RECEIVER_LONG =
SWAPTION_RECEIVER_LONG_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final SwaptionCashFixedIbor SWAPTION_PAYER_SHORT =
SWAPTION_PAYER_SHORT_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
private static final SwaptionCashFixedIbor SWAPTION_RECEIVER_SHORT =
SWAPTION_RECEIVER_SHORT_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
// Calculator
private static final SwaptionCashFixedIborHullWhiteNumericalIntegrationMethod
METHOD_HW_INTEGRATION = new SwaptionCashFixedIborHullWhiteNumericalIntegrationMethod();
private static final SwaptionCashFixedIborHullWhiteApproximationMethod METHOD_HW_APPROXIMATION =
new SwaptionCashFixedIborHullWhiteApproximationMethod();
private static final HullWhiteOneFactorPiecewiseConstantParameters PARAMETERS_HW =
TestsDataSetsHullWhite.createHullWhiteParameters();
private static final HullWhiteOneFactorPiecewiseConstantDataBundle BUNDLE_HW =
new HullWhiteOneFactorPiecewiseConstantDataBundle(PARAMETERS_HW, CURVES);
@Test
/** Tests long/short parity. */
public void longShortParity() {
CurrencyAmount pvLong = METHOD_HW_INTEGRATION.presentValue(SWAPTION_PAYER_LONG, BUNDLE_HW);
CurrencyAmount pvShort = METHOD_HW_INTEGRATION.presentValue(SWAPTION_PAYER_SHORT, BUNDLE_HW);
assertEquals(
"Swaption cash - Hull-White - present value - long/short parity",
pvLong.getAmount(),
-pvShort.getAmount(),
1E-2);
}
@Test
/** Tests long/short parity. */
public void scaling() {
double scale = 12.3;
SwapFixedIborDefinition scaledSwapDefinition =
SwapFixedIborDefinition.from(
SETTLEMENT_DATE, CMS_INDEX, scale * NOTIONAL, RATE, FIXED_IS_PAYER);
SwaptionCashFixedIborDefinition scaledSwaptionDefinition =
SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, scaledSwapDefinition, IS_LONG);
SwaptionCashFixedIbor scaledSwaption =
scaledSwaptionDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
CurrencyAmount pvOriginal = METHOD_HW_INTEGRATION.presentValue(SWAPTION_PAYER_LONG, BUNDLE_HW);
CurrencyAmount pvScaled = METHOD_HW_INTEGRATION.presentValue(scaledSwaption, BUNDLE_HW);
assertEquals(
"Swaption cash - Hull-White - present value - scaling",
scale * pvOriginal.getAmount(),
pvScaled.getAmount(),
1E-1);
}
@Test
/** Compare approximate formula with numerical integration. */
public void comparison() {
double bp1 = 10000;
CurrencyAmount pvPayerLongExplicit =
METHOD_HW_APPROXIMATION.presentValue(SWAPTION_PAYER_LONG, BUNDLE_HW);
CurrencyAmount pvPayerLongIntegration =
METHOD_HW_INTEGRATION.presentValue(SWAPTION_PAYER_LONG, BUNDLE_HW);
assertEquals(
"Swaption cash - Hull-White - present value - explicit/numerical integration",
pvPayerLongExplicit.getAmount() / NOTIONAL * bp1,
pvPayerLongIntegration.getAmount() / NOTIONAL * bp1,
3.0E-1);
CurrencyAmount pvPayerShortExplicit =
METHOD_HW_APPROXIMATION.presentValue(SWAPTION_PAYER_SHORT, BUNDLE_HW);
CurrencyAmount pvPayerShortIntegration =
METHOD_HW_INTEGRATION.presentValue(SWAPTION_PAYER_SHORT, BUNDLE_HW);
assertEquals(
"Swaption cash - Hull-White - present value - explicit/numerical integration",
pvPayerShortExplicit.getAmount() / NOTIONAL * bp1,
pvPayerShortIntegration.getAmount() / NOTIONAL * bp1,
3.0E-1);
CurrencyAmount pvReceiverLongExplicit =
METHOD_HW_APPROXIMATION.presentValue(SWAPTION_RECEIVER_LONG, BUNDLE_HW);
CurrencyAmount pvReceiverLongIntegration =
METHOD_HW_INTEGRATION.presentValue(SWAPTION_RECEIVER_LONG, BUNDLE_HW);
assertEquals(
"Swaption cash - Hull-White - present value - explicit/numerical integration",
