/**
* 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 static org.testng.AssertJUnit.assertEquals;
import java.util.List;
import org.testng.annotations.Test;
import org.threeten.bp.Period;
import org.threeten.bp.ZonedDateTime;
import cern.colt.Arrays;
import cern.jet.random.engine.MersenneTwister;
import com.opengamma.analytics.financial.instrument.annuity.AnnuityCouponFixedDefinition;
import com.opengamma.analytics.financial.instrument.annuity.AnnuityCouponIborDefinition;
import com.opengamma.analytics.financial.instrument.annuity.AnnuityDefinition;
import com.opengamma.analytics.financial.instrument.index.GeneratorSwapFixedIbor;
import com.opengamma.analytics.financial.instrument.index.GeneratorSwapFixedIborMaster;
import com.opengamma.analytics.financial.instrument.index.IborIndex;
import com.opengamma.analytics.financial.instrument.payment.CouponFixedDefinition;
import com.opengamma.analytics.financial.instrument.payment.CouponIborDefinition;
import com.opengamma.analytics.financial.instrument.payment.PaymentDefinition;
import com.opengamma.analytics.financial.instrument.swap.SwapFixedIborDefinition;
import com.opengamma.analytics.financial.instrument.swaption.SwaptionPhysicalFixedIborDefinition;
import com.opengamma.analytics.financial.interestrate.PresentValueSABRSensitivityDataBundle;
import com.opengamma.analytics.financial.interestrate.annuity.derivative.Annuity;
import com.opengamma.analytics.financial.interestrate.annuity.derivative.AnnuityCouponFixed;
import com.opengamma.analytics.financial.interestrate.payments.derivative.Coupon;
import com.opengamma.analytics.financial.interestrate.payments.derivative.CouponFixed;
import com.opengamma.analytics.financial.interestrate.payments.derivative.CouponIbor;
import com.opengamma.analytics.financial.interestrate.payments.derivative.Payment;
import com.opengamma.analytics.financial.interestrate.swap.derivative.SwapFixedCoupon;
import com.opengamma.analytics.financial.interestrate.swap.provider.SwapFixedCouponDiscountingMethod;
import com.opengamma.analytics.financial.interestrate.swaption.derivative.SwaptionPhysicalFixedIbor;
import com.opengamma.analytics.financial.interestrate.swaption.method.SwaptionPhysicalFixedIborBasketMethod;
import com.opengamma.analytics.financial.model.interestrate.TestsDataSetLiborMarketModelDisplacedDiffusion;
import com.opengamma.analytics.financial.model.interestrate.definition.LiborMarketModelDisplacedDiffusionParameters;
import com.opengamma.analytics.financial.model.option.definition.SABRInterestRateParameters;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.BlackFunctionData;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.EuropeanVanillaOption;
import com.opengamma.analytics.financial.model.volatility.BlackImpliedVolatilityFormula;
import com.opengamma.analytics.financial.montecarlo.provider.LiborMarketModelMonteCarloMethod;
import com.opengamma.analytics.financial.provider.calculator.discounting.ParRateDiscountingCalculator;
import com.opengamma.analytics.financial.provider.calculator.discounting.PresentValueDiscountingCalculator;
import com.opengamma.analytics.financial.provider.calculator.libormarket.PresentValueCurveSensitivityLMMDDCalculator;
import com.opengamma.analytics.financial.provider.calculator.libormarket.PresentValueLMMDDCalculator;
import com.opengamma.analytics.financial.provider.calculator.sabrswaption.PresentValueSABRSwaptionCalculator;
import com.opengamma.analytics.financial.provider.description.MulticurveProviderDiscountDataSets;
import com.opengamma.analytics.financial.provider.description.SABRDataSets;
import com.opengamma.analytics.financial.provider.description.interestrate.LiborMarketModelDisplacedDiffusionProvider;
import com.opengamma.analytics.financial.provider.description.interestrate.LiborMarketModelDisplacedDiffusionProviderDiscount;
import com.opengamma.analytics.financial.provider.description.interestrate.LiborMarketModelDisplacedDiffusionProviderInterface;
import com.opengamma.analytics.financial.provider.description.interestrate.MulticurveProviderDiscount;
import com.opengamma.analytics.financial.provider.description.interestrate.SABRSwaptionProvider;
import com.opengamma.analytics.financial.provider.description.interestrate.SABRSwaptionProviderDiscount;
import com.opengamma.analytics.financial.provider.description.interestrate.SABRSwaptionProviderInterface;
import com.opengamma.analytics.financial.provider.method.CalibrationEngineWithCalculators;
import com.opengamma.analytics.financial.provider.method.SuccessiveRootFinderLMMDDCalibrationEngine;
import com.opengamma.analytics.financial.provider.method.SuccessiveRootFinderLMMDDCalibrationObjective;
import com.opengamma.analytics.financial.provider.sensitivity.libormarket.ParameterSensitivityLMMDDDiscountInterpolatedFDCalculator;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MultipleCurrencyMulticurveSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MultipleCurrencyParameterSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.parameter.ParameterSensitivityParameterCalculator;
import com.opengamma.analytics.financial.schedule.ScheduleCalculator;
import com.opengamma.analytics.financial.util.AssertSensitivityObjects;
import com.opengamma.analytics.math.random.NormalRandomNumberGenerator;
import com.opengamma.financial.convention.calendar.Calendar;
import com.opengamma.util.money.Currency;
import com.opengamma.util.money.MultipleCurrencyAmount;
import com.opengamma.util.test.TestGroup;
import com.opengamma.util.time.DateUtils;
import com.opengamma.util.tuple.DoublesPair;
/**
* Tests related to the pricing of physical delivery swaption in LMM displaced diffusion.
