/**
* 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.provider;
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.GeneratorSwapFixedCompoundedONCompounded;
import com.opengamma.analytics.financial.instrument.index.GeneratorSwapFixedIbor;
import com.opengamma.analytics.financial.instrument.index.GeneratorSwapFixedON;
import com.opengamma.analytics.financial.interestrate.sensitivity.PresentValueSwaptionSurfaceSensitivity;
import com.opengamma.analytics.financial.interestrate.swap.provider.SwapFixedCouponDiscountingMethod;
import com.opengamma.analytics.financial.interestrate.swaption.derivative.SwaptionPhysicalFixedIbor;
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.financial.provider.calculator.discounting.ParRateCurveSensitivityDiscountingCalculator;
import com.opengamma.analytics.financial.provider.calculator.discounting.ParRateDiscountingCalculator;
import com.opengamma.analytics.financial.provider.description.interestrate.BlackSwaptionFlatProviderInterface;
import com.opengamma.analytics.financial.provider.description.interestrate.MulticurveProviderInterface;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MulticurveSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MultipleCurrencyMulticurveSensitivity;
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.MultipleCurrencyAmount;
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 (no smile).
* The swap underlying the swaption should be a Fixed for Ibor (without spread) swap.
*/
public final class SwaptionPhysicalFixedIborBlackMethod {
/**
* 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 calculator and methods.
*/
private static final ParRateDiscountingCalculator PRDC = ParRateDiscountingCalculator.getInstance();
private static final ParRateCurveSensitivityDiscountingCalculator PRCSDC = ParRateCurveSensitivityDiscountingCalculator.getInstance();
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 blackMulticurves Black volatility for swaption and multi-curves provider.
* @return The present value.
*/
public MultipleCurrencyAmount presentValue(final SwaptionPhysicalFixedIbor swaption, final BlackSwaptionFlatProviderInterface blackMulticurves) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(blackMulticurves, "Black volatility for swaption and multicurve");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = blackMulticurves.getBlackParameters().getGeneratorSwap();
Calendar calendar;
DayCount dayCountModification;
if (generatorSwap instanceof GeneratorSwapFixedIbor) {
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
calendar = fixedIborGenerator.getCalendar();
dayCountModification = fixedIborGenerator.getFixedLegDayCount();
} else if (generatorSwap instanceof GeneratorSwapFixedON) {
final GeneratorSwapFixedON fixedONGenerator = (GeneratorSwapFixedON) generatorSwap;
calendar = fixedONGenerator.getOvernightCalendar();
dayCountModification = fixedONGenerator.getFixedLegDayCount();
} else if (generatorSwap instanceof GeneratorSwapFixedCompoundedONCompounded) {
final GeneratorSwapFixedCompoundedONCompounded fixedCompoundedON = (GeneratorSwapFixedCompoundedONCompounded) generatorSwap;
calendar = fixedCompoundedON.getOvernightCalendar();
dayCountModification = fixedCompoundedON.getFixedLegDayCount();
} else {
throw new IllegalArgumentException("Cannot handle swap with underlying generator of type " + generatorSwap.getClass());
}
final MulticurveProviderInterface multicurves = blackMulticurves.getMulticurveProvider();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), dayCountModification,
calendar, multicurves);
final double forwardModified = PRDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, multicurves);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, multicurves);
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 = blackMulticurves.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 MultipleCurrencyAmount.of(swaption.getCurrency(), pv);
}
/**
* Computes the implied Black volatility of the vanilla swaption.
* @param swaption The swaption.
* @param blackMulticurves Black volatility for swaption and multi-curves provider.
* @return The implied volatility.
*/
public double impliedVolatility(final SwaptionPhysicalFixedIbor swaption, final BlackSwaptionFlatProviderInterface blackMulticurves) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(blackMulticurves, "Black volatility for swaption and multicurve");
final double tenor = swaption.getMaturityTime();
final double volatility = blackMulticurves.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 blackMulticurves Black volatility for swaption and multi-curves provider.
* @return The present value curve sensitivity.
