/**
* 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 static org.testng.AssertJUnit.assertEquals;
import org.testng.annotations.Test;
import org.threeten.bp.Period;
import org.threeten.bp.ZonedDateTime;
import com.opengamma.analytics.financial.instrument.index.IndexPrice;
import com.opengamma.analytics.financial.instrument.inflation.CapFloorInflationZeroCouponMonthlyDefinition;
import com.opengamma.analytics.financial.interestrate.inflation.derivative.CapFloorInflationZeroCouponMonthly;
import com.opengamma.analytics.financial.model.interestrate.definition.InflationZeroCouponCapFloorParameters;
import com.opengamma.analytics.financial.model.option.parameters.BlackSmileCapInflationZeroCouponParameters;
import com.opengamma.analytics.financial.provider.description.BlackDataSets;
import com.opengamma.analytics.financial.provider.description.MulticurveProviderDiscountDataSets;
import com.opengamma.analytics.financial.provider.description.inflation.BlackSmileCapInflationZeroCouponProvider;
import com.opengamma.analytics.financial.provider.description.inflation.BlackSmileCapInflationZeroCouponProviderDiscount;
import com.opengamma.analytics.financial.provider.description.inflation.InflationIssuerProviderDiscount;
import com.opengamma.analytics.financial.provider.description.inflation.InflationProviderInterface;
import com.opengamma.analytics.financial.provider.method.SuccessiveRootFinderInflationZeroCouponCapFloorCalibrationEngine;
import com.opengamma.analytics.financial.provider.method.SuccessiveRootFinderInflationZeroCouponCapFloorCalibrationObjective;
import com.opengamma.analytics.financial.schedule.ScheduleCalculator;
import com.opengamma.analytics.math.interpolation.Interpolator2D;
import com.opengamma.analytics.math.surface.InterpolatedDoublesSurface;
import com.opengamma.financial.convention.businessday.BusinessDayConvention;
import com.opengamma.financial.convention.businessday.BusinessDayConventionFactory;
import com.opengamma.financial.convention.calendar.Calendar;
import com.opengamma.timeseries.DoubleTimeSeries;
import com.opengamma.util.money.Currency;
import com.opengamma.util.money.MultipleCurrencyAmount;
import com.opengamma.util.time.DateUtils;
/**
* Tests related to the calibration engine for inflation zero coupon cap/floor calibration.
*/
public class CapFloorZeroCouponCalibrationObjectiveTest {
//Cap/floor description details
private static final BusinessDayConvention BUSINESS_DAY = BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Modified Following");
private static final Currency CUR = Currency.EUR;
private static final ZonedDateTime START_DATE = DateUtils.getUTCDate(2011, 9, 7);
private static final ZonedDateTime SETTLEMENT_DATE = DateUtils.getUTCDate(2011, 9, 9);
private static final double NOTIONAL = 10000; //100m
private static final double[] STRIKES = {-.01, .00, .01, .02, .03, .04 };
private static final boolean IS_CAP = true;
private static final InflationIssuerProviderDiscount MARKET = MulticurveProviderDiscountDataSets.createMarket1();
private static final IndexPrice[] PRICE_INDEXES = MARKET.getPriceIndexes().toArray(new IndexPrice[MARKET.getPriceIndexes().size()]);
private static final IndexPrice PRICE_INDEX_EUR = PRICE_INDEXES[0];
private static final double INDEX_START_VALUE = 100.0;
private static final Calendar CALENDAR_EUR = MulticurveProviderDiscountDataSets.getEURCalendar();
private static final int MONTH_LAG = 3;
private static final ZonedDateTime LAST_KNOWN_FIXING_DATE = DateUtils.getUTCDate(2008, 7, 01);
private static final InterpolatedDoublesSurface BLACK_SURF = BlackDataSets.createBlackSurfaceExpiryStrike();
private static final BlackSmileCapInflationZeroCouponParameters BLACK_PARAM = new BlackSmileCapInflationZeroCouponParameters(BLACK_SURF, PRICE_INDEX_EUR);
private static final BlackSmileCapInflationZeroCouponProviderDiscount BLACK_INFLATION = new BlackSmileCapInflationZeroCouponProviderDiscount(MARKET.getInflationProvider(), BLACK_PARAM);
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 9, 7);
private static final CapFloorInflationZeroCouponMonthlyBlackSmileMethod METHOD = CapFloorInflationZeroCouponMonthlyBlackSmileMethod.getInstance();
double[][] marketPrices = new double[6][30];
// volatility matrix first guess details
private static double[] expiryTimes1 = new double[30];
private static final double[] strikes = {-.01, .00, .01, .02, .03, .04 };
private static final double[][] volatilities = { {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 },
{.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 },
{.01, .01, .01, .01, .01, .01 },
{.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 },
{.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 },
{.01, .01, .01, .01, .01, .01 },
{.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 },
{.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 }, {.01, .01, .01, .01, .01, .01 },
{.01, .01, .01, .01, .01, .01 } };
private static final int[] availabelTenor = {1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 12, 15, 20, 25, 30 };
CapFloorInflationZeroCouponMonthlyDefinition[][] CAP_DEFINITIONS = new CapFloorInflationZeroCouponMonthlyDefinition[6][availabelTenor.length];
CapFloorInflationZeroCouponMonthly[][] CAPS = new CapFloorInflationZeroCouponMonthly[6][availabelTenor.length];
private static final DoubleTimeSeries<ZonedDateTime> cpiTimeSerie = MulticurveProviderDiscountDataSets.usCpiFrom2009();
@Test
/**
* Tests the correctness of INFLATION YEAR ON YEAR CAP/FLOOR calibration to market prices.