*/
@Test(groups = TestGroup.UNIT)
public class SwaptionPhysicalFixedIborLMMDDMethodTest {
private static final MulticurveProviderDiscount MULTICURVES = MulticurveProviderDiscountDataSets.createMulticurveEurUsd();
private static final IborIndex EURIBOR6M = MulticurveProviderDiscountDataSets.getIndexesIborMulticurveEurUsd()[1];
private static final Currency EUR = EURIBOR6M.getCurrency();
private static final Calendar TARGET = MulticurveProviderDiscountDataSets.getEURCalendar();
private static final GeneratorSwapFixedIbor EUR1YEURIBOR6M = GeneratorSwapFixedIborMaster.getInstance().getGenerator("EUR1YEURIBOR6M", TARGET);
private static final GeneratorSwapFixedIbor EUR1YEURIBOR3M = GeneratorSwapFixedIborMaster.getInstance().getGenerator("EUR1YEURIBOR3M", TARGET);
// Swaption 5Yx5Y
private static final int SWAP_TENOR_YEAR = 5;
private static final Period SWAP_TENOR = Period.ofYears(SWAP_TENOR_YEAR);
private static final ZonedDateTime EXPIRY_DATE = DateUtils.getUTCDate(2016, 7, 7);
private static final ZonedDateTime SETTLEMENT_DATE = ScheduleCalculator.getAdjustedDate(EXPIRY_DATE, EURIBOR6M.getSpotLag(), TARGET);
private static final double NOTIONAL = 100000000; //100m
private static final double RATE = 0.0200;
private static final boolean FIXED_IS_PAYER = true;
private static final SwapFixedIborDefinition SWAP_PAYER_DEFINITION = SwapFixedIborDefinition.from(SETTLEMENT_DATE, SWAP_TENOR, EUR1YEURIBOR6M, NOTIONAL, RATE, FIXED_IS_PAYER);
private static final SwapFixedIborDefinition SWAP_RECEIVER_DEFINITION = SwapFixedIborDefinition.from(SETTLEMENT_DATE, SWAP_TENOR, EUR1YEURIBOR6M, NOTIONAL, RATE, !FIXED_IS_PAYER);
private static final boolean IS_LONG = true;
private static final SwaptionPhysicalFixedIborDefinition SWAPTION_PAYER_LONG_DEFINITION = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE, SWAP_PAYER_DEFINITION, true, IS_LONG);
private static final SwaptionPhysicalFixedIborDefinition SWAPTION_RECEIVER_LONG_DEFINITION = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE, SWAP_RECEIVER_DEFINITION, false, IS_LONG);
private static final SwaptionPhysicalFixedIborDefinition SWAPTION_PAYER_SHORT_DEFINITION = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE, SWAP_PAYER_DEFINITION, true, !IS_LONG);
//to derivatives
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 7, 7);
private static final SwapFixedCoupon<Coupon> SWAP_RECEIVER = SWAP_RECEIVER_DEFINITION.toDerivative(REFERENCE_DATE);
private static final SwaptionPhysicalFixedIbor SWAPTION_PAYER_LONG = SWAPTION_PAYER_LONG_DEFINITION.toDerivative(REFERENCE_DATE);
private static final SwaptionPhysicalFixedIbor SWAPTION_RECEIVER_LONG = SWAPTION_RECEIVER_LONG_DEFINITION.toDerivative(REFERENCE_DATE);
private static final SwaptionPhysicalFixedIbor SWAPTION_PAYER_SHORT = SWAPTION_PAYER_SHORT_DEFINITION.toDerivative(REFERENCE_DATE);
// Parameters and methods
private static final PresentValueDiscountingCalculator PVDC = PresentValueDiscountingCalculator.getInstance();
private static final ParRateDiscountingCalculator PRDC = ParRateDiscountingCalculator.getInstance();
private static final SwaptionPhysicalFixedIborLMMDDMethod METHOD_LMM = SwaptionPhysicalFixedIborLMMDDMethod.getInstance();
private static final SwaptionPhysicalFixedIborSABRMethod METHOD_SABR = SwaptionPhysicalFixedIborSABRMethod.getInstance();
private static final PresentValueSABRSwaptionCalculator PVSSC = PresentValueSABRSwaptionCalculator.getInstance();
private static final PresentValueLMMDDCalculator PVLLC = PresentValueLMMDDCalculator.getInstance();
private static final PresentValueCurveSensitivityLMMDDCalculator PVCSLLC = PresentValueCurveSensitivityLMMDDCalculator.getInstance();
private static final double SHIFT = 1.0E-7;
private static final ParameterSensitivityParameterCalculator<LiborMarketModelDisplacedDiffusionProviderInterface> PS_LL_C = new ParameterSensitivityParameterCalculator<>(
PVCSLLC);
private static final ParameterSensitivityLMMDDDiscountInterpolatedFDCalculator PS_LL_FDC = new ParameterSensitivityLMMDDDiscountInterpolatedFDCalculator(PVLLC, SHIFT);
private static final LiborMarketModelDisplacedDiffusionParameters PARAMETERS_LMM = TestsDataSetLiborMarketModelDisplacedDiffusion.createLMMParameters(REFERENCE_DATE,
SWAP_PAYER_DEFINITION.getIborLeg());
private static final LiborMarketModelDisplacedDiffusionProviderDiscount LMM_MULTICURVES = new LiborMarketModelDisplacedDiffusionProviderDiscount(MULTICURVES, PARAMETERS_LMM, EUR);
private static final SABRInterestRateParameters SABR_PARMETERS = SABRDataSets.createSABR1();
private static final SABRSwaptionProviderDiscount SABR_MULTICURVES = new SABRSwaptionProviderDiscount(MULTICURVES, SABR_PARMETERS, EUR1YEURIBOR6M);
private static final int NB_PATH = 12500;
// private static final LiborMarketModelMonteCarloMethod METHOD_LMM_MC = new LiborMarketModelMonteCarloMethod(new NormalRandomNumberGenerator(0.0, 1.0), NB_PATH);
private static final SwapFixedCouponDiscountingMethod METHOD_SWAP = SwapFixedCouponDiscountingMethod.getInstance();
private static final double[] MONEYNESS = new double[] {-0.0100, 0, 0.0100 };
private static final SwaptionPhysicalFixedIborSABRLMMLeastSquareMethod METHOD_SABR_LMM_ATBEST = new SwaptionPhysicalFixedIborSABRLMMLeastSquareMethod(MONEYNESS, PARAMETERS_LMM);
private static final SwaptionPhysicalFixedIborBasketMethod METHOD_BASKET = SwaptionPhysicalFixedIborBasketMethod.getInstance();
private static final double TOLERANCE_PV = 1.0E-2;
private static final double TOLERANCE_PV_DELTA = 1.0E+2;
@Test
/**
* Test the present value.