*/
public MultipleCurrencyMulticurveSensitivity presentValueCurveSensitivity(final SwaptionPhysicalFixedIbor swaption, final BlackSwaptionFlatProviderInterface blackMulticurves) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(blackMulticurves, "Black volatility for swaption and multicurve");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = blackMulticurves.getBlackParameters().getGeneratorSwap();
Calendar calendar;
DayCount dayCountModification;
if (generatorSwap instanceof GeneratorSwapFixedIbor) {
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
calendar = fixedIborGenerator.getCalendar();
dayCountModification = fixedIborGenerator.getFixedLegDayCount();
} else if (generatorSwap instanceof GeneratorSwapFixedON) {
final GeneratorSwapFixedON fixedONGenerator = (GeneratorSwapFixedON) generatorSwap;
calendar = fixedONGenerator.getOvernightCalendar();
dayCountModification = fixedONGenerator.getFixedLegDayCount();
} else if (generatorSwap instanceof GeneratorSwapFixedCompoundedONCompounded) {
final GeneratorSwapFixedCompoundedONCompounded fixedCompoundedON = (GeneratorSwapFixedCompoundedONCompounded) generatorSwap;
calendar = fixedCompoundedON.getOvernightCalendar();
dayCountModification = fixedCompoundedON.getFixedLegDayCount();
} else {
throw new IllegalArgumentException("Cannot handle swap with underlying generator of type " + generatorSwap.getClass());
}
final MulticurveProviderInterface multicurves = blackMulticurves.getMulticurveProvider();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), dayCountModification, calendar, multicurves);
final double forwardModified = PRDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, multicurves);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, multicurves);
final double maturity = swaption.getMaturityTime();
// Derivative of the forward and pvbp with respect to the rates.
final MulticurveSensitivity pvbpModifiedDr = METHOD_SWAP.presentValueBasisPointCurveSensitivity(swaption.getUnderlyingSwap(), dayCountModification,
calendar, multicurves);
final MulticurveSensitivity forwardModifiedDr = PRCSDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, multicurves);
// 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 = blackMulticurves.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), maturity);
final BlackFunctionData dataBlack = new BlackFunctionData(forwardModified, 1.0, volatility);
final double[] bsAdjoint = blackFunction.getPriceAdjoint(option, dataBlack);
MulticurveSensitivity result = pvbpModifiedDr.multipliedBy(bsAdjoint[0]);
result = result.plus(forwardModifiedDr.multipliedBy(pvbpModified * bsAdjoint[1]));
if (!swaption.isLong()) {
result = result.multipliedBy(-1);
}
return MultipleCurrencyMulticurveSensitivity.of(swaption.getCurrency(), result);
}
/**
* Computes the 2nd order sensitivity of the present value to rates of a physical delivery European swaption in the SABR model.
* @param swaption The swaption.
* @param blackMulticurves Black volatility for swaption and multi-curves provider.
* @return The present value curve sensitivity.
*/
public MultipleCurrencyMulticurveSensitivity presentValueSecondOrderCurveSensitivity(final SwaptionPhysicalFixedIbor swaption, final BlackSwaptionFlatProviderInterface blackMulticurves) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(blackMulticurves, "Black volatility for swaption and multicurve");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = blackMulticurves.getBlackParameters().getGeneratorSwap();
Calendar calendar;
DayCount dayCountModification;
if (generatorSwap instanceof GeneratorSwapFixedIbor) {
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
calendar = fixedIborGenerator.getCalendar();
dayCountModification = fixedIborGenerator.getFixedLegDayCount();
} else if (generatorSwap instanceof GeneratorSwapFixedON) {
final GeneratorSwapFixedON fixedONGenerator = (GeneratorSwapFixedON) generatorSwap;
calendar = fixedONGenerator.getOvernightCalendar();
dayCountModification = fixedONGenerator.getFixedLegDayCount();
} else if (generatorSwap instanceof GeneratorSwapFixedCompoundedONCompounded) {
final GeneratorSwapFixedCompoundedONCompounded fixedCompoundedON = (GeneratorSwapFixedCompoundedONCompounded) generatorSwap;
calendar = fixedCompoundedON.getOvernightCalendar();
dayCountModification = fixedCompoundedON.getFixedLegDayCount();
} else {
throw new IllegalArgumentException("Cannot handle swap with underlying generator of type " + generatorSwap.getClass());
