/** * Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies * * Please see distribution for license. */ package com.opengamma.analytics.financial.interestrate.swaption.provider; import java.util.ArrayList; import java.util.HashMap; import java.util.List; import java.util.Map; import com.opengamma.analytics.financial.interestrate.sensitivity.PresentValueSwaptionSurfaceSensitivity; import com.opengamma.analytics.financial.interestrate.swap.provider.SwapFixedCouponDiscountingMethod; import com.opengamma.analytics.financial.interestrate.swaption.derivative.SwaptionCashFixedIbor; 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.volatility.BlackFormulaRepository; import com.opengamma.analytics.financial.provider.calculator.discounting.ParRateCurveSensitivityDiscountingCalculator; import com.opengamma.analytics.financial.provider.calculator.discounting.ParRateDiscountingCalculator; import com.opengamma.analytics.financial.provider.description.interestrate.BlackSwaptionFlatProviderInterface; import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MulticurveSensitivity; import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MultipleCurrencyMulticurveSensitivity; import com.opengamma.analytics.math.function.Function1D; import com.opengamma.util.ArgumentChecker; import com.opengamma.util.money.MultipleCurrencyAmount; import com.opengamma.util.tuple.DoublesPair; /** * Class used to compute the price and sensitivity of a cash-settled swaption using the Black method. */ public final class SwaptionCashFixedIborBlackMethod { /** * The method unique instance. */ private static final SwaptionCashFixedIborBlackMethod INSTANCE = new SwaptionCashFixedIborBlackMethod(); /** * Return the unique instance of the class. * @return The instance. */ public static SwaptionCashFixedIborBlackMethod getInstance() { return INSTANCE; } /** * Private constructor. */ private SwaptionCashFixedIborBlackMethod() { } /** * The par rate sensitivity calculator. */ private static final ParRateCurveSensitivityDiscountingCalculator PRCS = ParRateCurveSensitivityDiscountingCalculator.getInstance(); /** * The par rate calculator. */ private static final ParRateDiscountingCalculator PRDC = ParRateDiscountingCalculator.getInstance(); /** * The swap method. */ private static final SwapFixedCouponDiscountingMethod METHOD_SWAP = SwapFixedCouponDiscountingMethod.getInstance(); /** * Computes the present value of a cash-settled European swaption in the Black model. * @param swaption The swaption. * @param curveBlack The curves with Black volatility data. * @return The present value. */ public MultipleCurrencyAmount presentValue(final SwaptionCashFixedIbor swaption, final BlackSwaptionFlatProviderInterface curveBlack) { ArgumentChecker.notNull(swaption, "Swaption"); ArgumentChecker.notNull(curveBlack, "Curves with Black volatility"); final double tenor = swaption.getMaturityTime(); final double forward = swaption.getUnderlyingSwap().accept(PRDC, curveBlack.getMulticurveProvider()); final double pvbp = METHOD_SWAP.getAnnuityCash(swaption.getUnderlyingSwap(), forward); // Implementation comment: cash-settled swaptions make sense only for constant strike, the computation of coupon equivalent is not required. final BlackPriceFunction blackFunction = new BlackPriceFunction(); final double volatility = curveBlack.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), tenor); final double discountFactorSettle = curveBlack.getMulticurveProvider().getDiscountFactor(swaption.getCurrency(), swaption.getSettlementTime()); final BlackFunctionData dataBlack = new BlackFunctionData(forward, discountFactorSettle * pvbp, volatility); final Function1D<BlackFunctionData, Double> func = blackFunction.getPriceFunction(swaption); final double price = func.evaluate(dataBlack) * (swaption.isLong() ? 1.0 : -1.0); return MultipleCurrencyAmount.of(swaption.getCurrency(), price); } /** * Computes the implied Black volatility of the vanilla swaption. * @param swaption The swaption. * @param blackMulticurves Black volatility for swaption and multi-curves provider. * @return The implied volatility. */ public double impliedVolatility(final SwaptionCashFixedIbor swaption, final BlackSwaptionFlatProviderInterface blackMulticurves) { ArgumentChecker.notNull(swaption, "Swaption"); ArgumentChecker.notNull(blackMulticurves, "Black volatility for swaption and multicurve"); final double tenor = swaption.getMaturityTime(); final double volatility = blackMulticurves.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), tenor); return volatility; } /** * Computes the present value rate sensitivity to rates of a cash-settled European swaption in the Black model. * @param swaption The swaption. * @param curveBlack The curves with Black volatility data. * @return The present value curve sensitivity. */ public MultipleCurrencyMulticurveSensitivity presentValueCurveSensitivity(final SwaptionCashFixedIbor swaption, final BlackSwaptionFlatProviderInterface curveBlack) { ArgumentChecker.notNull(swaption, "Swaption"); ArgumentChecker.notNull(curveBlack, "Curves with Black volatility"); final double tenor = swaption.getMaturityTime(); final double forward = swaption.getUnderlyingSwap().accept(PRDC, curveBlack.getMulticurveProvider()); // Derivative of the forward with respect to the rates. final MulticurveSensitivity forwardDr = swaption.getUnderlyingSwap().accept(PRCS, curveBlack.getMulticurveProvider()); final double pvbp = METHOD_SWAP.getAnnuityCash(swaption.getUnderlyingSwap(), forward); // Derivative of the cash annuity with respect to the forward. final double pvbpDf = METHOD_SWAP.getAnnuityCashDerivative(swaption.getUnderlyingSwap(), forward); // Implementation note: strictly speaking, the strike equivalent is curve dependent; that dependency is ignored. final BlackPriceFunction blackFunction = new BlackPriceFunction(); final double volatility = curveBlack.