*/
public void presentValue() {
final double pvPreviousRun = 2000842.564; // Mean reversion 0.001: 4367793.468;
final MultipleCurrencyAmount pv = METHOD_LMM.presentValue(SWAPTION_PAYER_LONG, LMM_MULTICURVES);
assertEquals("Swaption physical - LMM - present value", pvPreviousRun, pv.getAmount(EUR), TOLERANCE_PV);
}
@Test
/**
* Test the present value: approximated formula vs Monte Carlo.
*/
public void presentValueMC() {
LiborMarketModelMonteCarloMethod methodLmmMc;
methodLmmMc = new LiborMarketModelMonteCarloMethod(new NormalRandomNumberGenerator(0.0, 1.0, new MersenneTwister()), NB_PATH);
final MultipleCurrencyAmount pvMC = methodLmmMc.presentValue(SWAPTION_PAYER_LONG, EUR, LMM_MULTICURVES);
final double pvMCPreviousRun = 1997241.514;
assertEquals("Swaption physical - LMM - present value Monte Carlo", pvMCPreviousRun, pvMC.getAmount(EUR), TOLERANCE_PV);
final MultipleCurrencyAmount pvApprox = METHOD_LMM.presentValue(SWAPTION_PAYER_LONG, LMM_MULTICURVES);
final double pvbp = METHOD_SWAP.presentValueBasisPoint(SWAP_RECEIVER, MULTICURVES);
final double forward = SWAP_RECEIVER.accept(PRDC, MULTICURVES);
final BlackFunctionData data = new BlackFunctionData(forward, pvbp, 0.20);
final EuropeanVanillaOption option = new EuropeanVanillaOption(RATE, SWAPTION_PAYER_LONG.getTimeToExpiry(), FIXED_IS_PAYER);
final BlackImpliedVolatilityFormula implied = new BlackImpliedVolatilityFormula();
final double impliedVolMC = implied.getImpliedVolatility(data, option, pvMC.getAmount(EUR));
final double impliedVolApprox = implied.getImpliedVolatility(data, option, pvApprox.getAmount(EUR));
assertEquals("Swaption physical - LMM - present value Approximation/Monte Carlo", impliedVolMC, impliedVolApprox, 2.0E-3);
}
@Test
/**
* Tests long/short parity.
*/
public void longShortParity() {
final MultipleCurrencyAmount pvLong = METHOD_LMM.presentValue(SWAPTION_PAYER_LONG, LMM_MULTICURVES);
final MultipleCurrencyAmount pvShort = METHOD_LMM.presentValue(SWAPTION_PAYER_SHORT, LMM_MULTICURVES);
assertEquals("Swaption physical - LMM - present value - long/short parity", pvLong.getAmount(EUR), -pvShort.getAmount(EUR), TOLERANCE_PV);
}
@Test
/**
* Tests payer/receiver/swap parity.
*/
public void payerReceiverParity() {
final MultipleCurrencyAmount pvReceiverLong = METHOD_LMM.presentValue(SWAPTION_RECEIVER_LONG, LMM_MULTICURVES);
final MultipleCurrencyAmount pvPayerShort = METHOD_LMM.presentValue(SWAPTION_PAYER_SHORT, LMM_MULTICURVES);
final MultipleCurrencyAmount pvSwap = SWAP_RECEIVER.accept(PVDC, MULTICURVES);
assertEquals("Swaption physical - LMM - present value - payer/receiver/swap parity", pvReceiverLong.getAmount(EUR) + pvPayerShort.getAmount(EUR), pvSwap.getAmount(EUR), TOLERANCE_PV);
}
@Test
/**
* Test the present value LMM volatility parameters sensitivity.