pvReceiverLongExplicit.getAmount() / NOTIONAL * bp1,
pvReceiverLongIntegration.getAmount() / NOTIONAL * bp1,
5.0E-1);
CurrencyAmount pvReceiverShortExplicit =
METHOD_HW_APPROXIMATION.presentValue(SWAPTION_RECEIVER_SHORT, BUNDLE_HW);
CurrencyAmount pvReceiverShortIntegration =
METHOD_HW_INTEGRATION.presentValue(SWAPTION_RECEIVER_SHORT, BUNDLE_HW);
assertEquals(
"Swaption cash - Hull-White - present value - explicit/numerical integration",
pvReceiverShortExplicit.getAmount() / NOTIONAL * bp1,
pvReceiverShortIntegration.getAmount() / NOTIONAL * bp1,
5.0E-1);
}
@Test
/** Tests the Hull-White parameters sensitivity. */
public void hullWhiteSensitivity() {
double[] hwSensitivity =
METHOD_HW_APPROXIMATION.presentValueHullWhiteSensitivity(SWAPTION_PAYER_LONG, BUNDLE_HW);
int nbVolatility = PARAMETERS_HW.getVolatility().length;
double shiftVol = 1.0E-6;
double[] volatilityBumped = new double[nbVolatility];
System.arraycopy(PARAMETERS_HW.getVolatility(), 0, volatilityBumped, 0, nbVolatility);
double[] volatilityTime = new double[nbVolatility - 1];
System.arraycopy(PARAMETERS_HW.getVolatilityTime(), 1, volatilityTime, 0, nbVolatility - 1);
double[] pvBumpedPlus = new double[nbVolatility];
double[] pvBumpedMinus = new double[nbVolatility];
HullWhiteOneFactorPiecewiseConstantParameters parametersBumped =
new HullWhiteOneFactorPiecewiseConstantParameters(
PARAMETERS_HW.getMeanReversion(), volatilityBumped, volatilityTime);
HullWhiteOneFactorPiecewiseConstantDataBundle bundleBumped =
new HullWhiteOneFactorPiecewiseConstantDataBundle(parametersBumped, CURVES);
double[] hwSensitivityExpected = new double[nbVolatility];
for (int loopvol = 0; loopvol < nbVolatility; loopvol++) {
volatilityBumped[loopvol] += shiftVol;
parametersBumped.setVolatility(volatilityBumped);
pvBumpedPlus[loopvol] =
METHOD_HW_APPROXIMATION.presentValue(SWAPTION_PAYER_LONG, bundleBumped).getAmount();
volatilityBumped[loopvol] -= 2 * shiftVol;
parametersBumped.setVolatility(volatilityBumped);
pvBumpedMinus[loopvol] =
METHOD_HW_APPROXIMATION.presentValue(SWAPTION_PAYER_LONG, bundleBumped).getAmount();
hwSensitivityExpected[loopvol] =
(pvBumpedPlus[loopvol] - pvBumpedMinus[loopvol]) / (2 * shiftVol);
assertEquals(
"Swaption - Hull-White sensitivity adjoint: derivative "
+ loopvol
+ " - difference:"
+ (hwSensitivityExpected[loopvol] - hwSensitivity[loopvol]),
hwSensitivityExpected[loopvol],
hwSensitivity[loopvol],
2.0E+5);
volatilityBumped[loopvol] = PARAMETERS_HW.getVolatility()[loopvol];
}
}
@Test(enabled = true)
/** Tests approximation error. "enabled = false" for the standard testing. */
public void errorAnalysis() {
double bp1 = 10000;
double errorLimit = 5.0E-1; // 0.5 bp
ParRateCalculator prc = ParRateCalculator.getInstance();
double forward = prc.visit(SWAP_PAYER, CURVES);
double[] strikeRel = new double[] {-0.0250, -0.0150, -0.0050, 0.0, 0.0050, 0.0150, 0.0250};
double[] pvPayerApproximation = new double[strikeRel.length];
double[] pvPayerIntegration = new double[strikeRel.length];
double[] pvReceiverApproximation = new double[strikeRel.length];
double[] pvReceiverIntegration = new double[strikeRel.length];
for (int loopstrike = 0; loopstrike < strikeRel.length; loopstrike++) {
SwapFixedIborDefinition swapStrikePayerDefinition =
SwapFixedIborDefinition.from(
SETTLEMENT_DATE, CMS_INDEX, bp1, forward + strikeRel[loopstrike], FIXED_IS_PAYER);
