/**
* 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.method;
import java.util.HashMap;
import java.util.Map;
import com.opengamma.analytics.financial.instrument.index.GeneratorAttributeIR;
import com.opengamma.analytics.financial.instrument.index.GeneratorInstrument;
import com.opengamma.analytics.financial.instrument.index.GeneratorSwapFixedIbor;
import com.opengamma.analytics.financial.interestrate.InstrumentDerivative;
import com.opengamma.analytics.financial.interestrate.InterestRateCurveSensitivity;
import com.opengamma.analytics.financial.interestrate.ParRateCalculator;
import com.opengamma.analytics.financial.interestrate.ParRateCurveSensitivityCalculator;
import com.opengamma.analytics.financial.interestrate.YieldCurveBundle;
import com.opengamma.analytics.financial.interestrate.method.PricingMethod;
import com.opengamma.analytics.financial.interestrate.sensitivity.PresentValueSwaptionSurfaceSensitivity;
import com.opengamma.analytics.financial.interestrate.swap.method.SwapFixedCouponDiscountingMethod;
import com.opengamma.analytics.financial.interestrate.swaption.derivative.SwaptionPhysicalFixedIbor;
import com.opengamma.analytics.financial.model.option.definition.YieldCurveWithBlackSwaptionBundle;
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.analytics.financial.model.volatility.BlackFormulaRepository;
import com.opengamma.analytics.math.function.Function1D;
import com.opengamma.financial.convention.calendar.Calendar;
import com.opengamma.financial.convention.daycount.DayCount;
import com.opengamma.util.ArgumentChecker;
import com.opengamma.util.money.CurrencyAmount;
import com.opengamma.util.tuple.DoublesPair;
/**
* Class used to compute the price and sensitivity of a physical delivery swaption with Black model.
* The implied Black volatilities are expiry and underlying maturity dependent.
* The swap underlying the swaption should be a Fixed for Ibor (without spread) swap.
* @deprecated Use {@link SwaptionPhysicalFixedIborBlackMethod}
*/
@Deprecated
public final class SwaptionPhysicalFixedIborBlackMethod implements PricingMethod {
/**
* The method unique instance.
*/
private static final SwaptionPhysicalFixedIborBlackMethod INSTANCE = new SwaptionPhysicalFixedIborBlackMethod();
/**
* Return the unique instance of the class.
* @return The instance.
*/
public static SwaptionPhysicalFixedIborBlackMethod getInstance() {
return INSTANCE;
}
/**
* Private constructor.
*/
private SwaptionPhysicalFixedIborBlackMethod() {
}
/**
* The par rate sensitivity calculator.
*/
private static final ParRateCurveSensitivityCalculator PRSC = ParRateCurveSensitivityCalculator.getInstance();
/**
* The par rate calculator.
*/
private static final ParRateCalculator PRC = ParRateCalculator.getInstance();
/**
* The swap method.
*/
private static final SwapFixedCouponDiscountingMethod METHOD_SWAP = SwapFixedCouponDiscountingMethod.getInstance();
/**
* Computes the present value of a physical delivery European swaption in the Black model.
* @param swaption The swaption.
* @param curveBlack The curves with Black volatility data.
* @return The present value.
*/
public CurrencyAmount presentValue(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curveBlack) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(curveBlack, "Curves with Black volatility");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = curveBlack.getBlackParameters().getGeneratorSwap();
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
final Calendar calendar = fixedIborGenerator.getCalendar();
final DayCount fixedLegDayCount = fixedIborGenerator.getFixedLegDayCount();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), fixedLegDayCount,
calendar, curveBlack);
final double forwardModified = PRC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), fixedLegDayCount, curveBlack, calendar);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, curveBlack);
final double maturity = swaption.getMaturityTime();
final EuropeanVanillaOption option = new EuropeanVanillaOption(strikeModified, swaption.getTimeToExpiry(), swaption.isCall());
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final BlackPriceFunction blackFunction = new BlackPriceFunction();
final double volatility = curveBlack.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), maturity);
final BlackFunctionData dataBlack = new BlackFunctionData(forwardModified, pvbpModified, volatility);
final Function1D<BlackFunctionData, Double> func = blackFunction.getPriceFunction(option);
final double pv = func.evaluate(dataBlack) * (swaption.isLong() ? 1.0 : -1.0);
return CurrencyAmount.of(swaption.getCurrency(), pv);
}
/**
* Computes the present value of a physical delivery European swaption in the Black model.
