/**
* 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 com.opengamma.analytics.financial.interestrate.PresentValueSABRSensitivityDataBundle;
import com.opengamma.analytics.financial.interestrate.swap.provider.SwapFixedCouponDiscountingMethod;
import com.opengamma.analytics.financial.interestrate.swaption.derivative.SwaptionPhysicalFixedIbor;
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.provider.calculator.discounting.ParRateCurveSensitivityDiscountingCalculator;
import com.opengamma.analytics.financial.provider.calculator.discounting.ParRateDiscountingCalculator;
import com.opengamma.analytics.financial.provider.description.interestrate.MulticurveProviderInterface;
import com.opengamma.analytics.financial.provider.description.interestrate.SABRSwaptionProviderInterface;
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.financial.convention.daycount.DayCount;
import com.opengamma.util.ArgumentChecker;
import com.opengamma.util.money.MultipleCurrencyAmount;
import com.opengamma.util.tuple.DoublesPair;
import com.opengamma.util.tuple.Triple;
/**
* Class used to compute the price and sensitivity of a physical delivery swaption with SABR model.
*/
public final class SwaptionPhysicalFixedIborSABRMethod {
/**
* The method unique instance.
*/
private static final SwaptionPhysicalFixedIborSABRMethod INSTANCE = new SwaptionPhysicalFixedIborSABRMethod();
/**
* Return the unique instance of the class.
* @return The instance.
*/
public static SwaptionPhysicalFixedIborSABRMethod getInstance() {
return INSTANCE;
}
/**
* Private constructor.
*/
private SwaptionPhysicalFixedIborSABRMethod() {
}
/**
* The calculator and methods.
*/
private static final SwapFixedCouponDiscountingMethod METHOD_SWAP = SwapFixedCouponDiscountingMethod.getInstance();
private static final ParRateDiscountingCalculator PRDC = ParRateDiscountingCalculator.getInstance();
private static final ParRateCurveSensitivityDiscountingCalculator PRCSDC = ParRateCurveSensitivityDiscountingCalculator.getInstance();
/**
* Computes the present value of a physical delivery European swaption in the SABR model.
* @param swaption The swaption.
* @param sabrData The SABR and multi-curves provider.
* @return The present value.
*/
public MultipleCurrencyAmount presentValue(final SwaptionPhysicalFixedIbor swaption, final SABRSwaptionProviderInterface sabrData) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(sabrData, "SABR swaption provider");
final DayCount dayCountModification = sabrData.getSABRGenerator().getFixedLegDayCount();
final MulticurveProviderInterface multicurves = sabrData.getMulticurveProvider();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), dayCountModification, multicurves);
final double forwardModified = PRDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, multicurves);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, multicurves);
final double maturity = swaption.getMaturityTime();
// TODO: A better notion of maturity may be required (using period?)
final EuropeanVanillaOption option = new EuropeanVanillaOption(strikeModified, swaption.getTimeToExpiry(), swaption.isCall());
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final BlackPriceFunction blackFunction = new BlackPriceFunction();
final double volatility = sabrData.getSABRParameter().getVolatility(swaption.getTimeToExpiry(), maturity, strikeModified, forwardModified);
final BlackFunctionData dataBlack = new BlackFunctionData(forwardModified, pvbpModified, volatility);
final Function1D<BlackFunctionData, Double> func = blackFunction.getPriceFunction(option);
final double pv = func.evaluate(dataBlack) * (swaption.isLong() ? 1.0 : -1.0);
return MultipleCurrencyAmount.of(swaption.getCurrency(), pv);
}
/**
* Computes the present value of a physical delivery European swaption in the SABR model.
* @param swaption The swaption.
* @param sabrData The SABR and multi-curves provider.
* @return The implied volatility.
*/
public double impliedVolatility(final SwaptionPhysicalFixedIbor swaption, final SABRSwaptionProviderInterface sabrData) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(sabrData, "SABR swaption provider");
final DayCount dayCountModification = sabrData.getSABRGenerator().getFixedLegDayCount();
final MulticurveProviderInterface multicurves = sabrData.getMulticurveProvider();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), dayCountModification, multicurves);
final double forwardModified = PRDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, multicurves);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, multicurves);
final double maturity = swaption.getMaturityTime();
final double volatility = sabrData.getSABRParameter().getVolatility(swaption.getTimeToExpiry(), maturity, strikeModified, forwardModified);
return volatility;
}
/**
* Computes the present value rate sensitivity to rates of a physical delivery European swaption in the SABR model.
