/**
* Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.future.method;
import com.opengamma.analytics.financial.interestrate.InterestRateCurveSensitivity;
import com.opengamma.analytics.financial.interestrate.YieldCurveBundle;
import com.opengamma.analytics.financial.interestrate.future.derivative.InterestRateFutureOptionMarginSecurity;
import com.opengamma.analytics.financial.interestrate.future.provider.InterestRateFutureOptionMarginSecurityBlackRateMethod;
import com.opengamma.analytics.financial.model.option.definition.YieldCurveWithBlackCubeBundle;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.BlackFunctionData;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.BlackPriceFunction;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.EuropeanVanillaOption;
import com.opengamma.analytics.financial.model.volatility.BlackFormulaRepository;
import com.opengamma.analytics.util.amount.SurfaceValue;
import com.opengamma.util.ArgumentChecker;
import com.opengamma.util.tuple.DoublesPair;
/**
* Method for the pricing of interest rate future options with margin process. The pricing is done with a Black approach on the future rate (1.0-price).
* The Black parameters are represented by (expiration-strike-delay) surfaces. The "delay" is the time between option expiration and future last trading date,
* i.e. 0 for quarterly options and x for x-year mid-curve options. The future prices are computed without convexity adjustments.
* @deprecated Use {@link InterestRateFutureOptionMarginSecurityBlackRateMethod}
*/
@Deprecated
public final class InterestRateFutureOptionMarginSecurityBlackSurfaceMethod extends InterestRateFutureOptionMarginSecurityMethod {
// TODO: Change to a surface when available.
/**
* Creates the method unique instance.
*/
private static final InterestRateFutureOptionMarginSecurityBlackSurfaceMethod INSTANCE = new InterestRateFutureOptionMarginSecurityBlackSurfaceMethod();
/**
* Return the method unique instance.
* @return The instance.
*/
public static InterestRateFutureOptionMarginSecurityBlackSurfaceMethod getInstance() {
return INSTANCE;
}
/**
* Constructor.
*/
private InterestRateFutureOptionMarginSecurityBlackSurfaceMethod() {
}
/**
* The Black function used in the pricing.
*/
private static final BlackPriceFunction BLACK_FUNCTION = new BlackPriceFunction();
/**
* The method used to compute the future price. It is a method without convexity adjustment.
*/
private static final InterestRateFutureSecurityDiscountingMethod METHOD_FUTURE = InterestRateFutureSecurityDiscountingMethod.getInstance();
/**
* Computes the option security price from future price.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @param priceFuture The price of the underlying future.
* @return The security price.
*/
public double optionPriceFromFuturePrice(final InterestRateFutureOptionMarginSecurity security, final YieldCurveWithBlackCubeBundle blackData, final double priceFuture) {
final double rateStrike = 1.0 - security.getStrike();
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
// final double delay = security.getUnderlyingFuture().getLastTradingTime() - security.getExpirationTime();
final double volatility = blackData.getVolatility(security.getExpirationTime(), security.getStrike()); // , delay
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final double priceSecurity = BLACK_FUNCTION.getPriceFunction(option).evaluate(dataBlack);
return priceSecurity;
}
@Override
public double optionPriceFromFuturePrice(final InterestRateFutureOptionMarginSecurity security, final YieldCurveBundle curves, final double priceFuture) {
ArgumentChecker.isTrue(curves instanceof YieldCurveWithBlackCubeBundle, "Yield curve bundle should contain Black cube");
return optionPriceFromFuturePrice(security, (YieldCurveWithBlackCubeBundle) curves, priceFuture);
}
/**
* Computes the option security price. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The security price.
*/
public double optionPrice(final InterestRateFutureOptionMarginSecurity security, final YieldCurveWithBlackCubeBundle blackData) {
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData);
return optionPriceFromFuturePrice(security, blackData, priceFuture);
}
@Override
public double optionPrice(final InterestRateFutureOptionMarginSecurity security, final YieldCurveBundle curves) {
ArgumentChecker.isTrue(curves instanceof YieldCurveWithBlackCubeBundle, "Yield curve bundle should contain Black cube");
return optionPrice(security, (YieldCurveWithBlackCubeBundle) curves);
}
/**
* Computes the option security price curve sensitivity, ie the sensitivity to the rate, not the futures price. The future price is computed without convexity adjustment.
* It is supposed that for a given strike the volatility does not change with the curves.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The security price curve sensitivity.
*/
public InterestRateCurveSensitivity priceCurveSensitivity(final InterestRateFutureOptionMarginSecurity security, final YieldCurveWithBlackCubeBundle blackData) {
final double priceFutureBar = optionPriceDelta(security, blackData);
final InterestRateCurveSensitivity priceFutureDerivative = METHOD_FUTURE.priceCurveSensitivity(security.getUnderlyingFuture(), blackData);
return priceFutureDerivative.multipliedBy(priceFutureBar);
}
@Override
public InterestRateCurveSensitivity priceCurveSensitivity(final InterestRateFutureOptionMarginSecurity security, final YieldCurveBundle curves) {
ArgumentChecker.isTrue(curves instanceof YieldCurveWithBlackCubeBundle, "Yield curve bundle should contain Black cube");
return priceCurveSensitivity(security, (YieldCurveWithBlackCubeBundle) curves);
}
/**
* Computes the option security price delta, wrt the futures price dV/df. The futures price is computed without convexity adjustment.
