Examples of com.opengamma.analytics.financial.forex.definition.ForexOptionDigitalDefinition

Package com.opengamma.analytics.financial.forex.definition

Examples of com.opengamma.analytics.financial.forex.definition.ForexOptionDigitalDefinition

com.opengamma.analytics.financial.forex.definition.ForexOptionDigitalDefinition
Class describing a digital foreign exchange European option. The implied strike is the absolute value of ratio of the domestic currency (currency 2) amount and the foreign currency amount (currency1). When the option is a call, it pays the absolute value of the payment currency amount when the spot rate is above the strike and nothing otherwise. When the option is a put, it pays the absolute value of the payment currency amount when the spot rate is below the strike and nothing otherwise.

    final boolean isLong = true;
    final double notional = 100000000;
    final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
    final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
    final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
    final ForexOptionDigitalDefinition callDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
    final ForexOptionDigitalDefinition putDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong);
    final ForexOptionDigital call = callDefinition.toDerivative(REFERENCE_DATE);
    final ForexOptionDigital put = putDefinition.toDerivative(REFERENCE_DATE);
    final MultipleCurrencyAmount pvCall = METHOD_DIGITAL_SPREAD.presentValue(call, SMILE_MULTICURVES);
    final MultipleCurrencyAmount pvPut = METHOD_DIGITAL_SPREAD.presentValue(put, SMILE_MULTICURVES);
    final Double pvCash = Math.abs(put.getUnderlyingForex().getPaymentCurrency2().accept(PVDC, MULTICURVES).getAmount(USD));
    assertEquals("Forex Digital option: call spread method - present value", pvCall.getAmount(USD) + pvPut.getAmount(USD), Math.abs(pvCash), TOLERANCE_PV_FLAT);
  }

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    final boolean isLong = true;
    final double notional = 100000000;
    final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
    final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
    final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
    final ForexOptionDigitalDefinition callDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong, false);
    final ForexOptionDigitalDefinition putDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong, false);
    final ForexOptionDigital call = callDefinition.toDerivative(REFERENCE_DATE);
    final ForexOptionDigital put = putDefinition.toDerivative(REFERENCE_DATE);
    final MultipleCurrencyAmount pvCall = METHOD_DIGITAL_SPREAD.presentValue(call, SMILE_MULTICURVES);
    final MultipleCurrencyAmount pvPut = METHOD_DIGITAL_SPREAD.presentValue(put, SMILE_MULTICURVES);
    final Double pvCash = Math.abs(put.getUnderlyingForex().getPaymentCurrency1().accept(PVDC, MULTICURVES).getAmount(EUR));
    assertEquals("Forex Digital option: call spread method - present value", pvCall.getAmount(EUR) + pvPut.getAmount(EUR), Math.abs(pvCash), TOLERANCE_PV_FLAT);
  }

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  @Test
  /**
   * Tests the present value long/short parity.
   */
  public void presentValueLongShort() {
    final ForexOptionDigitalDefinition forexOptionShortDefinition = new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, !IS_LONG);
    final ForexOptionDigital forexOptionShort = forexOptionShortDefinition.toDerivative(REFERENCE_DATE);
    final MultipleCurrencyAmount pvShort = METHOD_DIGITAL_SPREAD.presentValue(forexOptionShort, SMILE_MULTICURVES);
    final MultipleCurrencyAmount pvLong = METHOD_DIGITAL_SPREAD.presentValue(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
    assertEquals("Forex Digital option: present value long/short parity", pvLong.getAmount(USD), -pvShort.getAmount(USD), 1E-2);
    final MultipleCurrencyAmount ceShort = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionShort, SMILE_MULTICURVES);
    final MultipleCurrencyAmount ceLong = METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);

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    final boolean isLong = true;
    final double notional = 100000000;
    final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
    final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
    final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
    final ForexOptionDigitalDefinition forexOptionDefinitionCall = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
    final ForexOptionDigitalDefinition forexOptionDefinitionPut = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong);
    final ForexOptionDigital forexOptionCall = forexOptionDefinitionCall.toDerivative(REFERENCE_DATE);
    final ForexOptionDigital forexOptionPut = forexOptionDefinitionPut.toDerivative(REFERENCE_DATE);
    final MultipleCurrencyAmount currencyExposureCall = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionCall, SMILE_MULTICURVES);
    final MultipleCurrencyAmount currencyExposurePut = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionPut, SMILE_MULTICURVES);
    final MultipleCurrencyAmount pvCash = forexOptionPut.getUnderlyingForex().getPaymentCurrency2().accept(PVDC, MULTICURVES);
    assertEquals("Forex Digital option: currency exposure put/call parity foreign", 0, currencyExposureCall.getAmount(EUR) + currencyExposurePut.getAmount(EUR),
        TOLERANCE_PV);

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    final boolean isLong = true;
    final double notional = 100000000;
    final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
    final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
    final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
    final ForexOptionDigitalDefinition forexOptionDefinitionCall = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong, false);
    final ForexOptionDigitalDefinition forexOptionDefinitionPut = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong, false);
    final ForexOptionDigital forexOptionCall = forexOptionDefinitionCall.toDerivative(REFERENCE_DATE);
    final ForexOptionDigital forexOptionPut = forexOptionDefinitionPut.toDerivative(REFERENCE_DATE);
    final MultipleCurrencyAmount currencyExposureCall = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionCall, SMILE_MULTICURVES);
    final MultipleCurrencyAmount currencyExposurePut = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionPut, SMILE_MULTICURVES);
    final MultipleCurrencyAmount pvCash = forexOptionPut.getUnderlyingForex().getPaymentCurrency1().accept(PVDC, MULTICURVES);
    assertEquals("Forex Digital option: currency exposure put/call parity foreign", 0, currencyExposureCall.getAmount(USD) + currencyExposurePut.getAmount(USD),
        TOLERANCE_PV);