SwaptionCashFixedIborDefinition swaptionStrikePayerDefinition =
SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, swapStrikePayerDefinition, IS_LONG);
SwaptionCashFixedIbor swaptionStrikePayer =
swaptionStrikePayerDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
pvPayerApproximation[loopstrike] =
METHOD_HW_APPROXIMATION.presentValue(swaptionStrikePayer, BUNDLE_HW).getAmount();
pvPayerIntegration[loopstrike] =
METHOD_HW_INTEGRATION.presentValue(swaptionStrikePayer, BUNDLE_HW).getAmount();
assertEquals(
"Swaption cash - Hull-White - present value - explicit/numerical integration",
pvPayerApproximation[loopstrike],
pvPayerIntegration[loopstrike],
errorLimit);
SwapFixedIborDefinition swapStrikeReceiverDefinition =
SwapFixedIborDefinition.from(
SETTLEMENT_DATE, CMS_INDEX, bp1, forward + strikeRel[loopstrike], !FIXED_IS_PAYER);
SwaptionCashFixedIborDefinition swaptionStrikeReceiverDefinition =
SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, swapStrikeReceiverDefinition, IS_LONG);
SwaptionCashFixedIbor swaptionStrikeReceiver =
swaptionStrikeReceiverDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
pvReceiverApproximation[loopstrike] =
METHOD_HW_APPROXIMATION.presentValue(swaptionStrikeReceiver, BUNDLE_HW).getAmount();
pvReceiverIntegration[loopstrike] =
METHOD_HW_INTEGRATION.presentValue(swaptionStrikeReceiver, BUNDLE_HW).getAmount();
assertEquals(
"Swaption cash - Hull-White - present value - explicit/numerical integration",
pvReceiverApproximation[loopstrike],
pvReceiverIntegration[loopstrike],
errorLimit);
}
}
@Test
/** Tests the curve sensitivity. */
public void presentValueCurveSensitivity() {
InterestRateCurveSensitivity pvsSwaption =
METHOD_HW_APPROXIMATION.presentValueCurveSensitivity(SWAPTION_PAYER_LONG, BUNDLE_HW);
pvsSwaption = pvsSwaption.cleaned();
final double deltaTolerancePrice = 1.0E+4;
// Testing note: Sensitivity is for a movement of 1. 1E+2 = 1 cent for a 1 bp move. Tolerance
// increased to cope with numerical imprecision of finite difference.
final double deltaShift = 1.0E-6;
// 1. Forward curve sensitivity
final String bumpedCurveName = "Bumped Curve";
final SwaptionCashFixedIbor swptBumpedForward =
SWAPTION_PAYER_LONG_DEFINITION.toDerivative(
REFERENCE_DATE, new String[] {CURVES_NAME[0], bumpedCurveName});
DoubleAVLTreeSet forwardTime = new DoubleAVLTreeSet();
for (int loopcpn = 0;
loopcpn < SWAPTION_PAYER_LONG.getUnderlyingSwap().getSecondLeg().getNumberOfPayments();
loopcpn++) {
CouponIbor cpn =
(CouponIbor)
SWAPTION_PAYER_LONG.getUnderlyingSwap().getSecondLeg().getNthPayment(loopcpn);
forwardTime.add(cpn.getFixingPeriodStartTime());
forwardTime.add(cpn.getFixingPeriodEndTime());
}
double[] nodeTimesForward = forwardTime.toDoubleArray();
final double[] sensiForwardMethod =
SensitivityFiniteDifference.curveSensitivity(
swptBumpedForward,
BUNDLE_HW,
CURVES_NAME[1],
bumpedCurveName,
nodeTimesForward,
deltaShift,
METHOD_HW_APPROXIMATION);
final List<DoublesPair> sensiPvForward = pvsSwaption.getSensitivities().get(CURVES_NAME[1]);
for (int loopnode = 0; loopnode < sensiForwardMethod.length; loopnode++) {
final DoublesPair pairPv = sensiPvForward.get(loopnode);
assertEquals(
"Sensitivity swaption pv to forward curve: Node " + loopnode,
nodeTimesForward[loopnode],
pairPv.getFirst(),
1E-8);
assertEquals(
"Sensitivity finite difference method: node sensitivity " + loopnode,
sensiForwardMethod[loopnode],
pairPv.second,
deltaTolerancePrice);
}
