/**
* Copyright (C) 2009 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.model.volatility.surface;
import static org.testng.AssertJUnit.assertEquals;
import java.util.Collections;
import java.util.HashMap;
import java.util.Map;
import org.testng.Assert;
import org.testng.annotations.Test;
import org.threeten.bp.ZonedDateTime;
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.EuropeanVanillaOptionDefinition;
import com.opengamma.analytics.financial.model.option.definition.OptionDefinition;
import com.opengamma.analytics.financial.model.option.definition.StandardOptionDataBundle;
import com.opengamma.analytics.financial.model.option.pricing.analytic.AnalyticOptionModel;
import com.opengamma.analytics.financial.model.option.pricing.analytic.BlackScholesMertonModel;
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;
import com.opengamma.util.tuple.DoublesPair;
/**
*
*/
public class PractitionerBlackScholesVolatilitySurfaceModelTest {
private static final AnalyticOptionModel<OptionDefinition, StandardOptionDataBundle> BSM = new BlackScholesMertonModel();
private static final PractitionerBlackScholesVolatilitySurfaceModel MODEL = new PractitionerBlackScholesVolatilitySurfaceModel();
private static final YieldAndDiscountCurve CURVE = YieldCurve.from(ConstantDoublesCurve.from(0.04));
private static final double B = 0.03;
private static final double SPOT = 100;
private static final boolean IS_CALL = true;
private static final ZonedDateTime DATE = DateUtils.getUTCDate(2009, 1, 1);
private static final Expiry[] EXPIRY = new Expiry[] {new Expiry(DateUtils.getDateOffsetWithYearFraction(DATE, 0.25)), new Expiry(DateUtils.getDateOffsetWithYearFraction(DATE, 0.5)),
new Expiry(DateUtils.getDateOffsetWithYearFraction(DATE, 0.75)), new Expiry(DateUtils.getDateOffsetWithYearFraction(DATE, 1))};
private static final double[] OFFSET = new double[] {0.05, 0.1, 0.125};
private static final Expiry[] TEST_EXPIRY = new Expiry[] {new Expiry(DateUtils.getDateOffsetWithYearFraction(EXPIRY[0].getExpiry(), OFFSET[0])),
new Expiry(DateUtils.getDateOffsetWithYearFraction(EXPIRY[1].getExpiry(), OFFSET[1])), new Expiry(DateUtils.getDateOffsetWithYearFraction(EXPIRY[2].getExpiry(), OFFSET[2]))};
private static final double[] STRIKE = new double[] {80, 86, 100, 101, 110};
private static final double[] TEST_STRIKE = new double[] {85, 95, 104};
private static final double EPS = 1e-9;
@Test(expectedExceptions = IllegalArgumentException.class)
public void testPriceInput() {
MODEL.getSurface(null, new StandardOptionDataBundle(null, 0, null, 0, null));
}
@Test(expectedExceptions = IllegalArgumentException.class)
public void testDataInput() {
MODEL.getSurface(Collections.<OptionDefinition, Double> emptyMap(), null);
}
@Test
public void testFlatSurface() {
final Map<OptionDefinition, Double> prices = new HashMap<>();
final double sigma = 0.3;
OptionDefinition definition;
final StandardOptionDataBundle data = new StandardOptionDataBundle(CURVE, B, new VolatilitySurface(ConstantDoublesSurface.from(sigma)), SPOT, DATE);
try {
MODEL.getSurface(prices, data);
Assert.fail();
} catch (final IllegalArgumentException e) {
// Expected
}
for (final Expiry expiry : EXPIRY) {
for (final double strike : STRIKE) {
definition = new EuropeanVanillaOptionDefinition(strike, expiry, IS_CALL);
prices.put(definition, BSM.getPricingFunction(definition).evaluate(data));
}
}
final VolatilitySurface surface = MODEL.getSurface(prices, data);
for (final Expiry expiry : TEST_EXPIRY) {
for (final double strike : TEST_STRIKE) {
assertEquals(surface.getVolatility(DoublesPair.of(DateUtils.getDifferenceInYears(DATE, expiry.getExpiry()), strike)), sigma, EPS);
}
}
}
@Test
public void testUnifomlyVaryingSurface() {
final Map<OptionDefinition, Double> prices = new HashMap<>();
OptionDefinition definition;
StandardOptionDataBundle data = new StandardOptionDataBundle(CURVE, B, null, SPOT, DATE);
final double diff = 0.09;
final double startSigma = 0.18;
final double[] sigma = new double[] {startSigma, startSigma + diff, startSigma + 2 * diff, startSigma + 3 * diff};
for (int i = 0; i < sigma.length; i++) {
for (final double strike : STRIKE) {
definition = new EuropeanVanillaOptionDefinition(strike, EXPIRY[i], IS_CALL);
data = data.withVolatilitySurface(new VolatilitySurface(ConstantDoublesSurface.from(sigma[i])));
prices.put(definition, BSM.getPricingFunction(definition).evaluate(data));
}
}
final VolatilitySurface surface = MODEL.getSurface(prices, data);
double result;
Expiry expiry;
for (int i = 0; i < TEST_EXPIRY.length; i++) {
expiry = TEST_EXPIRY[i];
result = sigma[i] + 4 * diff * DateUtils.getDifferenceInYears(EXPIRY[i].getExpiry(), expiry.getExpiry());
for (final double strike : TEST_STRIKE) {
assertEquals(surface.getVolatility(DoublesPair.of(DateUtils.getDifferenceInYears(DATE, expiry.getExpiry()), strike)), result, EPS);
}
}
}
}