}
final MulticurveProviderInterface multicurves = blackMulticurves.getMulticurveProvider();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), dayCountModification, calendar, multicurves);
final double forwardModified = PRDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, multicurves);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, multicurves);
final double maturity = swaption.getMaturityTime();
final MulticurveSensitivity pvbpModifiedDr = METHOD_SWAP.presentValueBasisPointCurveSensitivity(swaption.getUnderlyingSwap(), dayCountModification,
calendar, multicurves);
final MulticurveSensitivity forwardModifiedDr = PRCSDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, multicurves);
final MulticurveSensitivity pvbpModifiedDr2 = METHOD_SWAP.presentValueBasisPointSecondOrderCurveSensitivity(swaption.getUnderlyingSwap(), dayCountModification,
calendar, multicurves);
final MulticurveSensitivity forwardModifiedDr2 = PRCSDC.visitFixedCouponSwapDerivative(swaption.getUnderlyingSwap(), dayCountModification, multicurves);
final double volatility = blackMulticurves.getBlackParameters().getVolatility(swaption.getTimeToExpiry(), maturity);
final double price = BlackFormulaRepository.price(forwardModified, strikeModified, volatility, swaption.getTimeToExpiry(), swaption.isCall());
final double delta = BlackFormulaRepository.delta(forwardModified, strikeModified, volatility, swaption.getTimeToExpiry(), swaption.isCall());
final double gamma = BlackFormulaRepository.gamma(forwardModified, strikeModified, volatility, swaption.getTimeToExpiry());
MulticurveSensitivity result = pvbpModifiedDr2.multipliedBy(price);
result = result.plus(pvbpModifiedDr.productOf(forwardModifiedDr.multipliedBy(2. * pvbpModified * delta)));
result = result.plus(forwardModifiedDr2.multipliedBy(pvbpModified * delta));
result = result.plus(forwardModifiedDr.productOf(forwardModifiedDr.multipliedBy(pvbpModified * gamma)));
if (!swaption.isLong()) {
result = result.multipliedBy(-1);
}
return MultipleCurrencyMulticurveSensitivity.of(swaption.getCurrency(), 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 blackMulticurves Black volatility for swaption and multi-curves provider.
* @return The present value Black sensitivity.
*/
public PresentValueSwaptionSurfaceSensitivity presentValueBlackSensitivity(final SwaptionPhysicalFixedIbor swaption, final BlackSwaptionFlatProviderInterface blackMulticurves) {
ArgumentChecker.notNull(swaption, "Swaption");
ArgumentChecker.notNull(blackMulticurves, "Black volatility for swaption and multicurve");
final GeneratorInstrument<GeneratorAttributeIR> generatorSwap = blackMulticurves.getBlackParameters().getGeneratorSwap();
Calendar calendar;
DayCount dayCountModification;
if (generatorSwap instanceof GeneratorSwapFixedIbor) {
final GeneratorSwapFixedIbor fixedIborGenerator = (GeneratorSwapFixedIbor) generatorSwap;
calendar = fixedIborGenerator.getCalendar();
dayCountModification = fixedIborGenerator.getFixedLegDayCount();
} else if (generatorSwap instanceof GeneratorSwapFixedON) {
final GeneratorSwapFixedON fixedONGenerator = (GeneratorSwapFixedON) generatorSwap;
calendar = fixedONGenerator.getOvernightCalendar();
dayCountModification = fixedONGenerator.getFixedLegDayCount();
} else if (generatorSwap instanceof GeneratorSwapFixedCompoundedONCompounded) {
final GeneratorSwapFixedCompoundedONCompounded fixedCompoundedON = (GeneratorSwapFixedCompoundedONCompounded) generatorSwap;
calendar = fixedCompoundedON.getOvernightCalendar();
dayCountModification = fixedCompoundedON.getFixedLegDayCount();
} else {
throw new IllegalArgumentException("Cannot handle swap with underlying generator of type " + generatorSwap.getClass());
}
final MulticurveProviderInterface multicurves = blackMulticurves.getMulticurveProvider();
final double pvbpModified = METHOD_SWAP.presentValueBasisPoint(swaption.getUnderlyingSwap(), dayCountModification, calendar, multicurves);
final double forwardModified = PRDC.visitFixedCouponSwap(swaption.getUnderlyingSwap(), dayCountModification, multicurves);
final double strikeModified = METHOD_SWAP.couponEquivalent(swaption.getUnderlyingSwap(), pvbpModified, multicurves);
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 = blackMulticurves.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, blackMulticurves.getBlackParameters().getGeneratorSwap());
}
}