/** * Copyright (C) 2009 - present by OpenGamma Inc. and the OpenGamma group of companies * * Please see distribution for license. */ package com.opengamma.analytics.financial.model.volatility.surface; import java.util.Map; import org.apache.commons.lang.Validate; import org.slf4j.Logger; import org.slf4j.LoggerFactory; import com.opengamma.analytics.financial.model.option.definition.ConstantElasticityOfVarianceModelDataBundle; import com.opengamma.analytics.financial.model.option.definition.OptionDefinition; import com.opengamma.analytics.math.surface.ConstantDoublesSurface; import com.opengamma.util.ArgumentChecker; /** * */ public class ConstantElasticityOfVarianceBlackEquivalentVolatilitySurfaceModel implements VolatilitySurfaceModel<Map<OptionDefinition, Double>, ConstantElasticityOfVarianceModelDataBundle> { private static final Logger s_logger = LoggerFactory.getLogger(ConstantElasticityOfVarianceBlackEquivalentVolatilitySurfaceModel.class); @Override public VolatilitySurface getSurface(final Map<OptionDefinition, Double> optionData, final ConstantElasticityOfVarianceModelDataBundle data) { Validate.notNull(optionData, "option data"); ArgumentChecker.notEmpty(optionData, "option data"); Validate.notNull(data, "data"); if (optionData.size() > 1) { s_logger.warn("Have more than one option: only using the first"); } final OptionDefinition option = optionData.keySet().iterator().next(); final double k = option.getStrike(); final double t = option.getTimeToExpiry(data.getDate()); final double sigma = data.getVolatility(t, k); final double beta = data.getElasticity(); final double forward = data.getSpot(); final double f = 0.5 * (forward + k); final double beta1 = 1 - beta; final double sigmaAdjusted = sigma * (1 + beta1 * (2 + beta) * (f - k) * (f - k) / 24 / f / f + beta1 * beta1 * sigma * sigma * t / 24 / Math.pow(f, 2 * beta1)) / Math.pow(f, beta1); return new VolatilitySurface(ConstantDoublesSurface.from(sigmaAdjusted)); } }