Package com.opengamma.analytics.financial.model.option.definition

Examples of com.opengamma.analytics.financial.model.option.definition.SABRInterestRateParameters

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    //    final VolatilitySurface rhoVolatility = new VolatilitySurface(rhoSurface);
    final InterpolatedDoublesSurface nuSurface = InterpolatedDoublesSurface.from(new double[] {0.0, 0.5, 1, 2, 5, 0.0, 0.5, 1, 2, 5 }, new double[] {1, 1, 1, 1, 1, 5, 5, 5, 5, 5 }, new double[] {
        0.50,
        0.50, 0.50, 0.50, 0.50, 0.30, 0.30, 0.30, 0.30, 0.30 }, new GridInterpolator2D(LINEAR, LINEAR));
    //    final VolatilitySurface nuVolatility = new VolatilitySurface(nuSurface);
    final SABRInterestRateParameters sabrParameter = new SABRInterestRateParameters(alphaSurface, betaSurface, rhoSurface, nuSurface, DAY_COUNT_STANDARD);
    final SABRInterestRateDataBundle sabrBundle = new SABRInterestRateDataBundle(sabrParameter, CURVES);
    // Swaption pricing.
    final double priceLongPayer = SWAPTION_LONG_PAYER.accept(PVC, sabrBundle);
    final double priceShortPayer = SWAPTION_SHORT_PAYER.accept(PVC, sabrBundle);
    final double priceLongReceiver = SWAPTION_LONG_RECEIVER.accept(PVC, sabrBundle);
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  @Test
  public void testPriceChangeSABRFormula() {
    final YieldCurveBundle curves = TestsDataSetsSABR.createCurves1();
    // SABR Hagan volatility function
    final SABRInterestRateParameters sabrParameterHagan = TestsDataSetsSABR.createSABR1(new SABRHaganVolatilityFunction());
    final SABRInterestRateDataBundle sabrHaganBundle = new SABRInterestRateDataBundle(sabrParameterHagan, curves);
    final double priceHagan = SWAPTION_LONG_PAYER.accept(PVC, sabrHaganBundle);
    // From previous run
    assertEquals(1905857.579, priceHagan, 1E-2);
    // SABR Hagan alternative volatility function
    final SABRInterestRateParameters sabrParameterHaganAlt = TestsDataSetsSABR.createSABR1(new SABRHaganAlternativeVolatilityFunction());
    final SABRInterestRateDataBundle sabrHaganAltBundle = new SABRInterestRateDataBundle(sabrParameterHaganAlt, curves);
    final double priceHaganAlt = SWAPTION_LONG_PAYER.accept(PVC, sabrHaganAltBundle);
    assertEquals(priceHagan, priceHaganAlt, 5E+2);
    // SABR Berestycki volatility function
    final SABRInterestRateParameters sabrParameterBerestycki = TestsDataSetsSABR.createSABR1(new SABRBerestyckiVolatilityFunction());
    final SABRInterestRateDataBundle sabrBerestyckiBundle = new SABRInterestRateDataBundle(sabrParameterBerestycki, curves);
    final double priceBerestycki = SWAPTION_LONG_PAYER.accept(PVC, sabrBerestyckiBundle);
    assertEquals(priceHagan, priceBerestycki, 5E+2);
    // SABR Johnson volatility function
    final SABRInterestRateParameters sabrParameterJohnson = TestsDataSetsSABR.createSABR1(new SABRJohnsonVolatilityFunction());
    final SABRInterestRateDataBundle sabrJohnsonBundle = new SABRInterestRateDataBundle(sabrParameterJohnson, curves);
    final double priceJohnson = SWAPTION_LONG_PAYER.accept(PVC, sabrJohnsonBundle);
    assertEquals(priceHagan, priceJohnson, 1E+3);
    // SABR Paulot volatility function ! Does not work well !