* @param swaption The swaption.
* @param curveBlack The curves with Black volatility data.
* @return The present value.
*/
public double forward(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curveBlack) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(curveBlack, "Curves with Black volatility");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = curveBlack.getBlackParameters().getGeneratorSwap();
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
final Calendar calendar = fixedIborGenerator.getCalendar();
final DayCount fixedLegDayCount = fixedIborGenerator.getFixedLegDayCount();
return PRC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), fixedLegDayCount, curveBlack, calendar);
}
@Override
public CurrencyAmount presentValue(final InstrumentDerivative instrument, final YieldCurveBundle curves) {
ArgumentChecker.isTrue(instrument instanceof SwaptionPhysicalFixedIbor, "Physical delivery swaption");
ArgumentChecker.isTrue(curves instanceof YieldCurveWithBlackSwaptionBundle, "Bundle should contain Black Swaption data");
return presentValue((SwaptionPhysicalFixedIbor) instrument, (YieldCurveWithBlackSwaptionBundle) curves);
}
/**
* Computes the implied Black volatility of the vanilla swaption.
* @param swaption The swaption.
* @param curves The yield curve bundle.
* @return The implied volatility.
*/
public double impliedVolatility(final SwaptionPhysicalFixedIbor swaption, final YieldCurveBundle curves) {
ArgumentChecker.notNull(curves, "Curves");
ArgumentChecker.isTrue(curves instanceof YieldCurveWithBlackSwaptionBundle, "Yield curve bundle should contain Black swaption data");
final YieldCurveWithBlackSwaptionBundle curvesBlack = (YieldCurveWithBlackSwaptionBundle) curves;
ArgumentChecker.notNull(swaption, "Forex option");
final double tenor = swaption.getMaturityTime();
final double volatility = curvesBlack.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), tenor);
return volatility;
}
/**
* Computes the present value rate sensitivity to rates of a physical delivery European swaption in the SABR model.
* @param swaption The swaption.
* @param curveBlack The curves with Black volatility data.
* @return The present value curve sensitivity.
*/
public InterestRateCurveSensitivity presentValueCurveSensitivity(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curveBlack) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(curveBlack, "Curves with Black volatility");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = curveBlack.getBlackParameters().getGeneratorSwap();
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
final Calendar calendar = fixedIborGenerator.getCalendar();
final DayCount dayCountModification = fixedIborGenerator.getFixedLegDayCount();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), dayCountModification, calendar, curveBlack);
final double forwardModified = PRC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, curveBlack, calendar);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, curveBlack);
final double maturity = swaption.getMaturityTime();
// Derivative of the forward and pvbp with respect to the rates.
final InterestRateCurveSensitivity pvbpModifiedDr = METHOD_SWAP.presentValueBasisPointCurveSensitivity(swaption.getUnderlyingSwap(), dayCountModification, calendar, curveBlack);
final InterestRateCurveSensitivity forwardModifiedDr = new InterestRateCurveSensitivity(PRSC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, curveBlack));
// Implementation note: strictly speaking, the strike equivalent is curve dependent; that dependency is ignored.
final EuropeanVanillaOption option = new EuropeanVanillaOption(strikeModified, swaption.getTimeToExpiry(), swaption.isCall());
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final BlackPriceFunction blackFunction = new BlackPriceFunction();
final double volatility = curveBlack.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), maturity);
final BlackFunctionData dataBlack = new BlackFunctionData(forwardModified, 1.0, volatility);
final double[] bsAdjoint = blackFunction.getPriceAdjoint(option, dataBlack);
InterestRateCurveSensitivity result = pvbpModifiedDr.multipliedBy(bsAdjoint[0]);
result = result.plus(forwardModifiedDr.multipliedBy(pvbpModified * bsAdjoint[1]));
if (!swaption.isLong()) {
result = result.multipliedBy(-1);
}
return result;
}
/**
* Computes the present value sensitivity to the Black volatility (also called vega) of a physical delivery European swaption in the Black swaption model.
* @param swaption The swaption.
* @param curveBlack The curves with Black volatility data.
