Examples of com.opengamma.analytics.financial.forex.derivative.ForexOptionDigital

Package com.opengamma.analytics.financial.forex.derivative

Examples of com.opengamma.analytics.financial.forex.derivative.ForexOptionDigital

com.opengamma.analytics.financial.forex.derivative.ForexOptionDigital
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 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, CURVES_NAME);
    final ForexOptionDigital forexOptionPut = forexOptionDefinitionPut.toDerivative(REFERENCE_DATE, CURVES_NAME);
    final MultipleCurrencyAmount currencyExposureCall = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionCall, SMILE_BUNDLE);
    final MultipleCurrencyAmount currencyExposurePut = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionPut, SMILE_BUNDLE);
    final Double pvCash = forexOptionPut.getUnderlyingForex().getPaymentCurrency2().accept(PVC, CURVES);
    assertEquals("Forex Digital option: currency exposure put/call parity foreign", 0, currencyExposureCall.getAmount(EUR) + currencyExposurePut.getAmount(EUR), TOLERANCE_PV);
    assertEquals("Forex Digital option: currency exposure put/call parity domestic", Math.abs(pvCash), currencyExposureCall.getAmount(USD) + currencyExposurePut.getAmount(USD), TOLERANCE_PV);
  }

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    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, CURVES_NAME);
    final ForexOptionDigital forexOptionPut = forexOptionDefinitionPut.toDerivative(REFERENCE_DATE, CURVES_NAME);
    final MultipleCurrencyAmount currencyExposureCall = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionCall, SMILE_BUNDLE);
    final MultipleCurrencyAmount currencyExposurePut = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionPut, SMILE_BUNDLE);
    final Double pvCash = forexOptionPut.getUnderlyingForex().getPaymentCurrency1().accept(PVC, CURVES);
    assertEquals("Forex Digital option: currency exposure put/call parity foreign", 0, currencyExposureCall.getAmount(USD) + currencyExposurePut.getAmount(USD), TOLERANCE_PV);
    assertEquals("Forex Digital option: currency exposure put/call parity domestic", Math.abs(pvCash), currencyExposureCall.getAmount(EUR) + currencyExposurePut.getAmount(EUR), TOLERANCE_PV);
  }

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  /**
   * 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, CURVES_NAME);
    final double strikeM = STRIKE * (1 - STANDARD_SPREAD);
    final double strikeP = STRIKE * (1 + STANDARD_SPREAD);
    final double amountPaid = Math.abs(digitalForeign.getUnderlyingForex().getPaymentCurrency1().getAmount());
    final double strikeRelM = 1.0 / strikeP;
    final double strikeRelP = 1.0 / strikeM;
    final double amount = amountPaid / (strikeRelP - strikeRelM);
    final Forex forexM = new Forex(digitalForeign.getUnderlyingForex().getPaymentCurrency2().withAmount(amount), digitalForeign.getUnderlyingForex().getPaymentCurrency1()
        .withAmount(-strikeRelM * amount));
    final Forex forexP = new Forex(digitalForeign.getUnderlyingForex().getPaymentCurrency2().withAmount(amount), digitalForeign.getUnderlyingForex().getPaymentCurrency1()
        .withAmount(-strikeRelP * amount));
    final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, digitalForeign.getExpirationTime(), !IS_CALL, false);
    final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, digitalForeign.getExpirationTime(), !IS_CALL, true);
    final CurrencyAmount gammaP = METHOD_VANILLA_BLACK.gamma(vanillaP, SMILE_BUNDLE, false);
    final CurrencyAmount gammaM = METHOD_VANILLA_BLACK.gamma(vanillaM, SMILE_BUNDLE, false);
    final CurrencyAmount gammaExpected = gammaM.plus(gammaP);
    final CurrencyAmount gammaComputed = METHOD_DIGITAL_SPREAD.gamma(digitalForeign, SMILE_BUNDLE);
    assertEquals("Forex Digital option: call spread method - gamma", gammaExpected.getAmount(), gammaComputed.getAmount(), TOLERANCE_PV);

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  /**
   * 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, CURVES_NAME);
    final double strikeM = STRIKE * (1 - STANDARD_SPREAD);
    final double strikeP = STRIKE * (1 + STANDARD_SPREAD);
    final double amountPaid = Math.abs(digitalForeign.getUnderlyingForex().getPaymentCurrency1().getAmount());
    final double strikeRelM = 1.0 / strikeP;
    final double strikeRelP = 1.0 / strikeM;
    final double amount = amountPaid / (strikeRelP - strikeRelM);
    final Forex forexM = new Forex(digitalForeign.getUnderlyingForex().getPaymentCurrency2().withAmount(amount), digitalForeign.getUnderlyingForex().getPaymentCurrency1()
        .withAmount(-strikeRelM * amount));
    final Forex forexP = new Forex(digitalForeign.getUnderlyingForex().getPaymentCurrency2().withAmount(amount), digitalForeign.getUnderlyingForex().getPaymentCurrency1()
        .withAmount(-strikeRelP * amount));
    final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, digitalForeign.getExpirationTime(), !IS_CALL, false);
    final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, digitalForeign.getExpirationTime(), !IS_CALL, true);
    final CurrencyAmount gammaP = METHOD_VANILLA_BLACK.gammaSpot(vanillaP, SMILE_BUNDLE, false);
    final CurrencyAmount gammaM = METHOD_VANILLA_BLACK.gammaSpot(vanillaM, SMILE_BUNDLE, false);
    final CurrencyAmount gammaExpected = gammaM.plus(gammaP);
    final CurrencyAmount gammaComputed = METHOD_DIGITAL_SPREAD.gammaSpot(digitalForeign, SMILE_BUNDLE);
    assertEquals("Forex Digital option: call spread method - gamma spot", gammaExpected.getAmount(), gammaComputed.getAmount(), TOLERANCE_PV);

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