    final SABRInterestRateParameters sabrParameterPaulot = TestsDataSetsSABR.createSABR1(new SABRPaulotVolatilityFunction());
    final SABRInterestRateDataBundle sabrPaulotBundle = new SABRInterestRateDataBundle(sabrParameterPaulot, curves);
    final double pricePaulot = SWAPTION_LONG_PAYER.accept(PVC, sabrPaulotBundle);
    assertEquals(priceHagan, pricePaulot, 1E+4);

  }
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    // SABR sensitivity vs finite difference
    final double shift = 0.0001;
    final double shiftAlpha = 0.00001;
    final DoublesPair expectedExpiryTenor = new DoublesPair(CAP_LONG.getFixingTime(), CAP_LONG.getFixingPeriodEndTime() - CAP_LONG.getFixingPeriodStartTime());
    // Alpha sensitivity vs finite difference computation
    final SABRInterestRateParameters sabrParameterAlphaBumped = SABRDataSets.createSABR1AlphaBumped(shiftAlpha);
    final SABRCapProviderDiscount sabrBundleAlphaBumped = new SABRCapProviderDiscount(MULTICURVES, sabrParameterAlphaBumped, EURIBOR3M);
    final double pvLongPayerAlphaBumped = METHOD_CAP_SABR.presentValue(CAP_LONG, sabrBundleAlphaBumped).getAmount(EUR);
    final double expectedAlphaSensi = (pvLongPayerAlphaBumped - pv) / shiftAlpha;
    assertEquals("Number of alpha sensitivity", pvsCapLong.getAlpha().getMap().keySet().size(), 1);
    assertEquals("Alpha sensitivity expiry/tenor", pvsCapLong.getAlpha().getMap().keySet().contains(expectedExpiryTenor), true);
    assertEquals("Alpha sensitivity value", expectedAlphaSensi, pvsCapLong.getAlpha().getMap().get(expectedExpiryTenor), 2.0E+0);
    // Rho sensitivity vs finite difference computation
    final SABRInterestRateParameters sabrParameterRhoBumped = SABRDataSets.createSABR1RhoBumped();
    final SABRCapProviderDiscount sabrBundleRhoBumped = new SABRCapProviderDiscount(MULTICURVES, sabrParameterRhoBumped, EURIBOR3M);
    final double pvLongPayerRhoBumped = METHOD_CAP_SABR.presentValue(CAP_LONG, sabrBundleRhoBumped).getAmount(EUR);
    final double expectedRhoSensi = (pvLongPayerRhoBumped - pv) / shift;
    assertEquals("Number of rho sensitivity", pvsCapLong.getRho().getMap().keySet().size(), 1);
    assertEquals("Rho sensitivity expiry/tenor", pvsCapLong.getRho().getMap().keySet().contains(expectedExpiryTenor), true);
    assertEquals("Rho sensitivity value", pvsCapLong.getRho().getMap().get(expectedExpiryTenor), expectedRhoSensi, 1.0E-2);
    // Alpha sensitivity vs finite difference computation
    final SABRInterestRateParameters sabrParameterNuBumped = SABRDataSets.createSABR1NuBumped();
    final SABRCapProviderDiscount sabrBundleNuBumped = new SABRCapProviderDiscount(MULTICURVES, sabrParameterNuBumped, EURIBOR3M);
    final double pvLongPayerNuBumped = METHOD_CAP_SABR.presentValue(CAP_LONG, sabrBundleNuBumped).getAmount(EUR);
    final double expectedNuSensi = (pvLongPayerNuBumped - pv) / shift;
    assertEquals("Number of nu sensitivity", pvsCapLong.getNu().getMap().keySet().size(), 1);
    assertTrue("Nu sensitivity expiry/tenor", pvsCapLong.getNu().getMap().keySet().contains(expectedExpiryTenor));
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  /**
   * Test the present value using the method with the direct formula (Black with implied volatility).
   */
  public void testPresentValue() {
    final YieldCurveBundle curves = TestsDataSetsSABR.createCurves1();
    final SABRInterestRateParameters sabrParameter = TestsDataSetsSABR.createSABR1();
    final SABRInterestRateDataBundle sabrBundle = new SABRInterestRateDataBundle(sabrParameter, curves);
    final double methodPrice = METHOD.presentValue(CAP_LONG, sabrBundle).getAmount();
    final double df = curves.getCurve(FUNDING_CURVE_NAME).getDiscountFactor(CAP_LONG.getPaymentTime());
    final double forward = CAP_LONG.accept(PRC, curves);
    final double maturity = CAP_LONG.getFixingPeriodEndTime() - CAP_LONG.getFixingPeriodStartTime();
    final double volatility = sabrParameter.getVolatility(CAP_LONG.getFixingTime(), maturity, STRIKE, forward);
    final BlackFunctionData dataBlack = new BlackFunctionData(forward, df, volatility);
    final EuropeanVanillaOption option = new EuropeanVanillaOption(STRIKE, CAP_LONG.getFixingTime(), IS_CAP);
    final Function1D<BlackFunctionData, Double> funcBlack = BLACK_FUNCTION.getPriceFunction(option);
    final double expectedPrice = funcBlack.evaluate(dataBlack) * CAP_LONG.getNotional() * CAP_LONG.getPaymentYearFraction();
    assertEquals("Cap/floor: SABR pricing", expectedPrice, methodPrice, 1E-2);
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  /**
   * Test the present value using the method and the calculator.