*/
public void presentValueLMMSensitivity() {
final double[][] pvLmmSensi = METHOD_LMM.presentValueLMMSensitivity(SWAPTION_PAYER_LONG, LMM_MULTICURVES);
final double shift = 1.0E-6;
final LiborMarketModelDisplacedDiffusionParameters parameterShiftPlus = TestsDataSetLiborMarketModelDisplacedDiffusion.createLMMParametersShiftVol(REFERENCE_DATE,
SWAP_PAYER_DEFINITION.getIborLeg(), shift);
final LiborMarketModelDisplacedDiffusionProviderDiscount bundleShiftPlus = new LiborMarketModelDisplacedDiffusionProviderDiscount(MULTICURVES, parameterShiftPlus, EUR);
final MultipleCurrencyAmount pvShiftPlus = METHOD_LMM.presentValue(SWAPTION_PAYER_LONG, bundleShiftPlus);
final LiborMarketModelDisplacedDiffusionParameters parameterShiftMinus = TestsDataSetLiborMarketModelDisplacedDiffusion.createLMMParametersShiftVol(REFERENCE_DATE,
SWAP_PAYER_DEFINITION.getIborLeg(), -shift);
final LiborMarketModelDisplacedDiffusionProviderDiscount bundleShiftMinus = new LiborMarketModelDisplacedDiffusionProviderDiscount(MULTICURVES, parameterShiftMinus, EUR);
final MultipleCurrencyAmount pvShiftMinus = METHOD_LMM.presentValue(SWAPTION_PAYER_LONG, bundleShiftMinus);
final double pvLmmSensiTotExpected = (pvShiftPlus.getAmount(EUR) - pvShiftMinus.getAmount(EUR)) / (2 * shift);
double pvLmmSensiTot = 0.0;
for (final double[] element : pvLmmSensi) {
for (int loopfact = 0; loopfact < pvLmmSensi[0].length; loopfact++) {
pvLmmSensiTot += element[loopfact];
}
}
assertEquals("Swaption physical - LMM - present value Lmm parameters sensitivity", pvLmmSensiTotExpected, pvLmmSensiTot, TOLERANCE_PV_DELTA);
}
@Test
/**
* Test the present value displaced diffusion parameters sensitivity.
*/
public void presentValueDDSensitivity() {
final double[] pvDDSensi = METHOD_LMM.presentValueDDSensitivity(SWAPTION_PAYER_LONG, LMM_MULTICURVES);
final double shift = 1.0E-6;
final LiborMarketModelDisplacedDiffusionParameters parameterShiftPlus = TestsDataSetLiborMarketModelDisplacedDiffusion.createLMMParametersShiftDis(REFERENCE_DATE,
SWAP_PAYER_DEFINITION.getIborLeg(), shift);
final LiborMarketModelDisplacedDiffusionProviderDiscount bundleShiftPlus = new LiborMarketModelDisplacedDiffusionProviderDiscount(MULTICURVES, parameterShiftPlus, EUR);
final MultipleCurrencyAmount pvShiftPlus = METHOD_LMM.presentValue(SWAPTION_PAYER_LONG, bundleShiftPlus);
final LiborMarketModelDisplacedDiffusionParameters parameterShiftMinus = TestsDataSetLiborMarketModelDisplacedDiffusion.createLMMParametersShiftDis(REFERENCE_DATE,
SWAP_PAYER_DEFINITION.getIborLeg(), -shift);
final LiborMarketModelDisplacedDiffusionProviderDiscount bundleShiftMinus = new LiborMarketModelDisplacedDiffusionProviderDiscount(MULTICURVES, parameterShiftMinus, EUR);
final MultipleCurrencyAmount pvShiftMinus = METHOD_LMM.presentValue(SWAPTION_PAYER_LONG, bundleShiftMinus);
final double pvDDSensiTotExpected = (pvShiftPlus.getAmount(EUR) - pvShiftMinus.getAmount(EUR)) / (2 * shift);
double pvDDSensiTot = 0.0;
for (final double element : pvDDSensi) {
pvDDSensiTot += element;
}
assertEquals("Swaption physical - LMM - present value displacement parameters sensitivity", pvDDSensiTotExpected, pvDDSensiTot, TOLERANCE_PV_DELTA);
}
@Test
/**
* Test the present value curve sensitivity.
*/
public void presentValueCurveSensitivity() {
final MultipleCurrencyParameterSensitivity pvpsExact = PS_LL_C.calculateSensitivity(SWAPTION_PAYER_LONG, LMM_MULTICURVES, LMM_MULTICURVES.getMulticurveProvider().getAllNames());
final MultipleCurrencyParameterSensitivity pvpsFD = PS_LL_FDC.calculateSensitivity(SWAPTION_PAYER_LONG, LMM_MULTICURVES);
AssertSensitivityObjects.assertEquals("SwaptionPhysicalFixedIborLMMDDMethod: presentValueCurveSensitivity ", pvpsExact, pvpsFD, TOLERANCE_PV_DELTA);
}
@Test(enabled = false)
/**
* Tests of performance. "enabled = false" for the standard testing.
*/
public void performance() {
long startTime, endTime;
final int nbTest = 1000;
final Period swapTenor = Period.ofYears(10);
final Period expTenor = Period.ofYears(10);
final ZonedDateTime expiryDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, expTenor, EURIBOR6M, TARGET);
final ZonedDateTime settleDate = ScheduleCalculator.getAdjustedDate(expiryDate, EURIBOR6M.getSpotLag(), TARGET);
final LiborMarketModelDisplacedDiffusionParameters parametersLMM = TestsDataSetLiborMarketModelDisplacedDiffusion.createLMMParameters(REFERENCE_DATE,
SwapFixedIborDefinition.from(settleDate, swapTenor, EUR1YEURIBOR3M, NOTIONAL, 0.0, FIXED_IS_PAYER).getIborLeg());
final LiborMarketModelDisplacedDiffusionProviderDiscount lmmMulticurves = new LiborMarketModelDisplacedDiffusionProviderDiscount(MULTICURVES, parametersLMM, EUR);
final double startRate = 0.03;
final double[] rate = new double[nbTest];
final SwapFixedIborDefinition[] swapDefinition = new SwapFixedIborDefinition[nbTest];
final SwaptionPhysicalFixedIborDefinition[] swaptionDefinition = new SwaptionPhysicalFixedIborDefinition[nbTest];
final SwaptionPhysicalFixedIbor[] swaption = new SwaptionPhysicalFixedIbor[nbTest];
for (int looptest = 0; looptest < nbTest; looptest++) {
rate[looptest] = startRate + 0.00001 * looptest;
swapDefinition[looptest] = SwapFixedIborDefinition.from(settleDate, swapTenor, EUR1YEURIBOR3M, NOTIONAL, rate[looptest], FIXED_IS_PAYER);
swaptionDefinition[looptest] = SwaptionPhysicalFixedIborDefinition.from(expiryDate, swapDefinition[looptest], FIXED_IS_PAYER, IS_LONG);
swaption[looptest] = swaptionDefinition[looptest].toDerivative(REFERENCE_DATE);
}
final MultipleCurrencyAmount[] pvPayerLongApproximation = new MultipleCurrencyAmount[nbTest];
final double[][][] pvLmmSensi = new double[nbTest][][];
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvPayerLongApproximation[looptest] = METHOD_LMM.presentValue(swaption[looptest], lmmMulticurves);
}
endTime = System.currentTimeMillis();
System.out.println("[SwaptionPhysicalFixedIborLMMDDMethod] " + nbTest + " swaption LMM approximation method: " + (endTime - startTime) + " ms");
// Performance note: LMM approximation: 1-Sep-11: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 30 ms for 1000 swaptions.
