@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(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(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 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); }