   */
  public void presentValueMethodVsCalculator() {
    final YieldCurveBundle curves = TestsDataSetsSABR.createCurves1();
    final SABRInterestRateParameters sabrParameter = TestsDataSetsSABR.createSABR1();
    final SABRInterestRateDataBundle sabrBundle = new SABRInterestRateDataBundle(sabrParameter, curves);
    final double expectedPv = METHOD.presentValue(CAP_LONG, sabrBundle).getAmount();
    final PresentValueSABRCalculator pvc = PresentValueSABRCalculator.getInstance();
    final double pv = CAP_LONG.accept(pvc, sabrBundle);
    assertEquals("Cap/floor SABR pricing: method and calculator", expectedPv, pv, 1E-2);
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  /**
   * Test several present value parities: long/short, cap/floor/forward
   */
  public void testPresentValueParity() {
    final YieldCurveBundle curves = TestsDataSetsSABR.createCurves1();
    final SABRInterestRateParameters sabrParameter = TestsDataSetsSABR.createSABR1();
    final SABRInterestRateDataBundle sabrBundle = new SABRInterestRateDataBundle(sabrParameter, curves);
    final double priceCapLong = METHOD.presentValue(CAP_LONG, sabrBundle).getAmount();
    final double priceCapShort = METHOD.presentValue(CAP_SHORT, sabrBundle).getAmount();
    assertEquals("Cap/floor - SABR pricing: long/short parity", -priceCapLong, priceCapShort, 1E-2);
    final double priceFloorShort = METHOD.presentValue(FLOOR_SHORT, sabrBundle).getAmount();
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  /**
   * Test the present value rate sensitivity against a finite difference computation. Test sensitivity long/short parity.
   */
  public void testPresentValueSensitivity() {
    final YieldCurveBundle curves = TestsDataSetsSABR.createCurves1();
    final SABRInterestRateParameters sabrParameter = TestsDataSetsSABR.createSABR1();
    final SABRInterestRateDataBundle sabrBundle = new SABRInterestRateDataBundle(sabrParameter, curves);
    final double pv = METHOD.presentValue(CAP_LONG, sabrBundle).getAmount();
    InterestRateCurveSensitivity pvsCapLong = METHOD.presentValueSensitivity(CAP_LONG, sabrBundle);
    final InterestRateCurveSensitivity pvsCapShort = METHOD.presentValueSensitivity(CAP_SHORT, sabrBundle);
    // Long/short parity
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    // SABR sensitivity vs finite difference
    final double shift = 0.0001;
    final double shiftAlpha = 0.00001;
    final DoublesPair expectedExpiryTenor = new DoublesPair(CAP_LONG.getFixingTime(), CAP_LONG.getFixingPeriodEndTime() - CAP_LONG.getFixingPeriodStartTime());
    // Alpha sensitivity vs finite difference computation
    final SABRInterestRateParameters sabrParameterAlphaBumped = TestsDataSetsSABR.createSABR1AlphaBumped(shiftAlpha);
    final SABRInterestRateDataBundle sabrBundleAlphaBumped = new SABRInterestRateDataBundle(sabrParameterAlphaBumped, CURVES);
    final double pvLongPayerAlphaBumped = METHOD.presentValue(CAP_LONG, sabrBundleAlphaBumped).getAmount();
    final double expectedAlphaSensi = (pvLongPayerAlphaBumped - pv) / shiftAlpha;
    assertEquals("Number of alpha sensitivity", pvsCapLong.getAlpha().getMap().keySet().size(), 1);
    assertEquals("Alpha sensitivity expiry/tenor", pvsCapLong.getAlpha().getMap().keySet().contains(expectedExpiryTenor), true);
    assertEquals("Alpha sensitivity value", expectedAlphaSensi, pvsCapLong.getAlpha().getMap().get(expectedExpiryTenor), 2.0E-1);
