/**
* Copyright (C) 2012 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.payments.method;
import org.apache.commons.lang.Validate;
import com.opengamma.analytics.financial.interestrate.CashFlowEquivalentCalculator;
import com.opengamma.analytics.financial.interestrate.InstrumentDerivative;
import com.opengamma.analytics.financial.interestrate.YieldCurveBundle;
import com.opengamma.analytics.financial.interestrate.annuity.derivative.AnnuityPaymentFixed;
import com.opengamma.analytics.financial.interestrate.method.PricingMethod;
import com.opengamma.analytics.financial.interestrate.payments.derivative.CouponCMS;
import com.opengamma.analytics.financial.interestrate.payments.derivative.Payment;
import com.opengamma.analytics.financial.interestrate.swap.derivative.SwapFixedCoupon;
import com.opengamma.analytics.financial.model.interestrate.HullWhiteOneFactorPiecewiseConstantInterestRateModel;
import com.opengamma.analytics.financial.model.interestrate.definition.HullWhiteOneFactorPiecewiseConstantDataBundle;
import com.opengamma.analytics.math.MathException;
import com.opengamma.analytics.math.function.Function1D;
import com.opengamma.analytics.math.integration.RungeKuttaIntegrator1D;
import com.opengamma.util.money.CurrencyAmount;
/**
* Pricing method of a CMS coupon in the Hull-White (extended Vasicek) model by numerical integration.
* @deprecated {@link HullWhiteOneFactorPiecewiseConstantDataBundle} is deprecated
*/
@Deprecated
public final class CouponCMSHullWhiteNumericalIntegrationMethod implements PricingMethod {
/**
* The method unique instance.
*/
private static final CouponCMSHullWhiteNumericalIntegrationMethod INSTANCE = new CouponCMSHullWhiteNumericalIntegrationMethod();
/**
* Return the unique instance of the class.
* @return The instance.
*/
public static CouponCMSHullWhiteNumericalIntegrationMethod getInstance() {
return INSTANCE;
}
/**
* Private constructor.
*/
private CouponCMSHullWhiteNumericalIntegrationMethod() {
}
/**
* The model used in computations.
*/
private static final HullWhiteOneFactorPiecewiseConstantInterestRateModel MODEL = new HullWhiteOneFactorPiecewiseConstantInterestRateModel();
/**
* The cash flow equivalent calculator used in computations.
*/
private static final CashFlowEquivalentCalculator CFEC = CashFlowEquivalentCalculator.getInstance();
/**
* Minimal number of integration steps.
*/
private static final int NB_INTEGRATION = 10;
/**
* Compute the present value of a CMS coupon with the Hull-White (extended Vasicek) model by numerical integration.
* @param cmsCoupon The CMS coupon.
* @param hwData The Hull-White parameters and the curves.
* @return The present value.
*/
public CurrencyAmount presentValue(final CouponCMS cmsCoupon, final HullWhiteOneFactorPiecewiseConstantDataBundle hwData) {
Validate.notNull(cmsCoupon);
Validate.notNull(hwData);
final double expiryTime = cmsCoupon.getFixingTime();
final SwapFixedCoupon<? extends Payment> swap = cmsCoupon.getUnderlyingSwap();
final int nbFixed = cmsCoupon.getUnderlyingSwap().getFixedLeg().getNumberOfPayments();
final double[] alphaFixed = new double[nbFixed];
final double[] dfFixed = new double[nbFixed];
final double[] discountedCashFlowFixed = new double[nbFixed];
for (int loopcf = 0; loopcf < nbFixed; loopcf++) {
alphaFixed[loopcf] = MODEL.alpha(hwData.getHullWhiteParameter(), 0.0, expiryTime, expiryTime, swap.getFixedLeg().getNthPayment(loopcf).getPaymentTime());
dfFixed[loopcf] = hwData.getCurve(swap.getFixedLeg().getNthPayment(loopcf).getFundingCurveName()).getDiscountFactor(swap.getFixedLeg().getNthPayment(loopcf).getPaymentTime());
discountedCashFlowFixed[loopcf] = dfFixed[loopcf] * swap.getFixedLeg().getNthPayment(loopcf).getPaymentYearFraction() * swap.getFixedLeg().getNthPayment(loopcf).getNotional();
