/**
* Copyright (C) 2012 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.future.provider;
import com.opengamma.analytics.financial.interestrate.future.derivative.InterestRateFutureOptionMarginSecurity;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.EuropeanVanillaOption;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.NormalFunctionData;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.NormalPriceFunction;
import com.opengamma.analytics.financial.provider.description.interestrate.MulticurveProviderInterface;
import com.opengamma.analytics.financial.provider.description.interestrate.NormalSTIRFuturesProviderInterface;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MulticurveSensitivity;
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 daily margining. The pricing is done with a Normal approach on the future price.
* The normal parameters are represented by (expiration-delay-strike-futures price) 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.
*/
public final class InterestRateFutureOptionMarginSecurityNormalSmileMethod extends
InterestRateFutureOptionMarginSecurityGenericMethod<NormalSTIRFuturesProviderInterface> {
/**
* Creates the method unique instance.
*/
private static final InterestRateFutureOptionMarginSecurityNormalSmileMethod INSTANCE = new InterestRateFutureOptionMarginSecurityNormalSmileMethod();
/**
* Constructor.
*/
private InterestRateFutureOptionMarginSecurityNormalSmileMethod() {
}
/**
* Return the method unique instance.
* @return The instance.
*/
public static InterestRateFutureOptionMarginSecurityNormalSmileMethod getInstance() {
return INSTANCE;
}
/**
* The Black function used in the pricing.
*/
private static final NormalPriceFunction NORMAL_FUNCTION = new NormalPriceFunction();
/**
* 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 normalData The normal volatility and multi-curves provider.
* @param priceFuture The price of the underlying future.
* @return The security price.
*/
public double priceFromFuturePrice(final InterestRateFutureOptionMarginSecurity security,
final NormalSTIRFuturesProviderInterface normalData, final double priceFuture) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
final EuropeanVanillaOption option = new EuropeanVanillaOption(security.getStrike(), security.getExpirationTime(), security.isCall());
final double delay = security.getUnderlyingFuture().getTradingLastTime() - security.getExpirationTime();
double volatility = normalData.getVolatility(security.getExpirationTime(), delay, security.getStrike(), priceFuture);
final NormalFunctionData normalPoint = new NormalFunctionData(priceFuture, 1.0, volatility);
final double priceSecurity = NORMAL_FUNCTION.getPriceFunction(option).evaluate(normalPoint);
return priceSecurity;
}
/**
* Computes the option security price. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param normalData The normal volatility and multi-curves provider.
* @return The security price.
*/
@Override
public double price(final InterestRateFutureOptionMarginSecurity security,
final NormalSTIRFuturesProviderInterface normalData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), normalData.getMulticurveProvider());
return priceFromFuturePrice(security, normalData, priceFuture);
}
/**
* Computes the option security price curve sensitivity. The future price is computed without convexity adjustment.
* It is supposed that for a given strike the volatility does not change with the curves (sticky strike).
* @param security The future option security.
* @param normalData The normal volatility and multi-curves provider.
* @return The security price curve sensitivity.
*/
@Override
public MulticurveSensitivity priceCurveSensitivity(InterestRateFutureOptionMarginSecurity security,
NormalSTIRFuturesProviderInterface normalData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), normalData.getMulticurveProvider());
return priceCurveSensitivityFromFuturePrice(security, normalData, priceFuture);
}
/**
* Computes the option security price curve sensitivity. with underlying futures price
* It is supposed that for a given strike the volatility does not change with the curves (sticky strike).
* @param security The future option security.
* @param normalData The normal volatility and multi-curves provider.
* @param priceFuture The price of the underlying future.
* @return The security price curve sensitivity.