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  @Test
  /**
   * Tests the gamma for Forex option. Payment in foreign currency.
   */
  public void gammaForeign() {
    final ForexOptionDigitalDefinition digitalForeignDefinition = new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, IS_LONG, false);
    final ForexOptionDigital digitalForeign = digitalForeignDefinition.toDerivative(REFERENCE_DATE);
    final double strikeM = STRIKE * (1 - CALL_SPREAD);
    final double strikeP = STRIKE * (1 + CALL_SPREAD);
    final double amountPaid = Math.abs(digitalForeign.getUnderlyingForex().getPaymentCurrency1().getAmount());
    final double strikeRelM = 1.0 / strikeP;
    final double strikeRelP = 1.0 / strikeM;

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  @Test
  /**
   * Tests the gamma for Forex option. Payment in foreign currency.
   */
  public void gammaSpotForeign() {
    final ForexOptionDigitalDefinition digitalForeignDefinition = new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, IS_LONG, false);
    final ForexOptionDigital digitalForeign = digitalForeignDefinition.toDerivative(REFERENCE_DATE);
    final double strikeM = STRIKE * (1 - CALL_SPREAD);
    final double strikeP = STRIKE * (1 + CALL_SPREAD);
    final double amountPaid = Math.abs(digitalForeign.getUnderlyingForex().getPaymentCurrency1().getAmount());
    final double strikeRelM = 1.0 / strikeP;
    final double strikeRelP = 1.0 / strikeM;

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    final ForexOptionVanilla[] forexOptionVanilla = new ForexOptionVanilla[nbStrike + 1];
    for (int loopstrike = 0; loopstrike <= nbStrike; loopstrike++) {
      strike[loopstrike] = SPOT - range + loopstrike * shift;
      final ForexDefinition forexDefinitonUSD = ForexDefinition.fromAmounts(EUR, USD, OPTION_EXP_DATE, -NOTIONAL / strike[loopstrike], NOTIONAL);
      final ForexDefinition forexDefinitonEUR = ForexDefinition.fromAmounts(EUR, USD, OPTION_EXP_DATE, -1.0, strike[loopstrike]);
      final ForexOptionDigitalDefinition forexOptionDigitalDefiniton = new ForexOptionDigitalDefinition(forexDefinitonUSD, OPTION_EXP_DATE, IS_CALL, IS_LONG);
      final ForexOptionVanillaDefinition forexOptionVanillaDefiniton = new ForexOptionVanillaDefinition(forexDefinitonEUR, OPTION_EXP_DATE, IS_CALL, IS_LONG);
      forexOptionDigital[loopstrike] = forexOptionDigitalDefiniton.toDerivative(REFERENCE_DATE);
      forexOptionVanilla[loopstrike] = forexOptionVanillaDefiniton.toDerivative(REFERENCE_DATE);
    }
    final double[] pvDigitalSpread = new double[nbStrike + 1];
    final double[] pvDigitalBlack = new double[nbStrike + 1];
    final double[] pvVanillaBlack = new double[nbStrike + 1];

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    final boolean isLong = true;
    final double notional = 100000000;
    final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
    final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
    final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
    final ForexOptionDigitalDefinition callDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
    final ForexOptionDigitalDefinition putDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong);
    final ForexOptionDigital call = callDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
    final ForexOptionDigital put = putDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
    final MultipleCurrencyAmount pvCall = METHOD_DIGITAL_SPREAD.presentValue(call, SMILE_BUNDLE);
    final MultipleCurrencyAmount pvPut = METHOD_DIGITAL_SPREAD.presentValue(put, SMILE_BUNDLE);
    final Double pvCash = Math.abs(put.getUnderlyingForex().getPaymentCurrency2().accept(PVC, CURVES));
    assertEquals("Forex Digital option: call spread method - present value", pvCall.getAmount(USD) + pvPut.getAmount(USD), Math.abs(pvCash), TOLERANCE_PV_FLAT);
  }

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    final boolean isLong = true;
    final double notional = 100000000;
    final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
    final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
    final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
    final ForexOptionDigitalDefinition callDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong, false);
    final ForexOptionDigitalDefinition putDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong, false);
    final ForexOptionDigital call = callDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
    final ForexOptionDigital put = putDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
    final MultipleCurrencyAmount pvCall = METHOD_DIGITAL_SPREAD.presentValue(call, SMILE_BUNDLE);
    final MultipleCurrencyAmount pvPut = METHOD_DIGITAL_SPREAD.presentValue(put, SMILE_BUNDLE);
    final Double pvCash = Math.abs(put.getUnderlyingForex().getPaymentCurrency1().accept(PVC, CURVES));
    assertEquals("Forex Digital option: call spread method - present value", pvCall.getAmount(EUR) + pvPut.getAmount(EUR), Math.abs(pvCash), TOLERANCE_PV_FLAT);
  }

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