    // Rho sensitivity vs finite difference computation
    final SABRInterestRateParameters sabrParameterRhoBumped = TestsDataSetsSABR.createSABR1RhoBumped();
    final SABRInterestRateDataBundle sabrBundleRhoBumped = new SABRInterestRateDataBundle(sabrParameterRhoBumped, CURVES);
    final double pvLongPayerRhoBumped = METHOD.presentValue(CAP_LONG, sabrBundleRhoBumped).getAmount();
    final double expectedRhoSensi = (pvLongPayerRhoBumped - pv) / shift;
    assertEquals("Number of rho sensitivity", pvsCapLong.getRho().getMap().keySet().size(), 1);
    assertEquals("Rho sensitivity expiry/tenor", pvsCapLong.getRho().getMap().keySet().contains(expectedExpiryTenor), true);
    assertEquals("Rho sensitivity value", pvsCapLong.getRho().getMap().get(expectedExpiryTenor), expectedRhoSensi, 1.0E-2);
    // Alpha sensitivity vs finite difference computation
    final SABRInterestRateParameters sabrParameterNuBumped = TestsDataSetsSABR.createSABR1NuBumped();
    final SABRInterestRateDataBundle sabrBundleNuBumped = new SABRInterestRateDataBundle(sabrParameterNuBumped, CURVES);
    final double pvLongPayerNuBumped = METHOD.presentValue(CAP_LONG, sabrBundleNuBumped).getAmount();
    final double expectedNuSensi = (pvLongPayerNuBumped - pv) / shift;
    assertEquals("Number of nu sensitivity", pvsCapLong.getNu().getMap().keySet().size(), 1);
    assertTrue("Nu sensitivity expiry/tenor", pvsCapLong.getNu().getMap().keySet().contains(expectedExpiryTenor));
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    final SwaptionPhysicalFixedIborDefinition swaptionDefinition = SwaptionInstrumentsDescriptionDataSet.createSwaptionPhysicalFixedIborDefinition(); // USD - Expiry date: 2011-Mar-28
    final SwaptionPhysicalFixedIbor swaption = swaptionDefinition.toDerivative(referenceDate, curveNames);
    final PresentValueSABRCalculator pvc = PresentValueSABRCalculator.getInstance();
    final PresentValueCurveSensitivitySABRCalculator pvcsc = PresentValueCurveSensitivitySABRCalculator.getInstance();
    final YieldCurveBundle curves = TestsDataSetsSABR.createCurves2();
    final SABRInterestRateParameters sabrParam = TestsDataSetsSABR.createSABR2();
    final SABRInterestRateDataBundle sabrBundle = new SABRInterestRateDataBundle(sabrParam, curves);
    final DoubleMatrix1D resultCalculator = NODE_CALCULATOR.calculateSensitivities(swaption, pvcsc, null, sabrBundle);
    final DoubleMatrix1D resultFiniteDifference = finiteDiffNodeSensitivitiesYield(swaption, pvc, null, sabrBundle);
    final double notional = Math.abs(swaption.getUnderlyingSwap().getFirstLeg().getNthPayment(0).getNotional());
    assertArrayEquals("Present Value Node Sensitivity", resultFiniteDifference.getData(), resultCalculator.getData(), notional * getTolerance());
 
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  private static final SwapFixedCouponDiscountingMethod METHOD_SWAP = SwapFixedCouponDiscountingMethod.getInstance();

  @Test(expectedExceptions = IllegalArgumentException.class)
  public void testNoSABRHaganSensi() {
    final YieldCurveBundle curves = TestsDataSetsSABR.createCurves1();
    final SABRInterestRateParameters sabrParameter = TestsDataSetsSABR.createSABR1(new SABRHaganAlternativeVolatilityFunction());
    final SABRInterestRateDataBundle sabrBundle = new SABRInterestRateDataBundle(sabrParameter, curves);
    SWAPTION_LONG_PAYER.accept(PVCSC_SABR, sabrBundle);
  }
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