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvLmmSensi[looptest] = METHOD_LMM.presentValueLMMSensitivity(swaption[looptest], lmmMulticurves);
}
endTime = System.currentTimeMillis();
System.out.println("[SwaptionPhysicalFixedIborLMMDDMethod] " + nbTest + " swaption LMM approximation method - LMM volatility parameters sensitivity (20x2): " + (endTime - startTime) + " ms");
// Performance note: LMM approximation - LMM sensi: 1-Sep-11: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 30 ms for 1000 swaptions.
System.out.println("Approximation: " + Arrays.toString(pvPayerLongApproximation));
final int nbPaths = 12500;
final LiborMarketModelMonteCarloMethod methodLMMMC = new LiborMarketModelMonteCarloMethod(new NormalRandomNumberGenerator(0.0, 1.0), nbPaths, 4.0);
final int nbTest2 = 5;
final MultipleCurrencyAmount[] pvMC = new MultipleCurrencyAmount[nbTest];
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest2; looptest++) {
pvMC[looptest] = methodLMMMC.presentValue(swaption[looptest], EUR, lmmMulticurves);
}
endTime = System.currentTimeMillis();
System.out.println("[SwaptionPhysicalFixedIborLMMDDMethod] " + nbTest2 + " swaption LMM Monte Carlo method (" + nbPaths + " paths): " + (endTime - startTime) + " ms");
// Performance note: LMM Monte Carlo: 20-Sep-11: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 2400 ms for 10 swaptions 5Yx5Y/12500 paths/5 jumps.
}
@Test
/**
* Calibrate and price an amortized swaption.
*/
public void calibrateExactPriceAmortized() {
final int[] swapTenorYear = {1, 2, 3, 4, 5 };
final double[] amortization = new double[] {1.00, 0.80, 0.60, 0.40, 0.20 }; // For 5Y amortization
// double[] amortization = new double[] {1.00, 0.90, 0.80, 0.70, 0.60, 0.50, 0.40, 0.30, 0.20, 0.10}; // For 10Y amortization
final SwapFixedIborDefinition[] swapCalibrationDefinition = new SwapFixedIborDefinition[swapTenorYear.length];
final SwaptionPhysicalFixedIborDefinition[] swaptionCalibrationDefinition = new SwaptionPhysicalFixedIborDefinition[swapTenorYear.length];
final SwaptionPhysicalFixedIbor[] swaptionCalibration = new SwaptionPhysicalFixedIbor[swapTenorYear.length];
for (int loopexp = 0; loopexp < swapTenorYear.length; loopexp++) {
swapCalibrationDefinition[loopexp] = SwapFixedIborDefinition.from(SETTLEMENT_DATE, Period.ofYears(loopexp + 1), EUR1YEURIBOR6M, NOTIONAL, RATE, FIXED_IS_PAYER);
swaptionCalibrationDefinition[loopexp] = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE, swapCalibrationDefinition[loopexp], FIXED_IS_PAYER, IS_LONG);
swaptionCalibration[loopexp] = swaptionCalibrationDefinition[loopexp].toDerivative(REFERENCE_DATE);
}
final CouponFixed[] cpnFixed = new CouponFixed[swapTenorYear.length];
final AnnuityCouponFixed legFixed = swaptionCalibration[swapTenorYear.length - 1].getUnderlyingSwap().getFixedLeg();
final CouponIbor[] cpnIbor = new CouponIbor[2 * swapTenorYear.length];
@SuppressWarnings("unchecked")
final Annuity<Payment> legIbor = (Annuity<Payment>) swaptionCalibration[swapTenorYear.length - 1].getUnderlyingSwap().getSecondLeg();
for (int loopexp = 0; loopexp < swapTenorYear.length; loopexp++) {
cpnFixed[loopexp] = legFixed.getNthPayment(loopexp).withNotional(legFixed.getNthPayment(loopexp).getNotional() * amortization[loopexp]);
cpnIbor[2 * loopexp] = ((CouponIbor) legIbor.getNthPayment(2 * loopexp)).withNotional(((CouponIbor) legIbor.getNthPayment(2 * loopexp)).getNotional() * amortization[loopexp]);
cpnIbor[2 * loopexp + 1] = ((CouponIbor) legIbor.getNthPayment(2 * loopexp + 1)).withNotional(((CouponIbor) legIbor.getNthPayment(2 * loopexp + 1)).getNotional() * amortization[loopexp]);
}
final SwapFixedCoupon<Coupon> swapAmortized = new SwapFixedCoupon<>(new AnnuityCouponFixed(cpnFixed), new Annuity<Coupon>(cpnIbor));
final SwaptionPhysicalFixedIbor swaptionAmortized = SwaptionPhysicalFixedIbor.from(swaptionCalibration[0].getTimeToExpiry(), swapAmortized, swaptionCalibration[0].getSettlementTime(), IS_LONG);
final SwaptionPhysicalFixedIbor[] swaptionCalibration2 = METHOD_BASKET.calibrationBasketFixedLegPeriod(swaptionAmortized);
assertEquals("Calibration basket", swaptionCalibration.length, swaptionCalibration2.length);
for (int loopcal = 0; loopcal < swaptionCalibration.length; loopcal++) {
assertEquals("Calibration basket: " + loopcal, METHOD_SABR.presentValue(swaptionCalibration[loopcal], SABR_MULTICURVES).getAmount(EUR),
METHOD_SABR.presentValue(swaptionCalibration2[loopcal], SABR_MULTICURVES).getAmount(EUR), TOLERANCE_PV);