*/
public MulticurveSensitivity priceCurveSensitivityFromFuturePrice(InterestRateFutureOptionMarginSecurity security,
NormalSTIRFuturesProviderInterface normalData, double priceFuture) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
// Forward sweep
final EuropeanVanillaOption option = new EuropeanVanillaOption(security.getStrike(), security.getExpirationTime(), security.isCall());
final double delay = security.getUnderlyingFuture().getTradingLastTime() - security.getExpirationTime();
double volatility = normalData.getVolatility(security.getExpirationTime(), delay, security.getStrike(), priceFuture);
final NormalFunctionData normalPoint = new NormalFunctionData(priceFuture, 1.0, volatility);
// Backward sweep
final double[] priceAdjoint = new double[3];
NORMAL_FUNCTION.getPriceAdjoint(option, normalPoint, priceAdjoint);
final double priceBar = 1.0;
final double priceFutureBar = priceAdjoint[0] * priceBar;
final MulticurveSensitivity priceFutureDerivative = METHOD_FUTURE.priceCurveSensitivity(security.getUnderlyingFuture(), normalData.getMulticurveProvider());
return priceFutureDerivative.multipliedBy(priceFutureBar);
}
/**
* Computes the option security price volatility sensitivity. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param normalData The normal volatility and multi-curves provider.
* @return The security price Black volatility sensitivity.
*/
public SurfaceValue priceNormalSensitivity(final InterestRateFutureOptionMarginSecurity security,
final NormalSTIRFuturesProviderInterface normalData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), normalData.getMulticurveProvider());
final double strike = security.getStrike();
final EuropeanVanillaOption option = new EuropeanVanillaOption(strike, security.getExpirationTime(), security.isCall());
final double delay = security.getUnderlyingFuture().getTradingLastTime() - security.getExpirationTime();
double volatility = normalData.getVolatility(security.getExpirationTime(), delay, security.getStrike(), priceFuture);
final NormalFunctionData normalPoint = new NormalFunctionData(priceFuture, 1.0, volatility);
// Backward sweep
final double[] priceAdjoint = new double[3];
NORMAL_FUNCTION.getPriceAdjoint(option, normalPoint, priceAdjoint);
final double priceBar = 1.0;
final double volatilityBar = priceAdjoint[1] * priceBar;
final DoublesPair expiryStrikeDelay = DoublesPair.of(security.getExpirationTime(), strike);
final SurfaceValue sensi = SurfaceValue.from(expiryStrikeDelay, volatilityBar);
return sensi;
}
/**
* Interpolates and returns the option's implied volatility
* The future price is computed without convexity adjustment.
* @param security The future option security.
* @param normalData The normal volatility and multi-curves provider.
* @return Lognormal Implied Volatility.
*/
public double impliedVolatility(final InterestRateFutureOptionMarginSecurity security,
final NormalSTIRFuturesProviderInterface normalData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
double priceFutures = METHOD_FUTURE.price(security.getUnderlyingFuture(), normalData);
final double delay = security.getUnderlyingFuture().getTradingLastTime() - security.getExpirationTime();
return normalData.getVolatility(security.getExpirationTime(), delay, security.getStrike(), priceFutures);
}
/**
* Computes the underlying future security price. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param multicurves The multi-curves provider.
* @return The security price.
*/
public double underlyingFuturesPrice(final InterestRateFutureOptionMarginSecurity security, final MulticurveProviderInterface multicurves) {
ArgumentChecker.notNull(security, "Option security");
return METHOD_FUTURE.price(security.getUnderlyingFuture(), multicurves);
}
/**
* 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 normalData The curve and normal volatility data.
* @return The delta.
*/
public double priceDelta(InterestRateFutureOptionMarginSecurity security,
NormalSTIRFuturesProviderInterface normalData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), normalData.getMulticurveProvider());
return priceDeltaFromFuturePrice(security, normalData, priceFuture);
}
/**
* Computes the option security price delta, wrt the futures price dV/df.
* It is supposed that for a given strike the volatility does not change with the curves.
* @param security The future option security.
* @param normalData The curve and normal volatility data.
* @param priceFuture The price of the underlying future.
* @return The delta.
