/**
* Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.future.method;
import com.opengamma.analytics.financial.interestrate.InstrumentDerivative;
import com.opengamma.analytics.financial.interestrate.InterestRateCurveSensitivity;
import com.opengamma.analytics.financial.interestrate.PresentValueSABRSensitivityDataBundle;
import com.opengamma.analytics.financial.interestrate.YieldCurveBundle;
import com.opengamma.analytics.financial.interestrate.future.derivative.InterestRateFutureOptionMarginSecurity;
import com.opengamma.analytics.financial.model.option.definition.SABRInterestRateDataBundle;
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.util.ArgumentChecker;
import com.opengamma.util.money.CurrencyAmount;
import com.opengamma.util.tuple.DoublesPair;
/**
* Method for the pricing of interest rate future options with margin process. The pricing is done with a SABR approach on the future rate (1.0-price).
* The SABR parameters are represented by (expiration-delay) surfaces. The "delay" is the time between option expiration and future last trading date,
* i.e. 0 for quarterly options and x for x-year mid-curve options. The future prices are computed without convexity adjustments.
* @deprecated Use {@link com.opengamma.analytics.financial.interestrate.future.provider.InterestRateFutureOptionMarginSecuritySABRMethod}
*/
@Deprecated
public final class InterestRateFutureOptionMarginSecuritySABRMethod extends InterestRateFutureOptionMarginSecurityMethod {
/**
* Creates the method unique instance.
*/
private static final InterestRateFutureOptionMarginSecuritySABRMethod INSTANCE = new InterestRateFutureOptionMarginSecuritySABRMethod();
/**
* Return the method unique instance.
* @return The instance.
*/
public static InterestRateFutureOptionMarginSecuritySABRMethod getInstance() {
return INSTANCE;
}
/**
* Constructor.
*/
private InterestRateFutureOptionMarginSecuritySABRMethod() {
}
/**
* The Black function used in the pricing.
*/
private static final BlackPriceFunction BLACK_FUNCTION = new BlackPriceFunction();
/**
* The method used to compute the future price. It is a method without convexity adjustment.
*/
private static final InterestRateFutureSecurityDiscountingMethod METHOD_FUTURE = InterestRateFutureSecurityDiscountingMethod.getInstance();
/**
* Computes the option security price from future price.
* @param security The future option security.
* @param sabrData The SABR data bundle.
* @param priceFuture The price of the underlying future.
* @return The security price.
*/
public double optionPriceFromFuturePrice(final InterestRateFutureOptionMarginSecurity security, final SABRInterestRateDataBundle sabrData, final double priceFuture) {
final double rateStrike = 1.0 - security.getStrike();
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double delay = security.getUnderlyingFuture().getTradingLastTime() - security.getExpirationTime();
final double volatility = sabrData.getSABRParameter().getVolatility(new double[] {security.getExpirationTime(), delay, rateStrike, forward });
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final double priceSecurity = BLACK_FUNCTION.getPriceFunction(option).evaluate(dataBlack);
return priceSecurity;
}
@Override
public double optionPriceFromFuturePrice(final InterestRateFutureOptionMarginSecurity security, final YieldCurveBundle curves, final double priceFuture) {
ArgumentChecker.isTrue(curves instanceof SABRInterestRateDataBundle, "Yield curve bundle should contain SABR parameters");
return optionPriceFromFuturePrice(security, (SABRInterestRateDataBundle) curves, priceFuture);
}
/**
* Computes the option security price. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param sabrData The SABR data bundle.
* @return The security price.
*/
public double optionPrice(final InterestRateFutureOptionMarginSecurity security, final SABRInterestRateDataBundle sabrData) {
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), sabrData);
return optionPriceFromFuturePrice(security, sabrData, priceFuture);
}
@Override
public double optionPrice(final InterestRateFutureOptionMarginSecurity security, final YieldCurveBundle curves) {
ArgumentChecker.isTrue(curves instanceof SABRInterestRateDataBundle, "Yield curve bundle should contain SABR parameters");
return optionPrice(security, (SABRInterestRateDataBundle) curves);
}
/**
* Computes the option security price curve sensitivity. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param sabrData The SABR data bundle.
* @return The security price curve sensitivity.
*/
public InterestRateCurveSensitivity priceCurveSensitivity(final InterestRateFutureOptionMarginSecurity security, final SABRInterestRateDataBundle sabrData) {
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), sabrData);
final double rateStrike = 1.0 - security.getStrike();
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double delay = security.getUnderlyingFuture().getTradingLastTime() - security.getExpirationTime();
final double[] volatilityAdjoint = sabrData.getSABRParameter().getVolatilityAdjoint(security.getExpirationTime(), delay, rateStrike, forward);
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatilityAdjoint[0]);
final double[] priceAdjoint = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
// Backward sweep
final double priceBar = 1.0;
final double volatilityBar = priceAdjoint[2] * priceBar;
final double forwardBar = priceAdjoint[1] * priceBar + volatilityAdjoint[1] * volatilityBar;
final double priceFutureBar = -forwardBar;
final InterestRateCurveSensitivity priceFutureDerivative = METHOD_FUTURE.priceCurveSensitivity(security.getUnderlyingFuture(), sabrData);
return priceFutureDerivative.multipliedBy(priceFutureBar);
}
@Override
public InterestRateCurveSensitivity priceCurveSensitivity(final InterestRateFutureOptionMarginSecurity security, final YieldCurveBundle curves) {
ArgumentChecker.isTrue(curves instanceof SABRInterestRateDataBundle, "Yield curve bundle should contain SABR parameters");
return priceCurveSensitivity(security, (SABRInterestRateDataBundle) curves);
}
/**
* Computes the option security price curve sensitivity. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param sabrData The SABR data bundle.
* @return The security price curve sensitivity.
*/
public PresentValueSABRSensitivityDataBundle priceSABRSensitivity(final InterestRateFutureOptionMarginSecurity security, final SABRInterestRateDataBundle sabrData) {
final PresentValueSABRSensitivityDataBundle sensi = new PresentValueSABRSensitivityDataBundle();
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), sabrData);
final double rateStrike = 1.0 - security.getStrike();
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double delay = security.getUnderlyingFuture().getTradingLastTime() - security.getExpirationTime();
final double[] volatilityAdjoint = sabrData.getSABRParameter().getVolatilityAdjoint(security.getExpirationTime(), delay, rateStrike, forward);
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatilityAdjoint[0]);
final double[] priceAdjoint = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
// Backward sweep
final double priceBar = 1.0;
final double volatilityBar = priceAdjoint[2] * priceBar;
final DoublesPair expiryDelay = DoublesPair.of(security.getExpirationTime(), delay);
sensi.addAlpha(expiryDelay, volatilityAdjoint[3] * volatilityBar);
sensi.addBeta(expiryDelay, volatilityAdjoint[4] * volatilityBar);
sensi.addRho(expiryDelay, volatilityAdjoint[5] * volatilityBar);
sensi.addNu(expiryDelay, volatilityAdjoint[6] * volatilityBar);
return sensi;
}
@Override
public CurrencyAmount presentValue(final InstrumentDerivative instrument, final YieldCurveBundle curves) {
throw new UnsupportedOperationException("The InterestRateFutureOptionMarginSecurity don't have a present value, only a price.");
}
}