* It is supposed that for a given strike the volatility does not change with the curves.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The delta.
*/
public double optionPriceDelta(final InterestRateFutureOptionMarginSecurity security, final YieldCurveWithBlackCubeBundle blackData) {
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData);
final double rateStrike = 1.0 - security.getStrike();
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
// final double delay = security.getUnderlyingFuture().getLastTradingTime() - security.getExpirationTime();
final double volatility = blackData.getVolatility(security.getExpirationTime(), security.getStrike());
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final double[] priceAdjoint = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
return -priceAdjoint[1];
}
/**
* Computes the option security Vega. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return Black lognormal Vega.
*/
public double optionPriceVega(final InterestRateFutureOptionMarginSecurity security, final YieldCurveWithBlackCubeBundle blackData) {
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData);
final double strike = security.getStrike();
final double rateStrike = 1.0 - strike;
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double volatility = blackData.getVolatility(security.getExpirationTime(), security.getStrike());
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final double[] priceAdjoint = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
return priceAdjoint[2];
}
/**
* Computes the option security theta. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return Black lognormal theta.
*/
public double optionPriceTheta(final InterestRateFutureOptionMarginSecurity security, final YieldCurveWithBlackCubeBundle blackData) {
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData);
final double strike = security.getStrike();
final double rateStrike = 1.0 - strike;
final double forward = 1 - priceFuture;
final double volatility = blackData.getVolatility(security.getExpirationTime(), security.getStrike());
return BlackFormulaRepository.driftlessTheta(forward, rateStrike, security.getExpirationTime(), volatility);
}
/**
* Computes the option security price volatility sensitivity. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The security price Black volatility sensitivity.
*/
public SurfaceValue priceBlackSensitivity(final InterestRateFutureOptionMarginSecurity security, final YieldCurveWithBlackCubeBundle blackData) {
final double volatilityBar = optionPriceVega(security, blackData);
final DoublesPair expiryStrikeDelay = DoublesPair.of(security.getExpirationTime(), security.getStrike());
final SurfaceValue sensi = SurfaceValue.from(expiryStrikeDelay, volatilityBar);
return sensi;
}
/**
* Computes the option's value gamma, the second derivative of the security price wrt underlying futures rate.
* The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The security price.
*/
public double optionPriceGamma(final InterestRateFutureOptionMarginSecurity security, final YieldCurveWithBlackCubeBundle blackData) {
ArgumentChecker.notNull(blackData, "YieldCurveWithBlackCubeBundle was unexpectedly null");
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData);
final double strike = security.getStrike();
final double rateStrike = 1.0 - strike;
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double volatility = blackData.getVolatility(security.getExpirationTime(), security.getStrike());
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
// TODO This is overkill. We only need one value, but it provides extra calculations while doing testing
final double[] firstDerivs = new double[3];
final double[][] secondDerivs = new double[3][3];
BLACK_FUNCTION.getPriceAdjoint2(option, dataBlack, firstDerivs, secondDerivs);
return secondDerivs[0][0];
}
/**
* Computes the option's value gamma, the second derivative of the security price wrt underlying futures rate.
* The future price is computed without convexity adjustment.
* @param security The future option security.
* @param curves The curve and Black volatility data.
* @return The security price.
*/
public double optionPriceGamma(final InterestRateFutureOptionMarginSecurity security, final YieldCurveBundle curves) {
ArgumentChecker.isTrue(curves instanceof YieldCurveWithBlackCubeBundle, "Yield curve bundle should contain Black cube");
return optionPriceGamma(security, (YieldCurveWithBlackCubeBundle) curves);
}
/**
* Interpolates and returns the option's implied volatility
* The future price is computed without convexity adjustment.
* @param security The future option security.
* @param curves The curve and Black volatility data.
* @return Lognormal Implied Volatility
*/
public double impliedVolatility(final InterestRateFutureOptionMarginSecurity security, final YieldCurveBundle curves) {
ArgumentChecker.notNull(security, "security");
ArgumentChecker.notNull(curves, "curves");
ArgumentChecker.isTrue(curves instanceof YieldCurveWithBlackCubeBundle, "Yield curve bundle should contain Black Cube");
return impliedVolatility(security, (YieldCurveWithBlackCubeBundle) curves);
}
/**
* Interpolates and returns the option's implied volatility
* The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return Lognormal Implied Volatility.
*/
public double impliedVolatility(final InterestRateFutureOptionMarginSecurity security, final YieldCurveWithBlackCubeBundle blackData) {
ArgumentChecker.notNull(security, "security");
ArgumentChecker.notNull(blackData, "blackData");
return blackData.getVolatility(security.getExpirationTime(), security.getStrike());
}
public double underlyingFuturePrice(final InterestRateFutureOptionMarginSecurity security, final YieldCurveBundle curves) {
ArgumentChecker.isTrue(curves instanceof YieldCurveWithBlackCubeBundle, "Yield curve bundle should contain Black cube");
return underlyingFuturePrice(security, (YieldCurveWithBlackCubeBundle) curves);
}
/**
* Computes the underlying future security price. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The security price.
*/
public double underlyingFuturePrice(final InterestRateFutureOptionMarginSecurity security, final YieldCurveWithBlackCubeBundle blackData) {
return METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData);
}
}