/**
* Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.forex.method;
import com.opengamma.analytics.financial.forex.derivative.Forex;
import com.opengamma.analytics.financial.forex.derivative.ForexOptionDigital;
import com.opengamma.analytics.financial.forex.derivative.ForexOptionVanilla;
import com.opengamma.analytics.financial.forex.provider.ForexOptionDigitalCallSpreadBlackSmileMethod;
import com.opengamma.analytics.financial.interestrate.InstrumentDerivative;
import com.opengamma.analytics.financial.interestrate.YieldCurveBundle;
import com.opengamma.analytics.financial.model.option.definition.SmileDeltaTermStructureDataBundle;
import com.opengamma.util.ArgumentChecker;
import com.opengamma.util.money.MultipleCurrencyAmount;
/**
* Pricing method for digital Forex option transactions as a call or put spread option.
* @deprecated Use {@link ForexOptionDigitalCallSpreadBlackSmileMethod}
*/
@Deprecated
public class ForexOptionDigitalCallSpreadMethod implements ForexPricingMethod {
/**
* The base method for the pricing of standard vanilla options.
*/
private final ForexPricingMethod _baseMethod;
/**
* The relative spread used in the call-spread pricing. The call spread strikes are (for an original strike K), K*(1-spread) and K*(1+spread).
*/
private final double _spread;
/**
* Constructor of the digital pricing method.
* @param baseMethod The base method for the pricing of standard vanilla options.
*/
public ForexOptionDigitalCallSpreadMethod(final ForexPricingMethod baseMethod) {
_baseMethod = baseMethod;
_spread = 0.0001;
}
/**
* Constructor of the digital pricing method.
* @param baseMethod The base method for the pricing of standard vanilla options.
* @param spread The relative spread used in the call-spread pricing. The call spread strikes are (for an original strike K), K*(1-spread) and K*(1+spread).
*/
public ForexOptionDigitalCallSpreadMethod(final ForexPricingMethod baseMethod, final double spread) {
_baseMethod = baseMethod;
_spread = spread;
}
/**
* Computes the present value of a digital Forex option by call-spread.
* @param optionDigital The option.
* @param smile The curve and smile data.
* @return The present value.
*/
public MultipleCurrencyAmount presentValue(final ForexOptionDigital optionDigital, final SmileDeltaTermStructureDataBundle smile) {
ArgumentChecker.notNull(optionDigital, "Forex option difital");
ArgumentChecker.notNull(smile, "Curve and smile data");
ArgumentChecker.isTrue(smile.checkCurrencies(optionDigital.getCurrency1(), optionDigital.getCurrency2()), "Option currencies not compatible with smile data");
final ForexOptionVanilla[] callSpread = callSpread(optionDigital, _spread);
// Spread value
final MultipleCurrencyAmount pvM = _baseMethod.presentValue(callSpread[0], smile);
final MultipleCurrencyAmount pvP = _baseMethod.presentValue(callSpread[1], smile);
return pvM.plus(pvP);
}
@Override
public MultipleCurrencyAmount presentValue(final InstrumentDerivative instrument, final YieldCurveBundle curves) {
ArgumentChecker.isTrue(instrument instanceof ForexOptionDigital, "Digital Forex option");
ArgumentChecker.isTrue(curves instanceof SmileDeltaTermStructureDataBundle, "Smile delta data bundle required");
return presentValue((ForexOptionDigital) instrument, (SmileDeltaTermStructureDataBundle) curves);
}
/**
* Computes the currency exposure of a digital Forex option by call-spread.
* @param optionDigital The option.
* @param smile The curve and smile data.
* @return The currency exposure.
*/
public MultipleCurrencyAmount currencyExposure(final ForexOptionDigital optionDigital, final SmileDeltaTermStructureDataBundle smile) {
ArgumentChecker.notNull(optionDigital, "Forex option difital");
ArgumentChecker.notNull(smile, "Curve and smile data");
final ForexOptionVanilla[] callSpread = callSpread(optionDigital, _spread);
// Spread value
final MultipleCurrencyAmount ceM = _baseMethod.currencyExposure(callSpread[0], smile);
final MultipleCurrencyAmount ceP = _baseMethod.currencyExposure(callSpread[1], smile);
return ceM.plus(ceP);
}
@Override
public MultipleCurrencyAmount currencyExposure(final InstrumentDerivative instrument, final YieldCurveBundle curves) {
ArgumentChecker.isTrue(instrument instanceof ForexOptionDigital, "Digital Forex option");
ArgumentChecker.isTrue(curves instanceof SmileDeltaTermStructureDataBundle, "Smile delta data bundle required");
return currencyExposure((ForexOptionDigital) instrument, (SmileDeltaTermStructureDataBundle) curves);
}
/**
* Computes the curve sensitivity of a digital Forex option by call-spread.