}
final AnnuityPaymentFixed cfeIbor = swap.getSecondLeg().accept(CFEC, hwData);
final double[] alphaIbor = new double[cfeIbor.getNumberOfPayments()];
final double[] dfIbor = new double[cfeIbor.getNumberOfPayments()];
final double[] discountedCashFlowIbor = new double[cfeIbor.getNumberOfPayments()];
for (int loopcf = 0; loopcf < cfeIbor.getNumberOfPayments(); loopcf++) {
alphaIbor[loopcf] = MODEL.alpha(hwData.getHullWhiteParameter(), 0.0, expiryTime, expiryTime, cfeIbor.getNthPayment(loopcf).getPaymentTime());
dfIbor[loopcf] = hwData.getCurve(cfeIbor.getDiscountCurve()).getDiscountFactor(cfeIbor.getNthPayment(loopcf).getPaymentTime());
discountedCashFlowIbor[loopcf] = dfIbor[loopcf] * cfeIbor.getNthPayment(loopcf).getAmount();
}
final double alphaPayment = MODEL.alpha(hwData.getHullWhiteParameter(), 0.0, expiryTime, expiryTime, cmsCoupon.getPaymentTime());
final double dfPayment = hwData.getCurve(cfeIbor.getDiscountCurve()).getDiscountFactor(cmsCoupon.getPaymentTime());
// Integration
final CMSIntegrant integrant = new CMSIntegrant(discountedCashFlowFixed, alphaFixed, discountedCashFlowIbor, alphaIbor, alphaPayment);
final double limit = 10.0;
final double absoluteTolerance = 1.0E-8;
final double relativeTolerance = 1.0E-9;
final RungeKuttaIntegrator1D integrator = new RungeKuttaIntegrator1D(absoluteTolerance, relativeTolerance, NB_INTEGRATION);
double pv = 0.0;
try {
pv = 1.0 / Math.sqrt(2.0 * Math.PI) * integrator.integrate(integrant, -limit, limit) * dfPayment * cmsCoupon.getNotional() * cmsCoupon.getPaymentYearFraction();
} catch (final Exception e) {
throw new MathException(e);
}
return CurrencyAmount.of(cmsCoupon.getCurrency(), pv);
}
@Override
public CurrencyAmount presentValue(final InstrumentDerivative instrument, final YieldCurveBundle curves) {
Validate.isTrue(instrument instanceof CouponCMS, "Coupon CMS");
Validate.isTrue(curves instanceof HullWhiteOneFactorPiecewiseConstantDataBundle, "Curves with HW data");
return presentValue((CouponCMS) instrument, (HullWhiteOneFactorPiecewiseConstantDataBundle) curves);
}
/**
* Inner class to implement the integration used in price computation.
*/
private static final class CMSIntegrant extends Function1D<Double, Double> {
private final double[] _discountedCashFlowFixed;
private final double[] _alphaFixed;
private final double[] _discountedCashFlowIbor;
private final double[] _alphaIbor;
private final double _alphaPayment;
/**
* Constructor to the integrant function.
* @param discountedCashFlowFixed The discounted cash flows of the underlying swap fixed leg.
* @param alphaFixed The bond volatilities of the underlying swap fixed leg.
* @param discountedCashFlowIbor The discounted cash flows of the underlying swap Ibor leg.
* @param alphaIbor The bond volatilities of the underlying swap Ibor leg.
* @param alphaPayment The bond volatilities of the payment discount factor.
*/
public CMSIntegrant(final double[] discountedCashFlowFixed, final double[] alphaFixed, final double[] discountedCashFlowIbor, final double[] alphaIbor, final double alphaPayment) {
_discountedCashFlowFixed = discountedCashFlowFixed;
_alphaFixed = alphaFixed;
_discountedCashFlowIbor = discountedCashFlowIbor;
_alphaIbor = alphaIbor;
_alphaPayment = alphaPayment;
}
@SuppressWarnings("synthetic-access")
@Override
public Double evaluate(final Double x) {
final double swapRate = MODEL.swapRate(x, _discountedCashFlowFixed, _alphaFixed, _discountedCashFlowIbor, _alphaIbor);
final double dfDensity = Math.exp(-(x + _alphaPayment) * (x + _alphaPayment) / 2.0);
final double result = dfDensity * swapRate;
return result;
}
}
}