@Test
public void presentValueCurveSensitivity() {
final InterestRateCurveSensitivity pvcsComputed =
METHOD_SECURITY.presentValueCurveSensitivity(BILL_IAM_SEC, CURVE_BUNDLE);
assertEquals(
"Bill Security: present value curve sensitivity",
1,
pvcsComputed.getSensitivities().size());
assertEquals(
"Bill Security: present value curve sensitivity",
1,
pvcsComputed.getSensitivities().get(NAME_CURVES[1]).size());
final double deltaTolerancePrice = 1.0E+2;
// Testing note: Sensitivity is for a movement of 1. 1E+2 = 0.01 unit for a 1 bp move.
final double deltaShift = 1.0E-6;
// Credit curve sensitivity
final String bumpedCurveName = "Bumped Curve";
final BillSecurity billBumped =
BILL_IAM_SEC_DEFINITION.toDerivative(REFERENCE_DATE, NAME_CURVES[0], bumpedCurveName);
final double[] nodeTimes = new double[] {billBumped.getEndTime()};
final double[] sensi =
SensitivityFiniteDifference.curveSensitivity(
billBumped,
CURVE_BUNDLE,
NAME_CURVES[1],
bumpedCurveName,
nodeTimes,
deltaShift,
METHOD_SECURITY);
final List<DoublesPair> sensiPv = pvcsComputed.getSensitivities().get(NAME_CURVES[1]);
for (int loopnode = 0; loopnode < sensi.length; loopnode++) {
final DoublesPair pairPv = sensiPv.get(loopnode);
assertEquals(
"Bill Security: curve sensitivity - Node " + loopnode,
nodeTimes[loopnode],
pairPv.getFirst(),
1E-8);
AssertJUnit.assertEquals(
"Bill Security: curve sensitivity", pairPv.second, sensi[loopnode], deltaTolerancePrice);
}
}
@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
/**
* 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);
}
}
