/**
* Copyright (C) 2013 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.inflation.provider;
import java.util.ArrayList;
import java.util.HashMap;
import java.util.List;
import java.util.Map;
import com.opengamma.analytics.financial.interestrate.inflation.derivative.CouponInflationYearOnYearInterpolation;
import com.opengamma.analytics.financial.provider.description.inflation.InflationProviderInterface;
import com.opengamma.analytics.financial.provider.sensitivity.inflation.InflationSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.inflation.MultipleCurrencyInflationSensitivity;
import com.opengamma.util.ArgumentChecker;
import com.opengamma.util.money.MultipleCurrencyAmount;
import com.opengamma.util.tuple.DoublesPair;
/**
* Pricing method for inflation Year on Year. The price is computed by index estimation and discounting.
*/
public class CouponInflationYearOnYearInterpolationDiscountingMethod {
/**
* Computes the net amount of the Year on Year coupon with reference index at start of the month.
* @param coupon The zero-coupon payment.
* @param inflation The inflation provider.
* @return The net amount.
*/
public MultipleCurrencyAmount netAmount(final CouponInflationYearOnYearInterpolation coupon, final InflationProviderInterface inflation) {
ArgumentChecker.notNull(coupon, "Coupon");
ArgumentChecker.notNull(inflation, "Inflation");
final double estimatedIndexStart = indexEstimationStart(coupon, inflation);
final double estimatedIndexEnd = indexEstimationEnd(coupon, inflation);
final double na = (estimatedIndexEnd / estimatedIndexStart - (coupon.payNotional() ? 0.0 : 1.0)) * coupon.getNotional();
return MultipleCurrencyAmount.of(coupon.getCurrency(), na);
}
/**
* Computes the present value of the Year on Year coupon without convexity adjustment.
* @param coupon The zero-coupon payment.
* @param inflation The inflation provider.
* @return The present value.
*/
public MultipleCurrencyAmount presentValue(final CouponInflationYearOnYearInterpolation coupon, final InflationProviderInterface inflation) {
ArgumentChecker.notNull(coupon, "Coupon");
ArgumentChecker.notNull(inflation, "Inflation");
final double discountFactor = inflation.getDiscountFactor(coupon.getCurrency(), coupon.getPaymentTime());
return netAmount(coupon, inflation).multipliedBy(discountFactor);
}
/**
* Computes the estimated index with the weight and the reference start date.
* @param coupon The zero-coupon payment.
* @param inflation The inflation provider.
* @return The estimated index for the reference start date.
*/
public double indexEstimationStart(final CouponInflationYearOnYearInterpolation coupon, final InflationProviderInterface inflation) {
final double estimatedIndexMonth0 = inflation.getPriceIndex(coupon.getPriceIndex(), coupon.getReferenceStartTime()[0]);
final double estimatedIndexMonth1 = inflation.getPriceIndex(coupon.getPriceIndex(), coupon.getReferenceStartTime()[1]);
return coupon.getWeightStart() * estimatedIndexMonth0 + (1 - coupon.getWeightStart()) * estimatedIndexMonth1;
}
/**
* Computes the estimated index with the weight and the reference end date.
* @param coupon The zero-coupon payment.
* @param inflation The inflation provider.
* @return The estimated index for the reference end date.
*/
public double indexEstimationEnd(final CouponInflationYearOnYearInterpolation coupon, final InflationProviderInterface inflation) {
final double estimatedIndexMonth0 = inflation.getPriceIndex(coupon.getPriceIndex(), coupon.getReferenceEndTime()[0]);
final double estimatedIndexMonth1 = inflation.getPriceIndex(coupon.getPriceIndex(), coupon.getReferenceEndTime()[1]);
return coupon.getWeightEnd() * estimatedIndexMonth0 + (1 - coupon.getWeightEnd()) * estimatedIndexMonth1;
}
/**
* Compute the present value sensitivity to rates of a Inflation coupon.