// 2. Discounting curve sensitivity
final SwaptionCashFixedIbor swptBumpedDisc =
SWAPTION_PAYER_LONG_DEFINITION.toDerivative(
REFERENCE_DATE, new String[] {bumpedCurveName, CURVES_NAME[1]});
DoubleAVLTreeSet discTime = new DoubleAVLTreeSet();
discTime.add(SWAPTION_PAYER_LONG.getSettlementTime());
for (int loopcpn = 0;
loopcpn < SWAPTION_PAYER_LONG.getUnderlyingSwap().getSecondLeg().getNumberOfPayments();
loopcpn++) {
CouponIbor cpn =
(CouponIbor)
SWAPTION_PAYER_LONG.getUnderlyingSwap().getSecondLeg().getNthPayment(loopcpn);
discTime.add(cpn.getPaymentTime());
}
double[] nodeTimesDisc = discTime.toDoubleArray();
final double[] sensiDiscMethod =
SensitivityFiniteDifference.curveSensitivity(
swptBumpedDisc,
BUNDLE_HW,
CURVES_NAME[0],
bumpedCurveName,
nodeTimesDisc,
deltaShift,
METHOD_HW_APPROXIMATION);
assertEquals(
"Sensitivity finite difference method: number of node", 11, sensiDiscMethod.length);
final List<DoublesPair> sensiPvDisc = pvsSwaption.getSensitivities().get(CURVES_NAME[0]);
for (int loopnode = 0; loopnode < sensiDiscMethod.length; loopnode++) {
final DoublesPair pairPv = sensiPvDisc.get(loopnode);
assertEquals(
"Sensitivity swaption pv to forward curve: Node " + loopnode,
nodeTimesDisc[loopnode],
pairPv.getFirst(),
1E-8);
assertEquals(
"Sensitivity finite difference method: node sensitivity",
sensiDiscMethod[loopnode],
pairPv.second,
deltaTolerancePrice);
}
}
@Test(enabled = false)
/** Tests of performance. "enabled = false" for the standard testing. */
public void performance() {
long startTime, endTime;
final int nbTest = 1000;
CurrencyAmount pvPayerLongExplicit = CurrencyAmount.of(CUR, 0.0);
CurrencyAmount pvPayerLongIntegration = CurrencyAmount.of(CUR, 0.0);
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvPayerLongExplicit = METHOD_HW_APPROXIMATION.presentValue(SWAPTION_PAYER_LONG, BUNDLE_HW);
}
endTime = System.currentTimeMillis();
System.out.println(
nbTest + " pv swaption Hull-White approximation method: " + (endTime - startTime) + " ms");
// Performance note: HW price: 8-Jul-11: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 330 ms for
// 10000 swaptions.
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
METHOD_HW_APPROXIMATION.presentValueHullWhiteSensitivity(SWAPTION_PAYER_LONG, BUNDLE_HW);
}
endTime = System.currentTimeMillis();
System.out.println(
nbTest
+ " HW sensitivity swaption Hull-White approximation method: "
+ (endTime - startTime)
+ " ms");
// Performance note: HW parameters sensitivity: 8-Jul-11: On Mac Pro 3.2 GHz Quad-Core Intel
// Xeon: 525 ms for 10000 swaptions.
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
METHOD_HW_APPROXIMATION.presentValueCurveSensitivity(SWAPTION_PAYER_LONG, BUNDLE_HW);
}
endTime = System.currentTimeMillis();
System.out.println(
nbTest
+ " curve sensitivity swaption Hull-White approximation method: "
+ (endTime - startTime)
+ " ms");
// Performance note: HW curve sensitivity: 8-Jul-11: On Mac Pro 3.2 GHz Quad-Core Intel Xeon:
// 550 ms for 10000 swaptions.
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvPayerLongIntegration = METHOD_HW_INTEGRATION.presentValue(SWAPTION_PAYER_LONG, BUNDLE_HW);
}
endTime = System.currentTimeMillis();
System.out.println(
nbTest
+ " cash swaption Hull-White numerical integration method: "
+ (endTime - startTime)
+ " ms");
// Performance note: HW numerical integration: 8-Jul-11: On Mac Pro 3.2 GHz Quad-Core Intel
// Xeon: 1300 ms for 10000 swaptions.