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), tenor); final double discountFactorSettle = curveBlack.getMulticurveProvider().getDiscountFactor(swaption.getCurrency(), swaption.getSettlementTime()); final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility); final double[] bsAdjoint = blackFunction.getPriceAdjoint(swaption, dataBlack); final double sensiDF = -swaption.getSettlementTime() * discountFactorSettle * pvbp * bsAdjoint[0]; final List<DoublesPair> list = new ArrayList<>(); list.add(DoublesPair.of(swaption.getSettlementTime(), sensiDF)); MulticurveSensitivity result = forwardDr.multipliedBy(discountFactorSettle * (pvbpDf * bsAdjoint[0] + pvbp * bsAdjoint[1])); if (!swaption.isLong()) { result = result.multipliedBy(-1); } return MultipleCurrencyMulticurveSensitivity.of(swaption.getCurrency(), result); } /** * Computes the 2nd order sensitivity of the present value to rates of a cash-settled European swaption in the Black model. * @param swaption The swaption. * @param curveBlack The curves with Black volatility data. * @return The present value curve sensitivity. */ public MultipleCurrencyMulticurveSensitivity presentValueSecondOrderCurveSensitivity(final SwaptionCashFixedIbor swaption, final BlackSwaptionFlatProviderInterface curveBlack) { ArgumentChecker.notNull(swaption, "Swaption"); ArgumentChecker.notNull(curveBlack, "Curves with Black volatility"); final double tenor = swaption.getMaturityTime(); final double forward = swaption.getUnderlyingSwap().accept(PRDC, curveBlack.getMulticurveProvider()); // Derivative of the forward with respect to the rates. final MulticurveSensitivity forwardDr = swaption.getUnderlyingSwap().accept(PRCS, curveBlack.getMulticurveProvider()); final double pvbp = METHOD_SWAP.getAnnuityCash(swaption.getUnderlyingSwap(), forward); // Derivative of the cash annuity with respect to the forward. final double pvbpDf = METHOD_SWAP.getAnnuityCashDerivative(swaption.getUnderlyingSwap(), forward); final double pvbpDff = METHOD_SWAP.getAnnuityCashSecondDerivative(swaption.getUnderlyingSwap(), forward); // Implementation note: strictly speaking, the strike equivalent is curve dependent; that dependency is ignored. final double volatility = curveBlack.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), tenor); final double discountFactorSettle = curveBlack.getMulticurveProvider().getDiscountFactor(swaption.getCurrency(), swaption.getSettlementTime()); final double price = BlackFormulaRepository.price(forward, swaption.getStrike(), volatility, swaption.getTimeToExpiry(), swaption.isCall()); final double delta = BlackFormulaRepository.delta(forward, swaption.getStrike(), volatility, swaption.getTimeToExpiry(), swaption.isCall()); final double gamma = BlackFormulaRepository.gamma(forward, swaption.getStrike(), volatility, swaption.getTimeToExpiry()); MulticurveSensitivity result = forwardDr.multipliedBy(discountFactorSettle * (pvbpDff * price + 2. * pvbpDf * delta + pvbp * gamma)); if (!swaption.isLong()) { result = result.multipliedBy(-1); } return MultipleCurrencyMulticurveSensitivity.of(swaption.getCurrency(), result); } /** * Computes the present value sensitivity to the Black volatility (also called vega) of a cash-settled European swaption in the Black swaption model. * @param swaption The swaption. * @param curveBlack The curves with Black volatility data. * @return The present value Black sensitivity. */ public PresentValueSwaptionSurfaceSensitivity presentValueBlackSensitivity(final SwaptionCashFixedIbor swaption, final BlackSwaptionFlatProviderInterface curveBlack) { ArgumentChecker.notNull(swaption, "Swaption"); ArgumentChecker.notNull(curveBlack, "Curves with Black volatility"); final double forward = swaption.getUnderlyingSwap().accept(PRDC, curveBlack.getMulticurveProvider()); final double pvbp = METHOD_SWAP.getAnnuityCash(swaption.getUnderlyingSwap(), forward); final double discountFactorSettle = curveBlack.getMulticurveProvider().getDiscountFactor(swaption.getCurrency(), swaption.getSettlementTime()); final DoublesPair point = DoublesPair.of(swaption.getTimeToExpiry(), swaption.getMaturityTime()); final BlackPriceFunction blackFunction = new BlackPriceFunction(); final double volatility = curveBlack.getBlackParameters().getVolatility(point); final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility); final double[] bsAdjoint = blackFunction.getPriceAdjoint(swaption, dataBlack); final Map<DoublesPair, Double> sensitivity = new HashMap<>(); sensitivity.put(point, bsAdjoint[2] * pvbp * discountFactorSettle * (swaption.isLong() ? 1.0 : -1.0)); return new PresentValueSwaptionSurfaceSensitivity(sensitivity, curveBlack.getBlackParameters().getGeneratorSwap()); } }