* @return The present value Black sensitivity.
*/
public PresentValueSwaptionSurfaceSensitivity presentValueBlackSensitivity(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curveBlack) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(curveBlack, "Curves with Black volatility");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = curveBlack.getBlackParameters().getGeneratorSwap();
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
final Calendar calendar = fixedIborGenerator.getCalendar();
final DayCount dayCountModification = fixedIborGenerator.getFixedLegDayCount();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), dayCountModification, calendar,
curveBlack);
final double forwardModified = PRC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, curveBlack, calendar);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, curveBlack);
final double maturity = swaption.getMaturityTime();
final EuropeanVanillaOption option = new EuropeanVanillaOption(strikeModified, swaption.getTimeToExpiry(), swaption.isCall());
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final DoublesPair point = DoublesPair.of(swaption.getTimeToExpiry(), maturity);
final BlackPriceFunction blackFunction = new BlackPriceFunction();
final double volatility = curveBlack.getBlackParameters().getVolatility(point);
final BlackFunctionData dataBlack = new BlackFunctionData(forwardModified, 1.0, volatility);
final double[] bsAdjoint = blackFunction.getPriceAdjoint(option, dataBlack);
final Map<DoublesPair, Double> sensitivity = new HashMap<>();
sensitivity.put(point, bsAdjoint[2] * pvbpModified * (swaption.isLong() ? 1.0 : -1.0));
return new PresentValueSwaptionSurfaceSensitivity(sensitivity, curveBlack.getBlackParameters().getGeneratorSwap());
}
/**
* Compute first derivative of present value with respect to forward rate
* @param swaption The swaption.
* @param curveBlack The curves with Black volatility data.
* @return The forward delta
*/
public double forwardDeltaTheoretical(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curveBlack) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(curveBlack, "Curves with Black volatility");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = curveBlack.getBlackParameters().getGeneratorSwap();
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
final Calendar calendar = fixedIborGenerator.getCalendar();
final DayCount fixedLegDayCount = fixedIborGenerator.getFixedLegDayCount();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), fixedLegDayCount,
calendar, curveBlack);
final double forwardModified = PRC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), fixedLegDayCount, curveBlack, calendar);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, curveBlack);
final double maturity = swaption.getMaturityTime();
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final double volatility = curveBlack.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), maturity);
final double expiry = swaption.getTimeToExpiry();
return BlackFormulaRepository.delta(forwardModified, strikeModified, expiry, volatility, swaption.isCall()) * (swaption.isLong() ? 1.0 : -1.0);
}
/**
* Calculates the delta
* @param swaption The swaption, not null
* @param curves Yield curves and swaption volatility surface, not null
* @return The delta
*/
public CurrencyAmount delta(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curves) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(curves, "Curves with Black volatility");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = curves.getBlackParameters().getGeneratorSwap();
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
final Calendar calendar = fixedIborGenerator.getCalendar();
final DayCount dayCountModification = fixedIborGenerator.getFixedLegDayCount();
final double forwardModified = PRC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, curves, calendar);
final double sign = swaption.isLong() ? 1.0 : -1.0;
return CurrencyAmount.of(swaption.getCurrency(), forwardDeltaTheoretical(swaption, curves) * forwardModified * sign);
}
/**
* Computes the gamma of the swaption. The gamma is the second order derivative of the option present value to the spot fx rate.
* @param swaption The Forex option.
* @param curves The yield curve bundle.
* @return The gamma.
*/
public CurrencyAmount gamma(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curves) {
ArgumentChecker.notNull(curves, "Curves");
final double gamma = forwardGammaTheoretical(swaption, curves);
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = curves.getBlackParameters().getGeneratorSwap();
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
final Calendar calendar = fixedIborGenerator.getCalendar();
final DayCount dayCountModification = fixedIborGenerator.getFixedLegDayCount();
final double forwardModified = PRC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, curves, calendar);
final double sign = swaption.isLong() ? 1.0 : -1.0;
return CurrencyAmount.of(swaption.getCurrency(), gamma * forwardModified * forwardModified * sign);
}
/**
* Calculates the theta
* @param swaption The swaption, not null
* @param curves Yield curves and swaption volatility surface, not null
* @return The delta
*/
public CurrencyAmount theta(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curves) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(curves, "Curves with Black volatility");
final double sign = swaption.isLong() ? 1.0 : -1.0;
return CurrencyAmount.of(swaption.getCurrency(), forwardThetaTheoretical(swaption, curves) * sign);
}
/**
* Compute second derivative of present value with respect to forward rate
* @param swaption The swaption.