*/
public double priceDeltaFromFuturePrice(final InterestRateFutureOptionMarginSecurity security,
final NormalSTIRFuturesProviderInterface normalData, final double priceFuture) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
final EuropeanVanillaOption option = new EuropeanVanillaOption(security.getStrike(), security.getExpirationTime(),
security.isCall());
final double delay = security.getUnderlyingFuture().getTradingLastTime() - security.getExpirationTime();
double volatility = normalData
.getVolatility(security.getExpirationTime(), delay, security.getStrike(), priceFuture);
final NormalFunctionData normalPoint = new NormalFunctionData(priceFuture, 1.0, volatility);
return NORMAL_FUNCTION.getDelta(option, normalPoint);
}
/**
* 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 normalData The curve and normal volatility data.
* @return The gamma.
*/
public double priceGamma(InterestRateFutureOptionMarginSecurity security,
NormalSTIRFuturesProviderInterface normalData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), normalData.getMulticurveProvider());
return priceGammaFromFuturePrice(security, normalData, priceFuture);
}
/**
* Computes the option's value gamma, the second derivative of the security price wrt underlying futures rate.
* @param security The future option security.
* @param normalData The curve and normal volatility data.
* @param priceFuture The price of the underlying future.
* @return The gamma.
*/
public double priceGammaFromFuturePrice(final InterestRateFutureOptionMarginSecurity security,
final NormalSTIRFuturesProviderInterface normalData, final double priceFuture) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
final EuropeanVanillaOption option = new EuropeanVanillaOption(security.getStrike(), security.getExpirationTime(),
security.isCall());
final double delay = security.getUnderlyingFuture().getTradingLastTime() - security.getExpirationTime();
double volatility = normalData
.getVolatility(security.getExpirationTime(), delay, security.getStrike(), priceFuture);
final NormalFunctionData normalPoint = new NormalFunctionData(priceFuture, 1.0, volatility);
return NORMAL_FUNCTION.getGamma(option, normalPoint);
}
/**
* Computes the option security vega. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param normalData The curve and normal volatility data.
* @return The vega.
*/
public double priceVega(InterestRateFutureOptionMarginSecurity security,
NormalSTIRFuturesProviderInterface normalData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), normalData.getMulticurveProvider());
return priceVegaFromFuturePrice(security, normalData, priceFuture);
}
/**
* Computes the option security vega.
* @param security The future option security.
* @param normalData The curve and normal volatility data.
* @param priceFuture The price of the underlying future.
* @return The vega.
*/
public double priceVegaFromFuturePrice(final InterestRateFutureOptionMarginSecurity security,
final NormalSTIRFuturesProviderInterface normalData, final double priceFuture) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
final EuropeanVanillaOption option = new EuropeanVanillaOption(security.getStrike(), security.getExpirationTime(),
security.isCall());
final double delay = security.getUnderlyingFuture().getTradingLastTime() - security.getExpirationTime();
double volatility = normalData
.getVolatility(security.getExpirationTime(), delay, security.getStrike(), priceFuture);
final NormalFunctionData normalPoint = new NormalFunctionData(priceFuture, 1.0, volatility);
return NORMAL_FUNCTION.getVega(option, normalPoint);
}
/**
* Computes the option security theta. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param normalData The curve and normal volatility data.
* @return The theta.
*/
public double priceTheta(InterestRateFutureOptionMarginSecurity security,
NormalSTIRFuturesProviderInterface normalData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), normalData.getMulticurveProvider());
return priceThetaFromFuturePrice(security, normalData, priceFuture);
}
/**
* Computes the option security theta.
* @param security The future option security.
* @param normalData The curve and normal volatility data.
* @param priceFuture The price of the underlying future.
* @return The theta.
*/
public double priceThetaFromFuturePrice(final InterestRateFutureOptionMarginSecurity security,
final NormalSTIRFuturesProviderInterface normalData, final double priceFuture) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(normalData, "Normal data");
final EuropeanVanillaOption option = new EuropeanVanillaOption(security.getStrike(), security.getExpirationTime(),
security.isCall());
final double delay = security.getUnderlyingFuture().getTradingLastTime() - security.getExpirationTime();
double volatility = normalData
.getVolatility(security.getExpirationTime(), delay, security.getStrike(), priceFuture);
final NormalFunctionData normalPoint = new NormalFunctionData(priceFuture, 1.0, volatility);
return NORMAL_FUNCTION.getTheta(option, normalPoint);
}
}