* @param swaption The swaption.
* @param sabrData The SABR data. The SABR function need to be the Hagan function.
* @return The present value curve sensitivity.
*/
public MultipleCurrencyMulticurveSensitivity presentValueCurveSensitivity(final SwaptionPhysicalFixedIbor swaption, final SABRSwaptionProviderInterface sabrData) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(sabrData, "SABR swaption provider");
final DayCount dayCountModification = sabrData.getSABRGenerator().getFixedLegDayCount();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), dayCountModification, sabrData.getMulticurveProvider());
final double forwardModified = PRDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, sabrData.getMulticurveProvider());
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, sabrData.getMulticurveProvider());
final double maturity = swaption.getMaturityTime();
// Derivative of the forward and pvbp with respect to the rates.
final MulticurveSensitivity pvbpModifiedDr = METHOD_SWAP.presentValueBasisPointCurveSensitivity(swaption.getUnderlyingSwap(), dayCountModification, sabrData.getMulticurveProvider());
final MulticurveSensitivity forwardModifiedDr = PRCSDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, sabrData.getMulticurveProvider());
// Implementation note: strictly speaking, the strike equivalent is curve dependent; that dependency is ignored.
final EuropeanVanillaOption option = new EuropeanVanillaOption(strikeModified, swaption.getTimeToExpiry(), swaption.isCall());
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final BlackPriceFunction blackFunction = new BlackPriceFunction();
final double[] volatilityAdjoint = sabrData.getSABRParameter().getVolatilityAdjoint(swaption.getTimeToExpiry(), maturity, strikeModified, forwardModified);
final BlackFunctionData dataBlack = new BlackFunctionData(forwardModified, 1.0, volatilityAdjoint[0]);
final double[] bsAdjoint = blackFunction.getPriceAdjoint(option, dataBlack);
MulticurveSensitivity result = pvbpModifiedDr.multipliedBy(bsAdjoint[0]);
result = result.plus(forwardModifiedDr.multipliedBy(pvbpModified * (bsAdjoint[1] + bsAdjoint[2] * volatilityAdjoint[1])));
if (!swaption.isLong()) {
result = result.multipliedBy(-1);
}
return MultipleCurrencyMulticurveSensitivity.of(swaption.getCurrency(), result);
}
/**
* Computes the present value SABR sensitivity of a physical delivery European swaption in the SABR model.
* @param swaption The swaption.
* @param sabrData The SABR data. The SABR function need to be the Hagan function.
* @return The present value SABR sensitivity.
*/
public PresentValueSABRSensitivityDataBundle presentValueSABRSensitivity(final SwaptionPhysicalFixedIbor swaption, final SABRSwaptionProviderInterface sabrData) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(sabrData, "SABR swaption provider");
final DayCount dayCountModification = sabrData.getSABRGenerator().getFixedLegDayCount();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), dayCountModification, sabrData.getMulticurveProvider());
final double forwardModified = PRDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, sabrData.getMulticurveProvider());
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, sabrData.getMulticurveProvider());
final double maturity = swaption.getMaturityTime();
final PresentValueSABRSensitivityDataBundle sensi = new PresentValueSABRSensitivityDataBundle();
final DoublesPair expiryMaturity = DoublesPair.of(swaption.getTimeToExpiry(), maturity);
final EuropeanVanillaOption option = new EuropeanVanillaOption(strikeModified, swaption.getTimeToExpiry(), swaption.isCall());
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final BlackPriceFunction blackFunction = new BlackPriceFunction();
final double[] volatilityAdjoint = sabrData.getSABRParameter().getVolatilityAdjoint(swaption.getTimeToExpiry(), maturity, strikeModified, forwardModified);
final BlackFunctionData dataBlack = new BlackFunctionData(forwardModified, 1.0, volatilityAdjoint[0]);
final double[] bsAdjoint = blackFunction.getPriceAdjoint(option, dataBlack);
final double omega = (swaption.isLong() ? 1.0 : -1.0);
sensi.addAlpha(expiryMaturity, omega * pvbpModified * bsAdjoint[2] * volatilityAdjoint[3]);
sensi.addBeta(expiryMaturity, omega * pvbpModified * bsAdjoint[2] * volatilityAdjoint[4]);
sensi.addRho(expiryMaturity, omega * pvbpModified * bsAdjoint[2] * volatilityAdjoint[5]);
sensi.addNu(expiryMaturity, omega * pvbpModified * bsAdjoint[2] * volatilityAdjoint[6]);
return sensi;
}
/**
* Computes the present value of a physical delivery European swaption in the SABR model and its sensitivities with respect to the curve and SABR parameters.