}
// Calibration and price
final LiborMarketModelDisplacedDiffusionParameters lmmParameters = TestsDataSetLiborMarketModelDisplacedDiffusion.createLMMParametersDisplacementAngle(REFERENCE_DATE,
swapCalibrationDefinition[swapTenorYear.length - 1].getIborLeg(), 0.10, Math.PI / 2);
final SuccessiveRootFinderLMMDDCalibrationObjective objective = new SuccessiveRootFinderLMMDDCalibrationObjective(lmmParameters, EUR);
final CalibrationEngineWithCalculators<SABRSwaptionProviderInterface> calibrationEngine = new SuccessiveRootFinderLMMDDCalibrationEngine<>(objective);
calibrationEngine.addInstrument(swaptionCalibration2, PVSSC);
calibrationEngine.calibrate(SABR_MULTICURVES);
final LiborMarketModelDisplacedDiffusionProviderInterface lmm = new LiborMarketModelDisplacedDiffusionProvider(MULTICURVES, lmmParameters, EUR);
final MultipleCurrencyAmount pvAmortized = METHOD_LMM.presentValue(swaptionAmortized, lmm);
final double pvAmortizedPrevious = 1125007.920;
assertEquals("LMM Amortized pricing", pvAmortizedPrevious, pvAmortized.getAmount(EUR), TOLERANCE_PV);
// Method
final SwaptionPhysicalFixedIborSABRLMMExactMethod method = new SwaptionPhysicalFixedIborSABRLMMExactMethod();
final MultipleCurrencyAmount pvAmortizedMethod = method.presentValue(swaptionAmortized, SABR_MULTICURVES);
assertEquals("LMM Amortized pricing", pvAmortized.getAmount(EUR), pvAmortizedMethod.getAmount(EUR), TOLERANCE_PV);
// SABR parameters sensitivity in all-in-one method.
final List<Object> results = method.presentValueCurveSABRSensitivity(swaptionAmortized, SABR_MULTICURVES);
final MultipleCurrencyMulticurveSensitivity pvcs1 = (MultipleCurrencyMulticurveSensitivity) results.get(1);
final PresentValueSABRSensitivityDataBundle pvss1 = (PresentValueSABRSensitivityDataBundle) results.get(2);
// SABR parameters sensitivity
final PresentValueSABRSensitivityDataBundle pvss = method.presentValueSABRSensitivity(swaptionAmortized, SABR_MULTICURVES);
// SABR parameters sensitivity (all-in-one)
for (final SwaptionPhysicalFixedIbor element : swaptionCalibration) {
final DoublesPair expiryMaturity = DoublesPair.of(element.getTimeToExpiry(), element.getMaturityTime());
assertEquals("Sensitivity swaption pv to alpha", pvss1.getAlpha().getMap().get(expiryMaturity), pvss.getAlpha().getMap().get(expiryMaturity), 1E-2);
assertEquals("Sensitivity swaption pv to rho", pvss1.getRho().getMap().get(expiryMaturity), pvss.getRho().getMap().get(expiryMaturity), 1E-2);
assertEquals("Sensitivity swaption pv to nu", pvss1.getNu().getMap().get(expiryMaturity), pvss.getNu().getMap().get(expiryMaturity), 1E-2);
}
// SABR parameters sensitivity (parallel shift check)
SABRInterestRateParameters sabrParameterShift;
SABRSwaptionProviderDiscount sabrBundleShift;
final LiborMarketModelDisplacedDiffusionParameters lmmParametersShift = TestsDataSetLiborMarketModelDisplacedDiffusion.createLMMParametersDisplacementAngle(REFERENCE_DATE,
swapCalibrationDefinition[swapTenorYear.length - 1].getIborLeg(), 0.10, Math.PI / 2);
final SuccessiveRootFinderLMMDDCalibrationObjective objectiveShift = new SuccessiveRootFinderLMMDDCalibrationObjective(lmmParametersShift, EUR);
final CalibrationEngineWithCalculators<SABRSwaptionProviderInterface> calibrationEngineShift = new SuccessiveRootFinderLMMDDCalibrationEngine<>(objectiveShift);
calibrationEngineShift.addInstrument(swaptionCalibration2, PVSSC);
final LiborMarketModelDisplacedDiffusionProvider lmmBundleShift = new LiborMarketModelDisplacedDiffusionProvider(MULTICURVES, lmmParametersShift, EUR);
double alphaVegaTotalComputed = 0.0;
assertEquals("Number of alpha sensitivity", pvss.getAlpha().getMap().keySet().size(), swaptionCalibration.length);
for (final SwaptionPhysicalFixedIbor element : swaptionCalibration) {
final DoublesPair expiryMaturity = DoublesPair.of(element.getTimeToExpiry(), element.getMaturityTime());
alphaVegaTotalComputed += pvss.getAlpha().getMap().get(expiryMaturity);
}
final double shiftAlpha = 0.00001;
sabrParameterShift = SABRDataSets.createSABR1AlphaBumped(shiftAlpha);
sabrBundleShift = new SABRSwaptionProviderDiscount(MULTICURVES, sabrParameterShift, EUR1YEURIBOR6M);
calibrationEngineShift.calibrate(sabrBundleShift);
final MultipleCurrencyAmount pvAmortizedShiftAlpha = METHOD_LMM.presentValue(swaptionAmortized, lmmBundleShift);
final double alphaVegaTotalExpected = (pvAmortizedShiftAlpha.getAmount(EUR) - pvAmortized.getAmount(EUR)) / shiftAlpha;
