/**
* Copyright (C) 2009 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.model.option.pricing.analytic;
import static org.testng.AssertJUnit.assertEquals;
import java.util.Collections;
import java.util.Set;
import org.testng.annotations.Test;
import org.threeten.bp.ZonedDateTime;
import com.opengamma.analytics.financial.greeks.Greek;
import com.opengamma.analytics.financial.model.interestrate.curve.YieldAndDiscountCurve;
import com.opengamma.analytics.financial.model.interestrate.curve.YieldCurve;
import com.opengamma.analytics.financial.model.option.definition.AsymmetricPowerOptionDefinition;
import com.opengamma.analytics.financial.model.option.definition.OptionDefinition;
import com.opengamma.analytics.financial.model.option.definition.StandardOptionDataBundle;
import com.opengamma.analytics.financial.model.volatility.surface.VolatilitySurface;
import com.opengamma.analytics.math.curve.ConstantDoublesCurve;
import com.opengamma.analytics.math.surface.ConstantDoublesSurface;
import com.opengamma.util.time.DateUtils;
import com.opengamma.util.time.Expiry;
public class AsymmetricPowerOptionModelTest {
private static final double B = 0.02;
private static final double SPOT = 10;
private static final double STRIKE = 100;
private static final ZonedDateTime DATE = DateUtils.getUTCDate(2009, 1, 1);
private static final Expiry EXPIRY = new Expiry(DateUtils.getDateOffsetWithYearFraction(DATE, 0.5));
private static final YieldAndDiscountCurve CURVE = YieldCurve.from(ConstantDoublesCurve.from(0.08));
private static final VolatilitySurface SURFACE = new VolatilitySurface(ConstantDoublesSurface.from(0.1));
private static final StandardOptionDataBundle BUNDLE = new StandardOptionDataBundle(CURVE, B, SURFACE, SPOT, DATE);
private static final AnalyticOptionModel<AsymmetricPowerOptionDefinition, StandardOptionDataBundle> MODEL = new AsymmetricPowerOptionModel();
private static final AnalyticOptionModel<OptionDefinition, StandardOptionDataBundle> BS_MODEL = new BlackScholesMertonModel();
private static final Set<Greek> REQUIRED_GREEKS = Collections.singleton(Greek.FAIR_PRICE);
private static final double EPS = 1e-4;
@Test(expectedExceptions = IllegalArgumentException.class)
public void testNullDefinition() {
MODEL.getPricingFunction(null);
}
@Test(expectedExceptions = IllegalArgumentException.class)
public void testNullData() {
MODEL.getPricingFunction(new AsymmetricPowerOptionDefinition(STRIKE, EXPIRY, 1, true)).evaluate((StandardOptionDataBundle) null);
}
@Test
public void test() {
assertEquals(getPrice(1.9, true), 0.3102, EPS);
assertEquals(getPrice(1.95, true), 1.9320, EPS);
assertEquals(getPrice(2., true), 6.7862, EPS);
assertEquals(getPrice(2.05, true), 15.8587, EPS);
assertEquals(getPrice(2.1, true), 28.4341, EPS);
assertEquals(getPrice(1.9, false), 18.2738, EPS);
assertEquals(getPrice(1.95, false), 10.2890, EPS);
assertEquals(getPrice(2., false), 4.3539, EPS);
assertEquals(getPrice(2.05, false), 1.3089, EPS);
assertEquals(getPrice(2.1, false), 0.2745, EPS);
for (int i = 0; i < 5; i++) {
final double power = 1.9 + 0.05 * i;
assertEquals(getPrice(power, true), getBSPrice(power, true), EPS);
assertEquals(getPrice(power, false), getBSPrice(power, false), EPS);
}
}
private double getPrice(final double power, final boolean isCall) {
return MODEL.getGreeks(getDefinition(power, isCall), BUNDLE, REQUIRED_GREEKS).get(Greek.FAIR_PRICE);
}
private double getBSPrice(final double power, final boolean isCall) {
final StandardOptionDataBundle bsBundle = getModifiedDataBundle(BUNDLE, power);
return BS_MODEL.getGreeks(getDefinition(power, isCall), bsBundle, REQUIRED_GREEKS).get(Greek.FAIR_PRICE);
}
private AsymmetricPowerOptionDefinition getDefinition(final double power, final boolean isCall) {
return new AsymmetricPowerOptionDefinition(STRIKE, EXPIRY, power, isCall);
}
private StandardOptionDataBundle getModifiedDataBundle(final StandardOptionDataBundle data, final double p) {
final double t = DateUtils.getDifferenceInYears(DATE, EXPIRY.getExpiry());
final double spot = Math.pow(data.getSpot(), p);
double sigma = data.getVolatility(t, STRIKE);
final double b = p * (data.getCostOfCarry() + (p - 1) * sigma * sigma * 0.5);
sigma *= p;
return new StandardOptionDataBundle(CURVE, b, new VolatilitySurface(ConstantDoublesSurface.from(sigma)), spot, DATE);
}
}