double difference = 0.0;
difference = pvPayerLongExplicit.getAmount() - pvPayerLongIntegration.getAmount();
System.out.println("Difference: " + difference);
}
}
@Test
/** Tests the curve sensitivity. */
public void presentValueCurveSensitivity() {
InterestRateCurveSensitivity pvsSwaption =
METHOD_HW_APPROXIMATION.presentValueCurveSensitivity(SWAPTION_PAYER_LONG, BUNDLE_HW);
pvsSwaption = pvsSwaption.cleaned();
final double deltaTolerancePrice = 1.0E+4;
// Testing note: Sensitivity is for a movement of 1. 1E+2 = 1 cent for a 1 bp move. Tolerance
// increased to cope with numerical imprecision of finite difference.
final double deltaShift = 1.0E-6;
// 1. Forward curve sensitivity
final String bumpedCurveName = "Bumped Curve";
final SwaptionCashFixedIbor swptBumpedForward =
SWAPTION_PAYER_LONG_DEFINITION.toDerivative(
REFERENCE_DATE, new String[] {CURVES_NAME[0], bumpedCurveName});
DoubleAVLTreeSet forwardTime = new DoubleAVLTreeSet();
for (int loopcpn = 0;
loopcpn < SWAPTION_PAYER_LONG.getUnderlyingSwap().getSecondLeg().getNumberOfPayments();
loopcpn++) {
CouponIbor cpn =
(CouponIbor)
SWAPTION_PAYER_LONG.getUnderlyingSwap().getSecondLeg().getNthPayment(loopcpn);
forwardTime.add(cpn.getFixingPeriodStartTime());
forwardTime.add(cpn.getFixingPeriodEndTime());
}
double[] nodeTimesForward = forwardTime.toDoubleArray();
final double[] sensiForwardMethod =
SensitivityFiniteDifference.curveSensitivity(
swptBumpedForward,
BUNDLE_HW,
CURVES_NAME[1],
bumpedCurveName,
nodeTimesForward,
deltaShift,
METHOD_HW_APPROXIMATION);
final List<DoublesPair> sensiPvForward = pvsSwaption.getSensitivities().get(CURVES_NAME[1]);
for (int loopnode = 0; loopnode < sensiForwardMethod.length; loopnode++) {
final DoublesPair pairPv = sensiPvForward.get(loopnode);
assertEquals(
"Sensitivity swaption pv to forward curve: Node " + loopnode,
nodeTimesForward[loopnode],
pairPv.getFirst(),
1E-8);
assertEquals(
"Sensitivity finite difference method: node sensitivity " + loopnode,
sensiForwardMethod[loopnode],
pairPv.second,
deltaTolerancePrice);
}
// 2. Discounting curve sensitivity
final SwaptionCashFixedIbor swptBumpedDisc =
SWAPTION_PAYER_LONG_DEFINITION.toDerivative(
REFERENCE_DATE, new String[] {bumpedCurveName, CURVES_NAME[1]});
DoubleAVLTreeSet discTime = new DoubleAVLTreeSet();
discTime.add(SWAPTION_PAYER_LONG.getSettlementTime());
for (int loopcpn = 0;
loopcpn < SWAPTION_PAYER_LONG.getUnderlyingSwap().getSecondLeg().getNumberOfPayments();
loopcpn++) {
CouponIbor cpn =
(CouponIbor)
SWAPTION_PAYER_LONG.getUnderlyingSwap().getSecondLeg().getNthPayment(loopcpn);
discTime.add(cpn.getPaymentTime());
}
double[] nodeTimesDisc = discTime.toDoubleArray();
final double[] sensiDiscMethod =
SensitivityFiniteDifference.curveSensitivity(
swptBumpedDisc,
BUNDLE_HW,
CURVES_NAME[0],
bumpedCurveName,
nodeTimesDisc,
deltaShift,
METHOD_HW_APPROXIMATION);
assertEquals(
"Sensitivity finite difference method: number of node", 11, sensiDiscMethod.length);
final List<DoublesPair> sensiPvDisc = pvsSwaption.getSensitivities().get(CURVES_NAME[0]);
for (int loopnode = 0; loopnode < sensiDiscMethod.length; loopnode++) {
final DoublesPair pairPv = sensiPvDisc.get(loopnode);
assertEquals(
"Sensitivity swaption pv to forward curve: Node " + loopnode,
nodeTimesDisc[loopnode],
pairPv.getFirst(),
1E-8);
assertEquals(
"Sensitivity finite difference method: node sensitivity",
sensiDiscMethod[loopnode],
pairPv.second,
deltaTolerancePrice);
}
}