* @param curveBlack The curves with Black volatility data.
* @return The forward gamma
*/
public double forwardGammaTheoretical(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curveBlack) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(curveBlack, "Curves with Black volatility");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = curveBlack.getBlackParameters().getGeneratorSwap();
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
final Calendar calendar = fixedIborGenerator.getCalendar();
final DayCount fixedLegDayCount = fixedIborGenerator.getFixedLegDayCount();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), fixedLegDayCount,
calendar, curveBlack);
final double forwardModified = PRC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), fixedLegDayCount, curveBlack, calendar);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, curveBlack);
final double maturity = swaption.getMaturityTime();
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final double volatility = curveBlack.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), maturity);
final double expiry = swaption.getTimeToExpiry();
return BlackFormulaRepository.gamma(forwardModified, strikeModified, expiry, volatility) * (swaption.isLong() ? 1.0 : -1.0);
}
/**
* Compute minus of first derivative of present value with respect to time, setting drift term to be 0
* @param swaption The swaption.
* @param curveBlack The curves with Black volatility data.
* @return The driftless theta
*/
public double driftlessThetaTheoretical(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curveBlack) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(curveBlack, "Curves with Black volatility");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = curveBlack.getBlackParameters().getGeneratorSwap();
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
final Calendar calendar = fixedIborGenerator.getCalendar();
final DayCount fixedLegDayCount = fixedIborGenerator.getFixedLegDayCount();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), fixedLegDayCount,
calendar, curveBlack);
final double forwardModified = PRC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), fixedLegDayCount, curveBlack, calendar);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, curveBlack);
final double maturity = swaption.getMaturityTime();
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final double volatility = curveBlack.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), maturity);
final double expiry = swaption.getTimeToExpiry();
return BlackFormulaRepository.driftlessTheta(forwardModified, strikeModified, expiry, volatility) * (swaption.isLong() ? 1.0 : -1.0);
}
/**
* Compute minus of first derivative of present value with respect to time
* @param swaption The swaption.
* @param curveBlack The curves with Black volatility data.
* @return The forward theta
*/
public double forwardThetaTheoretical(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curveBlack) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(curveBlack, "Curves with Black volatility");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = curveBlack.getBlackParameters().getGeneratorSwap();
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
final Calendar calendar = fixedIborGenerator.getCalendar();
final DayCount fixedLegDayCount = fixedIborGenerator.getFixedLegDayCount();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), fixedLegDayCount,
calendar, curveBlack);
final double forwardModified = PRC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), fixedLegDayCount, curveBlack, calendar);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, curveBlack);
final double maturity = swaption.getMaturityTime();
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final double volatility = curveBlack.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), maturity);
final double expiry = swaption.getTimeToExpiry();
return pvbpModified * BlackFormulaRepository.driftlessTheta(forwardModified, strikeModified, expiry, volatility);
}
/**
* Compute first derivative of present value with respect to volatility
* @param swaption The swaption.
* @param curveBlack The curves with Black volatility data.
* @return The forward vega
*/
public double forwardVegaTheoretical(final SwaptionPhysicalFixedIbor swaption, final YieldCurveWithBlackSwaptionBundle curveBlack) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(curveBlack, "Curves with Black volatility");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = curveBlack.getBlackParameters().getGeneratorSwap();
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
final Calendar calendar = fixedIborGenerator.getCalendar();
final DayCount fixedLegDayCount = fixedIborGenerator.getFixedLegDayCount();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), fixedLegDayCount,
calendar, curveBlack);
final double forwardModified = PRC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), fixedLegDayCount, curveBlack, calendar);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, curveBlack);
final double maturity = swaption.getMaturityTime();
// Implementation note: option required to pass the strike (in case the swap has non-constant coupon).
final double volatility = curveBlack.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), maturity);
final double expiry = swaption.getTimeToExpiry();
return BlackFormulaRepository.vega(forwardModified, strikeModified, expiry, volatility) * (swaption.isLong() ? 1.0 : -1.0);
}
}