/**
* Copyright (C) 2009 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.model.option.pricing.analytic;
import org.apache.commons.lang.Validate;
import org.threeten.bp.ZonedDateTime;
import com.opengamma.analytics.financial.model.option.definition.ForwardStartOptionDefinition;
import com.opengamma.analytics.financial.model.option.definition.StandardOptionDataBundle;
import com.opengamma.analytics.math.function.Function1D;
import com.opengamma.analytics.math.statistics.distribution.NormalDistribution;
import com.opengamma.analytics.math.statistics.distribution.ProbabilityDistribution;
/**
*
*/
public class ForwardStartOptionModel extends AnalyticOptionModel<ForwardStartOptionDefinition, StandardOptionDataBundle> {
private static final ProbabilityDistribution<Double> NORMAL = new NormalDistribution(0, 1);
@Override
public Function1D<StandardOptionDataBundle, Double> getPricingFunction(final ForwardStartOptionDefinition definition) {
Validate.notNull(definition, "definition");
return new Function1D<StandardOptionDataBundle, Double>() {
@SuppressWarnings("synthetic-access")
@Override
public Double evaluate(final StandardOptionDataBundle data) {
Validate.notNull(data, "data");
final ZonedDateTime date = data.getDate();
final double s = data.getSpot();
final double t = definition.getTimeToExpiry(date);
final double start = definition.getTimeToStart(date);
final double b = data.getCostOfCarry();
final double r = data.getInterestRate(t); // does this need r at both times?
final double alpha = definition.getAlpha();
final double sigma = data.getVolatility(t, alpha * s);
final double deltaT = t - start;
final double df1 = Math.exp(start * (b - r));
final double df2 = Math.exp(deltaT * (b - r));
final double df3 = Math.exp(-r * deltaT);
final double sigmaT = sigma * Math.sqrt(deltaT);
final double d1 = (Math.log(1. / alpha) + deltaT * (b + 0.5 * sigma * sigma)) / sigmaT;
final double d2 = d1 - sigmaT;
final int sign = definition.isCall() ? 1 : -1;
return s * df1 * (sign * (df2 * NORMAL.getCDF(sign * d1) - alpha * df3 * NORMAL.getCDF(sign * d2)));
}
};
}
}