*/
public void calibration() {
// creation of the basket of the calibration instruments.
for (int loop1 = 0; loop1 < STRIKES.length; loop1++) {
for (int loop2 = 0; loop2 < availabelTenor.length; loop2++) {
final Period tenor = Period.ofYears(availabelTenor[loop2]);
final ZonedDateTime payementDate = ScheduleCalculator.getAdjustedDate(START_DATE, tenor, BUSINESS_DAY, CALENDAR_EUR);
CAP_DEFINITIONS[loop1][loop2] = CapFloorInflationZeroCouponMonthlyDefinition.from(SETTLEMENT_DATE, payementDate, NOTIONAL, PRICE_INDEX_EUR, MONTH_LAG, MONTH_LAG,
availabelTenor[loop2], LAST_KNOWN_FIXING_DATE, STRIKES[loop1], IS_CAP);
CAPS[loop1][loop2] = (CapFloorInflationZeroCouponMonthly) CAP_DEFINITIONS[loop1][loop2].toDerivative(REFERENCE_DATE, cpiTimeSerie);
}
}
// Creation of the expiry vector used for the interpolation in the volatility matrix
// expiry times = reference end time. (for inflation option)
for (int loopexp = 0; loopexp < CAPS[0].length; loopexp++) {
expiryTimes1[loopexp] = CAPS[0][loopexp].getReferenceEndTime();
}
// parameters bundle that we want to calibrate
final InflationZeroCouponCapFloorParameters parameters = new InflationZeroCouponCapFloorParameters(expiryTimes1, strikes, volatilities, PRICE_INDEX_EUR);
// Objective function that we use in the calibration
final SuccessiveRootFinderInflationZeroCouponCapFloorCalibrationObjective objective = new SuccessiveRootFinderInflationZeroCouponCapFloorCalibrationObjective(parameters, CUR);
// Calibration engine
final SuccessiveRootFinderInflationZeroCouponCapFloorCalibrationEngine<InflationProviderInterface> calibrationEngine = new SuccessiveRootFinderInflationZeroCouponCapFloorCalibrationEngine<>(
objective);
// Creation of the market prices we will use in the calibration.
//For this example we calculate the market prices using a matrix of volatility, but normally market prices should be linked to bloomberg tickers (for example or another data provider)
for (int loop1 = 0; loop1 < STRIKES.length; loop1++) {
for (int loop2 = 0; loop2 < availabelTenor.length; loop2++) {
marketPrices[loop1][loop2] = METHOD.presentValue(CAPS[loop1][loop2], BLACK_INFLATION).getAmount(CUR);
}
}
// we add each instruments to the calibration engine
// here we are calibration all strikes and maturities (it is possible to calibrate on only few instruments but there is no reason to do so)
for (int loop1 = 0; loop1 < STRIKES.length; loop1++) {
for (int loop2 = 0; loop2 < availabelTenor.length; loop2++) {
calibrationEngine.addInstrument(CAPS[loop1][loop2], marketPrices[loop1][loop2]);
}
}
// We do the calibration
calibrationEngine.calibrate(MARKET.getInflationProvider());
// We tests if we
final MultipleCurrencyAmount[][] pvCapYearOnYear = new MultipleCurrencyAmount[STRIKES.length][CAPS[0].length];
for (int loop1 = 0; loop1 < STRIKES.length; loop1++) {
for (int loop2 = 0; loop2 < availabelTenor.length; loop2++) {
final Interpolator2D interpolator = objective.getInflationCapZeroCouponProvider().getBlackParameters().getVolatilitySurface().getInterpolator();
final BlackSmileCapInflationZeroCouponParameters CalibratedBlackSmileCapInflationZeroCouponParameters = new BlackSmileCapInflationZeroCouponParameters(
objective.getInflationCapZeroCouponParameters(), interpolator);
final BlackSmileCapInflationZeroCouponProvider CalibratedBlackSmileCapInflationYearOnYearProvider = new BlackSmileCapInflationZeroCouponProvider(objective.getInflationCapZeroCouponProvider()
.getInflationProvider(),
CalibratedBlackSmileCapInflationZeroCouponParameters);
pvCapYearOnYear[loop1][loop2] = METHOD.presentValue(CAPS[loop1][loop2], CalibratedBlackSmileCapInflationYearOnYearProvider);
assertEquals("Inflaiton year on year calibration: cap/floor " + loop1, pvCapYearOnYear[loop1][loop2].getAmount(CUR), marketPrices[loop1][loop2], 1E-2);
}
}
}
@Test(enabled = false)
public void performance() {
// creation of the basket of the calibration instruments.
