/**
* Copyright (C) 2014 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.equity;
import com.opengamma.OpenGammaRuntimeException;
import com.opengamma.analytics.financial.equity.option.EquityIndexFutureOption;
import com.opengamma.analytics.financial.equity.option.EquityIndexFutureOptionBlackMethod;
import com.opengamma.analytics.financial.equity.option.EquityIndexOption;
import com.opengamma.analytics.financial.equity.option.EquityIndexOptionBlackMethod;
import com.opengamma.analytics.financial.equity.option.EquityOption;
import com.opengamma.analytics.financial.equity.option.EquityOptionBlackMethod;
import com.opengamma.analytics.financial.equity.variance.pricing.AffineDividends;
import com.opengamma.analytics.financial.interestrate.InstrumentDerivative;
import com.opengamma.analytics.financial.interestrate.InstrumentDerivativeVisitorAdapter;
import com.opengamma.analytics.financial.model.interestrate.curve.ForwardCurve;
import com.opengamma.analytics.financial.model.interestrate.curve.ForwardCurveAffineDividends;
import com.opengamma.analytics.financial.model.option.pricing.analytic.BjerksundStenslandModel;
import com.opengamma.analytics.financial.model.option.pricing.analytic.RollGeskeWhaleyModel;
import com.opengamma.analytics.financial.model.volatility.BlackFormulaRepository;
import com.opengamma.util.ArgumentChecker;
/**
* Calculates implied volatility for American options using Roll-Geske-Whaley model
*/
public final class EqyOptRollGeskeWhaleyImpliedVolatilityCalculator extends InstrumentDerivativeVisitorAdapter<StaticReplicationDataBundle, Double> {
/** Static instance */
private static final EqyOptRollGeskeWhaleyImpliedVolatilityCalculator s_instance = new EqyOptRollGeskeWhaleyImpliedVolatilityCalculator();
/**
* The Black present value calculator
* The model is chosen to be consistent with {@link EquityBlackVolatilitySurfaceFromSinglePriceFunction}
*/
private static final EquityOptionBlackPresentValueCalculator s_pvCalculator = EquityOptionBlackPresentValueCalculator.getInstance();
/**
* Gets the (singleton) instance of this calculator
* @return The instance of this calculator
*/
public static EqyOptRollGeskeWhaleyImpliedVolatilityCalculator getInstance() {
return s_instance;
}
private EqyOptRollGeskeWhaleyImpliedVolatilityCalculator() {
}
@Override
public Double visitEquityIndexOption(final EquityIndexOption option, final StaticReplicationDataBundle data) {
ArgumentChecker.notNull(option, "option");
ArgumentChecker.notNull(data, "data");
return EquityIndexOptionBlackMethod.getInstance().impliedVol(option, data);
}
@Override
public Double visitEquityOption(final EquityOption option, final StaticReplicationDataBundle data) {
ArgumentChecker.notNull(option, "option");
ArgumentChecker.notNull(data, "data");
return EquityOptionBlackMethod.getInstance().impliedVol(option, data);
}
@Override
public Double visitEquityIndexFutureOption(final EquityIndexFutureOption option, final StaticReplicationDataBundle data) {
ArgumentChecker.notNull(option, "option");
ArgumentChecker.notNull(data, "data");
return EquityIndexFutureOptionBlackMethod.getInstance().impliedVol(option, data);
}
/**
* Calculates implied volatility for American options using Roll-Geske-Whaley model
* @param derivative The derivative
* @param data The market data bundle
* @param marketPrice The market price of security
* @return The implied volatility
*/
public Double getRollGeskeWhaleyImpliedVol(final InstrumentDerivative derivative, final StaticReplicationDataBundle data, final Double marketPrice) {
ArgumentChecker.notNull(derivative, "derivative");
ArgumentChecker.notNull(data, "data");
if (derivative instanceof EquityOption) {
final EquityOption option = (EquityOption) derivative;
return impliedVolEquityOption(option, data, marketPrice);
} else if (derivative instanceof EquityIndexOption) {
final EquityIndexOption option = (EquityIndexOption) derivative;
return impliedVolEquityIndexOption(option, data, marketPrice);
