SabrExtrapolationReplicationCmsLegPricer.java

/**
 * Copyright (C) 2016 - present by OpenGamma Inc. and the OpenGamma group of companies
 *
 * Please see distribution for license.
 */
package com.opengamma.strata.pricer.cms;

import java.util.stream.Collectors;

import com.opengamma.strata.basics.currency.CurrencyAmount;
import com.opengamma.strata.collect.ArgChecker;
import com.opengamma.strata.market.explain.ExplainKey;
import com.opengamma.strata.market.explain.ExplainMap;
import com.opengamma.strata.market.explain.ExplainMapBuilder;
import com.opengamma.strata.market.sensitivity.PointSensitivityBuilder;
import com.opengamma.strata.pricer.rate.RatesProvider;
import com.opengamma.strata.pricer.swaption.SabrSwaptionVolatilities;
import com.opengamma.strata.product.cms.CmsLeg;
import com.opengamma.strata.product.cms.CmsPeriod;
import com.opengamma.strata.product.cms.ResolvedCmsLeg;

/**
 * Pricer for CMS legs by swaption replication on a SABR formula with extrapolation.
 * <p>
 * This function provides the ability to price {@link ResolvedCmsLeg}. 
 * One must apply {@code resolved()} in order to price {@link CmsLeg}. 
 */
public class SabrExtrapolationReplicationCmsLegPricer {

  /**
   * The pricer for {@link CmsPeriod}.
   */
  private final SabrExtrapolationReplicationCmsPeriodPricer cmsPeriodPricer;

  /**
   * Creates an instance.
   * 
   * @param cmsPeriodPricer  the pricer for {@link CmsPeriod}
   */
  public SabrExtrapolationReplicationCmsLegPricer(SabrExtrapolationReplicationCmsPeriodPricer cmsPeriodPricer) {
    this.cmsPeriodPricer = ArgChecker.notNull(cmsPeriodPricer, "cmsPeriodPricer");
  }

  //-------------------------------------------------------------------------
  /**
   * Calculates the present value of the CMS leg.
   * <p>
   * The present value of the leg is the value on the valuation date.
   * The result is returned using the payment currency of the leg.
   * 
   * @param cmsLeg  the CMS leg
   * @param ratesProvider  the rates provider
   * @param swaptionVolatilities  the swaption volatilities
   * @return the present value
   */
  public CurrencyAmount presentValue(
      ResolvedCmsLeg cmsLeg,
      RatesProvider ratesProvider,
      SabrSwaptionVolatilities swaptionVolatilities) {

    validate(ratesProvider, swaptionVolatilities);
    return cmsLeg.getCmsPeriods().stream()
        .map(cmsPeriod -> cmsPeriodPricer.presentValue(cmsPeriod, ratesProvider, swaptionVolatilities))
        .reduce((c1, c2) -> c1.plus(c2))
        .get();
  }

  //-------------------------------------------------------------------------
  /**
   * Explains the present value of a CMS leg.
   * <p>
   * This returns explanatory information about the calculation.
   * 
   * @param cmsLeg  the CMS leg
   * @param provider  the rates provider
   * @param volatilities  the swaption volatilities
   * @return the explanatory information
   */
  public ExplainMap explainPresentValue(
      ResolvedCmsLeg cmsLeg,
      RatesProvider provider,
      SabrSwaptionVolatilities volatilities) {

    ExplainMapBuilder builder = ExplainMap.builder();
    builder.put(ExplainKey.ENTRY_TYPE, "CmsLeg");
    builder.put(ExplainKey.PAY_RECEIVE, cmsLeg.getPayReceive());
    builder.put(ExplainKey.PAYMENT_CURRENCY, cmsLeg.getCurrency());
    builder.put(ExplainKey.START_DATE, cmsLeg.getStartDate());
    builder.put(ExplainKey.END_DATE, cmsLeg.getEndDate());
    builder.put(ExplainKey.INDEX, cmsLeg.getIndex());
    for (CmsPeriod period : cmsLeg.getCmsPeriods()) {
      builder.addListEntry(
          ExplainKey.PAYMENT_PERIODS, child -> cmsPeriodPricer.explainPresentValue(period, provider, volatilities, child));
    }
    builder.put(ExplainKey.PRESENT_VALUE, presentValue(cmsLeg, provider, volatilities));
    return builder.build();
  }