for (int loop1 = 0; loop1 < STRIKES.length; loop1++) {
for (int loop2 = 0; loop2 < availabelTenor.length; loop2++) {
final Period tenor = Period.ofYears(availabelTenor[loop2]);
final ZonedDateTime payementDate = ScheduleCalculator.getAdjustedDate(START_DATE, tenor, BUSINESS_DAY, CALENDAR_EUR);
CAP_DEFINITIONS[loop1][loop2] = CapFloorInflationZeroCouponMonthlyDefinition.from(SETTLEMENT_DATE, payementDate, NOTIONAL, PRICE_INDEX_EUR, MONTH_LAG, MONTH_LAG,
availabelTenor[loop2], LAST_KNOWN_FIXING_DATE, STRIKES[loop1], IS_CAP);
CAPS[loop1][loop2] = CAP_DEFINITIONS[loop1][loop2].toDerivative(REFERENCE_DATE);
}
}
// Creation of the expiry vector used for the interpolation in the volatility matrix
// expiry times = reference end time. (for inflation option)
for (int loopexp = 0; loopexp < CAPS[0].length; loopexp++) {
expiryTimes1[loopexp] = CAPS[0][loopexp].getReferenceEndTime();
}
// parameters bundle that we want to calibrate
final InflationZeroCouponCapFloorParameters parameters = new InflationZeroCouponCapFloorParameters(expiryTimes1, strikes, volatilities, PRICE_INDEX_EUR);
// Objective function that we use in the calibration
final SuccessiveRootFinderInflationZeroCouponCapFloorCalibrationObjective objective = new SuccessiveRootFinderInflationZeroCouponCapFloorCalibrationObjective(parameters, CUR);
// Calibration engine
final SuccessiveRootFinderInflationZeroCouponCapFloorCalibrationEngine<InflationProviderInterface> calibrationEngine = new SuccessiveRootFinderInflationZeroCouponCapFloorCalibrationEngine<>(
objective);
// Creation of the market prices we will use in the calibration.
//For this example we calculate the market prices using a matrix of volatility, but normally market prices should be linked to bloomberg tickers (for example or another data provider)
for (int loop1 = 0; loop1 < STRIKES.length; loop1++) {
for (int loop2 = 0; loop2 < availabelTenor.length; loop2++) {
marketPrices[loop1][loop2] = METHOD.presentValue(CAPS[loop1][loop2], BLACK_INFLATION).getAmount(CUR);
}
}
// we add each instruments to the calibration engine
// here we are calibration all strikes and maturities (it is possible to calibrate on only few instruments but there is no reason to do so)
for (int loop1 = 0; loop1 < STRIKES.length; loop1++) {
for (int loop2 = 0; loop2 < availabelTenor.length; loop2++) {
calibrationEngine.addInstrument(CAPS[loop1][loop2], marketPrices[loop1][loop2]);
}
}
long startTime, endTime;
final int nbTest = 100;
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
calibrationEngine.calibrate(MARKET.getInflationProvider());
}
endTime = System.currentTimeMillis();
System.out.println("CapFloorYearOnYearInterpolationCalibrationObjectiveTest - " + nbTest + " volatility matrix construction zero coupon cap/floor: " + (endTime - startTime) + " ms");
// Performance note:volatility matrix construction zero coupon cap/floor: 28-Aug-13: On Dell Precision T1850 3.5 GHz Quad-Core Intel Xeon: 5054 ms for 100 sets.
}
}