* @param coupon The coupon.
* @param inflation The inflation provider.
* @return The present value sensitivity.
*/
public MultipleCurrencyInflationSensitivity presentValueCurveSensitivity(final CouponInflationYearOnYearInterpolation coupon, final InflationProviderInterface inflation) {
ArgumentChecker.notNull(coupon, "Coupon");
ArgumentChecker.notNull(inflation, "Inflation");
final double estimatedIndexStartMonth0 = inflation.getPriceIndex(coupon.getPriceIndex(), coupon.getReferenceStartTime()[0]);
final double estimatedIndexStartMonth1 = inflation.getPriceIndex(coupon.getPriceIndex(), coupon.getReferenceStartTime()[1]);
final double estimatedIndexEndMonth0 = inflation.getPriceIndex(coupon.getPriceIndex(), coupon.getReferenceEndTime()[0]);
final double estimatedIndexEndMonth1 = inflation.getPriceIndex(coupon.getPriceIndex(), coupon.getReferenceEndTime()[1]);
final double estimatedIndexStart = coupon.getWeightStart() * estimatedIndexStartMonth0 + (1 - coupon.getWeightStart()) * estimatedIndexStartMonth1;
final double estimatedIndexEnd = coupon.getWeightEnd() * estimatedIndexEndMonth0 + (1 - coupon.getWeightEnd()) * estimatedIndexEndMonth1;
final double discountFactor = inflation.getDiscountFactor(coupon.getCurrency(), coupon.getPaymentTime());
// Backward sweep
final double pvBar = 1.0;
final double discountFactorBar = (estimatedIndexEnd / estimatedIndexStart - (coupon.payNotional() ? 0.0 : 1.0)) * coupon.getNotional() * pvBar;
final double estimatedIndexEndBar = 1.0 / estimatedIndexStart * discountFactor * coupon.getNotional() * pvBar;
final double estimatedIndexStartBar = -estimatedIndexEnd / (estimatedIndexStart * estimatedIndexStart) * discountFactor * coupon.getNotional() * pvBar;
final double estimatedIndexEndMonth1bar = (1 - coupon.getWeightEnd()) * estimatedIndexEndBar;
final double estimatedIndexEndMonth0bar = coupon.getWeightEnd() * estimatedIndexEndBar;
final double estimatedIndexStartMonth1bar = (1 - coupon.getWeightStart()) * estimatedIndexStartBar;
final double estimatedIndexStartMonth0bar = coupon.getWeightStart() * estimatedIndexStartBar;
final Map<String, List<DoublesPair>> resultMapDisc = new HashMap<>();
final List<DoublesPair> listDiscounting = new ArrayList<>();
listDiscounting.add(new DoublesPair(coupon.getPaymentTime(), -coupon.getPaymentTime() * discountFactor * discountFactorBar));
resultMapDisc.put(inflation.getName(coupon.getCurrency()), listDiscounting);
final Map<String, List<DoublesPair>> resultMapPrice = new HashMap<>();
final List<DoublesPair> listPrice = new ArrayList<>();
listPrice.add(new DoublesPair(coupon.getReferenceEndTime()[0], estimatedIndexEndMonth0bar));
listPrice.add(new DoublesPair(coupon.getReferenceEndTime()[1], estimatedIndexEndMonth1bar));
listPrice.add(new DoublesPair(coupon.getReferenceStartTime()[0], estimatedIndexStartMonth0bar));
listPrice.add(new DoublesPair(coupon.getReferenceStartTime()[1], estimatedIndexStartMonth1bar));
resultMapPrice.put(inflation.getName(coupon.getPriceIndex()), listPrice);
final InflationSensitivity inflationSensitivity = InflationSensitivity.ofYieldDiscountingAndPriceIndex(resultMapDisc, resultMapPrice);
return MultipleCurrencyInflationSensitivity.of(coupon.getCurrency(), inflationSensitivity);
}
}