  //-------------------------------------------------------------------------
  /**
   * Calculates the present value curve sensitivity of the CMS leg.
   * <p>
   * The present value sensitivity of the leg is the sensitivity of the present value to
   * the underlying curves.
   * 
   * @param cmsLeg  the CMS leg
   * @param ratesProvider  the rates provider
   * @param swaptionVolatilities  the swaption volatilities
   * @return the present value sensitivity
   */
  public PointSensitivityBuilder presentValueSensitivityRates(
      ResolvedCmsLeg cmsLeg,
      RatesProvider ratesProvider,
      SabrSwaptionVolatilities swaptionVolatilities) {

    validate(ratesProvider, swaptionVolatilities);
    return cmsLeg.getCmsPeriods().stream()
        .map(cmsPeriod -> cmsPeriodPricer.presentValueSensitivityRates(cmsPeriod, ratesProvider, swaptionVolatilities))
        .reduce((p1, p2) -> p1.combinedWith(p2))
        .get();
  }

  //-------------------------------------------------------------------------
  /**
   * Calculates the present value sensitivity to the SABR model parameters.
   * <p>
   * The present value sensitivity of the leg is the sensitivity of the present value to
   * the SABR model parameters, alpha, beta, rho and nu.
   * 
   * @param cmsLeg  the CMS leg
   * @param ratesProvider  the rates provider
   * @param swaptionVolatilities  the swaption volatilities
   * @return the present value sensitivity
   */
  public PointSensitivityBuilder presentValueSensitivityModelParamsSabr(
      ResolvedCmsLeg cmsLeg,
      RatesProvider ratesProvider,
      SabrSwaptionVolatilities swaptionVolatilities) {

    validate(ratesProvider, swaptionVolatilities);
    return cmsLeg.getCmsPeriods().stream()
        .map(cmsPeriod -> cmsPeriodPricer.presentValueSensitivityModelParamsSabr(cmsPeriod, ratesProvider, swaptionVolatilities))
        .reduce(PointSensitivityBuilder.none(), PointSensitivityBuilder::combinedWith)
        .normalize();
  }

  //-------------------------------------------------------------------------
  /**
   * Calculates the present value sensitivity to the strike value.
   * <p>
   * The present value sensitivity of the leg is the sensitivity of the present value to the strike value.
   * This is not relevant for CMS coupons and an exception is thrown in the underlying pricer.
   * 
   * @param cmsLeg  the CMS leg
   * @param ratesProvider  the rates provider
   * @param swaptionVolatilities  the swaption volatilities
   * @return the present value sensitivity
   */
  public double presentValueSensitivityStrike(
      ResolvedCmsLeg cmsLeg,
      RatesProvider ratesProvider,
      SabrSwaptionVolatilities swaptionVolatilities) {

    validate(ratesProvider, swaptionVolatilities);
    return cmsLeg.getCmsPeriods().stream()
        .map(cmsPeriod -> cmsPeriodPricer.presentValueSensitivityStrike(cmsPeriod, ratesProvider, swaptionVolatilities))
        .collect(Collectors.summingDouble(Double::doubleValue));
  }

  //-------------------------------------------------------------------------
  /**
   * Calculates the current cash of the leg.
   * 
   * @param cmsLeg  the CMS leg
   * @param ratesProvider  the rates provider
   * @param swaptionVolatilities  the swaption volatilities
   * @return the current cash
   */
  public CurrencyAmount currentCash(
      ResolvedCmsLeg cmsLeg,
      RatesProvider ratesProvider,
      SabrSwaptionVolatilities swaptionVolatilities) {

    validate(ratesProvider, swaptionVolatilities);
    return cmsLeg.getCmsPeriods().stream()
        .filter(x -> x.getPaymentDate().equals(ratesProvider.getValuationDate()))
        .map(x -> cmsPeriodPricer.presentValue(x, ratesProvider, swaptionVolatilities))
        .reduce((c1, c2) -> c1.plus(c2))
        .orElse(CurrencyAmount.zero(cmsLeg.getCurrency()));
  }

  //-------------------------------------------------------------------------
  private void validate(RatesProvider ratesProvider, SabrSwaptionVolatilities swaptionVolatilities) {
    ArgChecker.isTrue(swaptionVolatilities.getValuationDate().equals(ratesProvider.getValuationDate()),
        "volatility and rate data must be for the same date");
  }

}