assertEquals("Alpha sensitivity value", alphaVegaTotalExpected, alphaVegaTotalComputed, 5 * TOLERANCE_PV_DELTA);
double rhoVegaTotalComputed = 0.0;
assertEquals("Number of alpha sensitivity", pvss.getRho().getMap().keySet().size(), swaptionCalibration.length);
for (final SwaptionPhysicalFixedIbor element : swaptionCalibration) {
final DoublesPair expiryMaturity = DoublesPair.of(element.getTimeToExpiry(), element.getMaturityTime());
rhoVegaTotalComputed += pvss.getRho().getMap().get(expiryMaturity);
}
final double shiftRho = 0.00001;
sabrParameterShift = SABRDataSets.createSABR1RhoBumped(shiftRho);
sabrBundleShift = new SABRSwaptionProviderDiscount(MULTICURVES, sabrParameterShift, EUR1YEURIBOR6M);
calibrationEngineShift.calibrate(sabrBundleShift);
final MultipleCurrencyAmount pvAmortizedShiftRho = METHOD_LMM.presentValue(swaptionAmortized, lmmBundleShift);
final double rhoVegaTotalExpected = (pvAmortizedShiftRho.getAmount(EUR) - pvAmortized.getAmount(EUR)) / shiftRho;
assertEquals("Rho sensitivity value", rhoVegaTotalExpected, rhoVegaTotalComputed, TOLERANCE_PV_DELTA);
double nuVegaTotalComputed = 0.0;
assertEquals("Number of alpha sensitivity", pvss.getNu().getMap().keySet().size(), swaptionCalibration.length);
for (final SwaptionPhysicalFixedIbor element : swaptionCalibration) {
final DoublesPair expiryMaturity = DoublesPair.of(element.getTimeToExpiry(), element.getMaturityTime());
nuVegaTotalComputed += pvss.getNu().getMap().get(expiryMaturity);
}
final double shiftNu = 0.00001;
sabrParameterShift = SABRDataSets.createSABR1NuBumped(shiftNu);
sabrBundleShift = new SABRSwaptionProviderDiscount(MULTICURVES, sabrParameterShift, EUR1YEURIBOR6M);
calibrationEngineShift.calibrate(sabrBundleShift);
final MultipleCurrencyAmount pvAmortizedShiftNu = METHOD_LMM.presentValue(swaptionAmortized, lmmBundleShift);
final double nuVegaTotalExpected = (pvAmortizedShiftNu.getAmount(EUR) - pvAmortized.getAmount(EUR)) / shiftNu;
assertEquals("Nu sensitivity value", nuVegaTotalExpected, nuVegaTotalComputed, TOLERANCE_PV_DELTA);
// Curve sensitivity
MultipleCurrencyMulticurveSensitivity pvcs = method.presentValueCurveSensitivity(swaptionAmortized, SABR_MULTICURVES);
pvcs = pvcs.cleaned();
// Curve sensitivity (all-in-one)
AssertSensitivityObjects.assertEquals("presentValueCurveSensitivity", pvcs1, pvcs, TOLERANCE_PV_DELTA);
// Curve sensitivity (parallel shift check)
// final double shiftCurve = 0.0000001;
// final YieldAndDiscountCurve curve5Shift = YieldCurve.from(ConstantDoublesCurve.from(0.05 + shiftCurve));
// final YieldAndDiscountCurve curve4Shift = YieldCurve.from(ConstantDoublesCurve.from(0.04 + shiftCurve));
//
// final YieldCurveBundle curvesDscShift = new YieldCurveBundle();
// curvesDscShift.setCurve(FUNDING_CURVE_NAME, curve5Shift);
// curvesDscShift.setCurve(FORWARD_CURVE_NAME, CURVES.getCurve(FORWARD_CURVE_NAME));
// final SABRInterestRateDataBundle sabrBundleCurveDscShift = new SABRInterestRateDataBundle(sabrParameter, curvesDscShift);
// final CurrencyAmount pvAmortizedShiftCurveDsc = method.presentValue(swaptionAmortized, sabrBundleCurveDscShift);
// final double dscDeltaTotalExpected = (pvAmortizedShiftCurveDsc.getAmount() - pvAmortized.getAmount()) / shiftCurve;
// double dscDeltaTotal = 0.0;
// final List<DoublesPair> dscSensi = pvcs.getSensitivities().get(FUNDING_CURVE_NAME);
// for (int looppay = 0; looppay < dscSensi.size(); looppay++) {
// dscDeltaTotal += dscSensi.get(looppay).second;
// }
// assertEquals("Curve DSC sensitivity value", dscDeltaTotalExpected, dscDeltaTotal, 5.0E+1);
//
// final YieldCurveBundle curvesFwdShift = new YieldCurveBundle();
// curvesFwdShift.setCurve(FUNDING_CURVE_NAME, CURVES.getCurve(FUNDING_CURVE_NAME));
// curvesFwdShift.setCurve(FORWARD_CURVE_NAME, curve4Shift);
// final SABRInterestRateDataBundle sabrBundleCurveFwdShift = new SABRInterestRateDataBundle(sabrParameter, curvesFwdShift);
// final CurrencyAmount pvAmortizedShiftCurveFwd = method.presentValue(swaptionAmortized, sabrBundleCurveFwdShift);
// final double fwdDeltaTotalExpected = (pvAmortizedShiftCurveFwd.getAmount() - pvAmortized.getAmount()) / shiftCurve;
// double fwdDeltaTotal = 0.0;
// final List<DoublesPair> fwdSensi = pvcs.getSensitivities().get(FORWARD_CURVE_NAME);
// for (int looppay = 0; looppay < fwdSensi.size(); looppay++) {
// fwdDeltaTotal += fwdSensi.get(looppay).second;
// }
// assertEquals("Curve FWD sensitivity value", fwdDeltaTotalExpected, fwdDeltaTotal, 2.0E+2);
}
@Test
/**
* Calibrate and price an amortized swaption.