* @param optionDigital The option.
* @param smile The curve and smile data.
* @return The curve sensitivity.
*/
public MultipleCurrencyInterestRateCurveSensitivity presentValueCurveSensitivity(final ForexOptionDigital optionDigital, final SmileDeltaTermStructureDataBundle smile) {
ArgumentChecker.notNull(optionDigital, "Forex option");
ArgumentChecker.notNull(smile, "Smile");
final ForexOptionVanilla[] callSpread = callSpread(optionDigital, _spread);
// Spread value
final MultipleCurrencyInterestRateCurveSensitivity pvcsM = _baseMethod.presentValueCurveSensitivity(callSpread[0], smile);
final MultipleCurrencyInterestRateCurveSensitivity pvcsP = _baseMethod.presentValueCurveSensitivity(callSpread[1], smile);
return pvcsM.plus(pvcsP);
}
@Override
public MultipleCurrencyInterestRateCurveSensitivity presentValueCurveSensitivity(final InstrumentDerivative instrument, final YieldCurveBundle curves) {
ArgumentChecker.isTrue(instrument instanceof ForexOptionDigital, "Digital Forex option");
ArgumentChecker.isTrue(curves instanceof SmileDeltaTermStructureDataBundle, "Smile delta data bundle required");
return presentValueCurveSensitivity((ForexOptionDigital) instrument, (SmileDeltaTermStructureDataBundle) curves);
}
protected ForexOptionVanilla[] callSpread(final ForexOptionDigital optionDigital, final double spread) {
final ForexOptionVanilla[] callSpread = new ForexOptionVanilla[2];
final double strike = optionDigital.getStrike();
final double strikeM = strike * (1 - spread);
final double strikeP = strike * (1 + spread);
double amountPaid;
double strikeRelM;
double strikeRelP;
if (optionDigital.payDomestic()) {
amountPaid = Math.abs(optionDigital.getUnderlyingForex().getPaymentCurrency2().getAmount());
strikeRelM = strikeM;
strikeRelP = strikeP;
final double amount = amountPaid / (strikeRelP - strikeRelM);
final Forex forexM = new Forex(optionDigital.getUnderlyingForex().getPaymentCurrency1().withAmount(amount),
optionDigital.getUnderlyingForex().getPaymentCurrency2().withAmount(-strikeRelM * amount));
final Forex forexP = new Forex(optionDigital.getUnderlyingForex().getPaymentCurrency1().withAmount(amount),
optionDigital.getUnderlyingForex().getPaymentCurrency2().withAmount(-strikeRelP * amount));
callSpread[0] = new ForexOptionVanilla(forexM, optionDigital.getExpirationTime(), optionDigital.isCall(),
(optionDigital.isLong() == optionDigital.isCall()));
callSpread[1] = new ForexOptionVanilla(forexP, optionDigital.getExpirationTime(), optionDigital.isCall(),
!(optionDigital.isLong() == optionDigital.isCall()));
} else {
amountPaid = Math.abs(optionDigital.getUnderlyingForex().getPaymentCurrency1().getAmount());
strikeRelM = 1.0 / strikeP;
strikeRelP = 1.0 / strikeM;
final double amount = amountPaid / (strikeRelP - strikeRelM);
final Forex forexM = new Forex(optionDigital.getUnderlyingForex().getPaymentCurrency2().withAmount(amount),
optionDigital.getUnderlyingForex().getPaymentCurrency1().withAmount(-strikeRelM * amount));
final Forex forexP = new Forex(optionDigital.getUnderlyingForex().getPaymentCurrency2().withAmount(amount),
optionDigital.getUnderlyingForex().getPaymentCurrency1().withAmount(-strikeRelP * amount));
callSpread[0] = new ForexOptionVanilla(forexM, optionDigital.getExpirationTime(), !optionDigital.isCall(),
!(optionDigital.isLong() == optionDigital.isCall()));
callSpread[1] = new ForexOptionVanilla(forexP, optionDigital.getExpirationTime(), !optionDigital.isCall(),
(optionDigital.isLong() == optionDigital.isCall()));
}
return callSpread;
}
/**
* Gets the base pricing method.
* @return The method.
*/
public ForexPricingMethod getBaseMethod() {
return _baseMethod;
}
/**
* Gets the spread used for call spread.
* @return The spread.
*/
public double getSpread() {
return _spread;
}
}