* The sensitivities are computed using algorithmic differentiation.
* @param swaption The swaption.
* @param sabrData The SABR data.
* @return The present value, present value curves sensitivity and present value SABR sensitivity.
*/
public Triple<MultipleCurrencyAmount, MultipleCurrencyMulticurveSensitivity, PresentValueSABRSensitivityDataBundle> presentValueAD(final SwaptionPhysicalFixedIbor swaption,
final SABRSwaptionProviderInterface sabrData) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(sabrData, "SABR swaption provider");
final DayCount dayCountModification = sabrData.getSABRGenerator().getFixedLegDayCount();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), dayCountModification, sabrData.getMulticurveProvider());
final double forwardModified = PRDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, sabrData.getMulticurveProvider());
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, sabrData.getMulticurveProvider());
final double maturity = swaption.getMaturityTime();
// TODO: A better notion of maturity may be required (using period?)
final EuropeanVanillaOption option = new EuropeanVanillaOption(strikeModified, swaption.getTimeToExpiry(), swaption.isCall());
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final BlackPriceFunction blackFunction = new BlackPriceFunction();
final double[] volatilityAdjoint = sabrData.getSABRParameter().getVolatilityAdjoint(swaption.getTimeToExpiry(), maturity, strikeModified, forwardModified);
final BlackFunctionData dataBlack = new BlackFunctionData(forwardModified, 1.0, volatilityAdjoint[0]);
final Function1D<BlackFunctionData, Double> func = blackFunction.getPriceFunction(option);
final MultipleCurrencyAmount pv = MultipleCurrencyAmount.of(swaption.getCurrency(), pvbpModified * func.evaluate(dataBlack) * (swaption.isLong() ? 1.0 : -1.0));
// Curve sensitivity
final MulticurveSensitivity pvbpModifiedDr = METHOD_SWAP.presentValueBasisPointCurveSensitivity(swaption.getUnderlyingSwap(), dayCountModification, sabrData.getMulticurveProvider());
final MulticurveSensitivity forwardModifiedDr = PRCSDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, sabrData.getMulticurveProvider());
final double[] bsAdjoint = blackFunction.getPriceAdjoint(option, dataBlack);
MulticurveSensitivity result = pvbpModifiedDr.multipliedBy(bsAdjoint[0]);
result = result.plus(forwardModifiedDr.multipliedBy(pvbpModified * (bsAdjoint[1] + bsAdjoint[2] * volatilityAdjoint[1])));
if (!swaption.isLong()) {
result = result.multipliedBy(-1);
}
final MultipleCurrencyMulticurveSensitivity pvcs = MultipleCurrencyMulticurveSensitivity.of(swaption.getCurrency(), result);
// SABR sensitivity
final PresentValueSABRSensitivityDataBundle pvss = new PresentValueSABRSensitivityDataBundle();
final DoublesPair expiryMaturity = DoublesPair.of(swaption.getTimeToExpiry(), maturity);
final double omega = (swaption.isLong() ? 1.0 : -1.0);
pvss.addAlpha(expiryMaturity, omega * pvbpModified * bsAdjoint[2] * volatilityAdjoint[3]);
pvss.addBeta(expiryMaturity, omega * pvbpModified * bsAdjoint[2] * volatilityAdjoint[4]);
pvss.addRho(expiryMaturity, omega * pvbpModified * bsAdjoint[2] * volatilityAdjoint[5]);
pvss.addNu(expiryMaturity, omega * pvbpModified * bsAdjoint[2] * volatilityAdjoint[6]);
return Triple.of(pv, pvcs, pvss);
}
}