*/
public void calibrateAtBestPriceAmortized() {
final double[] amortization = new double[] {1.00, 0.80, 0.60, 0.40, 0.20 }; // For 5Y amortization
final int nbPeriods = amortization.length;
final SwapFixedIborDefinition swapDefinition = SwapFixedIborDefinition.from(SETTLEMENT_DATE, Period.ofYears(nbPeriods), EUR1YEURIBOR6M, NOTIONAL, RATE, FIXED_IS_PAYER);
// SwapFixedCoupon<Coupon> swap = swapDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
final CouponFixedDefinition[] cpnFixed = new CouponFixedDefinition[nbPeriods];
final AnnuityCouponFixedDefinition legFixed = swapDefinition.getFixedLeg();
final CouponIborDefinition[] cpnIbor = new CouponIborDefinition[2 * nbPeriods];
final AnnuityDefinition<? extends PaymentDefinition> legIbor = swapDefinition.getSecondLeg();
for (int loopexp = 0; loopexp < nbPeriods; loopexp++) {
cpnFixed[loopexp] = legFixed.getNthPayment(loopexp).withNotional(legFixed.getNthPayment(loopexp).getNotional() * amortization[loopexp]);
cpnIbor[2 * loopexp] = ((CouponIborDefinition) legIbor.getNthPayment(2 * loopexp))
.withNotional(((CouponIborDefinition) legIbor.getNthPayment(2 * loopexp)).getNotional() * amortization[loopexp]);
cpnIbor[2 * loopexp + 1] = ((CouponIborDefinition) legIbor.getNthPayment(2 * loopexp + 1)).withNotional(((CouponIborDefinition) legIbor.getNthPayment(2 * loopexp + 1)).getNotional()
* amortization[loopexp]);
}
final SwapFixedIborDefinition swapAmortizedDefinition = new SwapFixedIborDefinition(new AnnuityCouponFixedDefinition(cpnFixed, TARGET), new AnnuityCouponIborDefinition(cpnIbor, EURIBOR6M, TARGET));
final SwaptionPhysicalFixedIborDefinition swaptionAmortizedDefinition = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE, swapAmortizedDefinition, FIXED_IS_PAYER, IS_LONG);
final SwaptionPhysicalFixedIbor swaptionAmortized = swaptionAmortizedDefinition.toDerivative(REFERENCE_DATE);
// SABR parameters sensitivity (parallel shift check). The sensitivities are not exact; in the approximation a small "second order" term is ignored
final PresentValueSABRSensitivityDataBundle pvss = METHOD_SABR_LMM_ATBEST.presentValueSABRSensitivity(swaptionAmortized, SABR_MULTICURVES);
final double[] shift = new double[] {0.0001, 0.0001, 0.0001 };
final double[] toleranceSABRSensi = new double[] {5.0E+4, 5.0E+3, 1.0E+4 };
final double[] sensiComputed = new double[] {pvss.getAlpha().toSingleValue(), pvss.getRho().toSingleValue(), pvss.getNu().toSingleValue() };
final double[] sensiExpected = new double[shift.length];
SABRInterestRateParameters sabrParameterShift;
SABRSwaptionProvider sabrBundleShift;
for (int loopp = 0; loopp < shift.length; loopp++) {
sabrParameterShift = SABRDataSets.createSABR1ParameterBumped(shift[loopp], loopp);
sabrBundleShift = new SABRSwaptionProvider(MULTICURVES, sabrParameterShift, EUR1YEURIBOR6M);
final MultipleCurrencyAmount pvShiftPlus = METHOD_SABR_LMM_ATBEST.presentValue(swaptionAmortized, sabrBundleShift);
sabrParameterShift = SABRDataSets.createSABR1ParameterBumped(-shift[loopp], loopp);
sabrBundleShift = new SABRSwaptionProvider(MULTICURVES, sabrParameterShift, EUR1YEURIBOR6M);
final MultipleCurrencyAmount pvShiftMinus = METHOD_SABR_LMM_ATBEST.presentValue(swaptionAmortized, sabrBundleShift);
sensiExpected[loopp] = (pvShiftPlus.getAmount(EUR) - pvShiftMinus.getAmount(EUR)) / (2 * shift[loopp]);
assertEquals("SwaptionPhysicalFixedIborLMM: Calibration at best - SABR sensitivity " + loopp, sensiExpected[loopp], sensiComputed[loopp], toleranceSABRSensi[loopp]);
}
// TODO: Curve sensitivity test
}
}