} else if (derivative instanceof EquityIndexFutureOption) {
final EquityIndexFutureOption option = (EquityIndexFutureOption) derivative;
return impliedVolEquityIndexFutureOption(option, data, marketPrice);
}
throw new OpenGammaRuntimeException("Unexpected InstrumentDerivative type");
}
private Double impliedVolEquityIndexOption(final EquityIndexOption option, final StaticReplicationDataBundle data, final Double marketPrice) {
final double optionPrice;
final double strike = option.getStrike();
final double timeToExpiry = option.getTimeToExpiry();
final boolean isCall = option.isCall();
if (marketPrice == null) {
optionPrice = option.accept(s_pvCalculator, data) / option.getUnitAmount();
} else {
optionPrice = marketPrice;
}
return getImpliedVol(optionPrice, strike, timeToExpiry, isCall, false, data);
}
private Double impliedVolEquityOption(final EquityOption option, final StaticReplicationDataBundle data, final Double marketPrice) {
final double optionPrice;
final double strike = option.getStrike();
final double timeToExpiry = option.getTimeToExpiry();
final boolean isCall = option.isCall();
if (marketPrice == null) {
optionPrice = option.accept(s_pvCalculator, data) / option.getUnitAmount();
} else {
optionPrice = marketPrice;
}
return getImpliedVol(optionPrice, strike, timeToExpiry, isCall, true, data);
}
private Double impliedVolEquityIndexFutureOption(final EquityIndexFutureOption option, final StaticReplicationDataBundle data, final Double marketPrice) {
final double optionPrice;
final double strike = option.getStrike();
final double timeToExpiry = option.getExpiry();
final boolean isCall = option.isCall();
if (marketPrice == null) {
optionPrice = option.accept(s_pvCalculator, data) / option.getPointValue();
} else {
optionPrice = marketPrice;
}
return getImpliedVol(optionPrice, strike, timeToExpiry, isCall, false, data);
}
private Double getImpliedVol(final double optionPrice, final double strike, final double timeToExpiry, final boolean isCall, final boolean eqyOpt, final StaticReplicationDataBundle data) {
final double spot = data.getForwardCurve().getSpot();
final double discountRate = data.getDiscountCurve().getInterestRate(timeToExpiry);
Double impliedVol = null;
if (isCall) {
final RollGeskeWhaleyModel model = new RollGeskeWhaleyModel();
final ForwardCurve fCurve = data.getForwardCurve();
double[] divTime = null;
double[] divAmount = null;
if (fCurve instanceof ForwardCurveAffineDividends) {
final AffineDividends div = ((ForwardCurveAffineDividends) fCurve).getDividends();
divTime = div.getTau();
divAmount = div.getAlpha();
} else {
divTime = new double[] {0. };
divAmount = new double[] {0. };
}
impliedVol = model.impliedVolatility(optionPrice, spot, strike, discountRate, timeToExpiry, divAmount, divTime);
} else {
final double volatility = data.getVolatilitySurface().getVolatility(timeToExpiry, strike);
if (eqyOpt) {
final BjerksundStenslandModel model = new BjerksundStenslandModel();
double costOfCarry = discountRate;
double modSpot = spot;
final ForwardCurve fCurve = data.getForwardCurve();
if (fCurve instanceof ForwardCurveAffineDividends) {
final AffineDividends div = ((ForwardCurveAffineDividends) fCurve).getDividends();
final int number = div.getNumberOfDividends();
int i = 0;
while (i < number && div.getTau(i) < timeToExpiry) {
modSpot = modSpot * (1. - div.getBeta(i)) - div.getAlpha(i) * data.getDiscountCurve().getDiscountFactor(div.getTau(i));
++i;
}
} else {
costOfCarry = Math.log(fCurve.getForward(timeToExpiry) / spot) / timeToExpiry;
}
if (timeToExpiry < 7. / 365.) {
final double fwd = optionPrice / data.getDiscountCurve().getDiscountFactor(timeToExpiry);
impliedVol = BlackFormulaRepository.impliedVolatility(fwd, fCurve.getForward(timeToExpiry), strike, timeToExpiry, false);
} else {
impliedVol = model.impliedVolatility(optionPrice, modSpot, strike, discountRate, costOfCarry, timeToExpiry, false, Math.min(volatility * 1.5, 0.2));
}
} else {
impliedVol = volatility;
}
}
return impliedVol;
}
}