/**
* Copyright (C) 2012 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.forex.provider;
import static org.testng.AssertJUnit.assertEquals;
import static org.testng.AssertJUnit.assertTrue;
import org.testng.annotations.Test;
import org.threeten.bp.Period;
import org.threeten.bp.ZonedDateTime;
import com.opengamma.analytics.financial.forex.definition.ForexDefinition;
import com.opengamma.analytics.financial.forex.definition.ForexOptionDigitalDefinition;
import com.opengamma.analytics.financial.forex.definition.ForexOptionVanillaDefinition;
import com.opengamma.analytics.financial.forex.derivative.Forex;
import com.opengamma.analytics.financial.forex.derivative.ForexOptionDigital;
import com.opengamma.analytics.financial.forex.derivative.ForexOptionVanilla;
import com.opengamma.analytics.financial.forex.method.FXMatrix;
import com.opengamma.analytics.financial.forex.method.PresentValueForexBlackVolatilityNodeSensitivityDataBundle;
import com.opengamma.analytics.financial.forex.method.PresentValueForexBlackVolatilitySensitivity;
import com.opengamma.analytics.financial.model.volatility.VolatilityAndBucketedSensitivities;
import com.opengamma.analytics.financial.model.volatility.surface.SmileDeltaTermStructureParametersStrikeInterpolation;
import com.opengamma.analytics.financial.provider.calculator.discounting.PresentValueDiscountingCalculator;
import com.opengamma.analytics.financial.provider.description.FXDataSets;
import com.opengamma.analytics.financial.provider.description.forex.BlackForexSmileProviderDiscount;
import com.opengamma.analytics.financial.provider.description.interestrate.MulticurveProviderDiscount;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MultipleCurrencyMulticurveSensitivity;
import com.opengamma.analytics.financial.schedule.ScheduleCalculator;
import com.opengamma.analytics.financial.util.AssertSensitivityObjects;
import com.opengamma.analytics.math.interpolation.CombinedInterpolatorExtrapolatorFactory;
import com.opengamma.analytics.math.interpolation.Interpolator1D;
import com.opengamma.analytics.math.interpolation.Interpolator1DFactory;
import com.opengamma.analytics.util.time.TimeCalculator;
import com.opengamma.financial.convention.businessday.BusinessDayConvention;
import com.opengamma.financial.convention.businessday.BusinessDayConventions;
import com.opengamma.financial.convention.calendar.Calendar;
import com.opengamma.financial.convention.calendar.MondayToFridayCalendar;
import com.opengamma.util.money.Currency;
import com.opengamma.util.money.CurrencyAmount;
import com.opengamma.util.money.MultipleCurrencyAmount;
import com.opengamma.util.test.TestGroup;
import com.opengamma.util.time.DateUtils;
import com.opengamma.util.tuple.DoublesPair;
import com.opengamma.util.tuple.Pair;
import com.opengamma.util.tuple.Pairs;
/**
* Tests related to the pricing method for digital Forex option transactions with Black function and a volatility provider.
*/
@Test(groups = TestGroup.UNIT)
public class ForexOptionDigitalCallSpreadMethodTest {
private static final MulticurveProviderDiscount MULTICURVES = MulticurveProviderDiscountForexDataSets.createMulticurvesForex();
private static final Currency EUR = Currency.EUR;
private static final Currency USD = Currency.USD;
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 6, 13);
private static final SmileDeltaTermStructureParametersStrikeInterpolation SMILE_TERM = ForexSmileProviderDataSets.smile5points(REFERENCE_DATE);
private static final SmileDeltaTermStructureParametersStrikeInterpolation SMILE_TERM_FLAT = ForexSmileProviderDataSets.smileFlat(REFERENCE_DATE);
private static final BlackForexSmileProviderDiscount SMILE_MULTICURVES = new BlackForexSmileProviderDiscount(MULTICURVES, SMILE_TERM, Pairs.of(EUR, USD));
private static final BlackForexSmileProviderDiscount SMILE_FLAT_MULTICURVES = new BlackForexSmileProviderDiscount(MULTICURVES, SMILE_TERM_FLAT, Pairs.of(EUR, USD));
private static final FXMatrix FX_MATRIX = MULTICURVES.getFxRates();
private static final double SPOT = FX_MATRIX.getFxRate(EUR, USD);
// General
private static final Calendar CALENDAR = new MondayToFridayCalendar("A");
private static final BusinessDayConvention BUSINESS_DAY = BusinessDayConventions.MODIFIED_FOLLOWING;
private static final int SETTLEMENT_DAYS = 2;
private static final ForexOptionVanillaBlackSmileMethod METHOD_VANILLA_BLACK = ForexOptionVanillaBlackSmileMethod.getInstance();
private static final ForexOptionDigitalBlackSmileMethod METHOD_DIGITAL_BLACK = ForexOptionDigitalBlackSmileMethod.getInstance();
private static final double CALL_SPREAD = 0.0001;
private static final ForexOptionDigitalCallSpreadBlackSmileMethod METHOD_DIGITAL_SPREAD = new ForexOptionDigitalCallSpreadBlackSmileMethod(CALL_SPREAD);
private static final PresentValueDiscountingCalculator PVDC = PresentValueDiscountingCalculator.getInstance();
// option
private static final double STRIKE = 1.45;
private static final boolean IS_CALL = true;
private static final boolean IS_LONG = true;
private static final double NOTIONAL = 100000000;
private static final ZonedDateTime OPTION_PAY_DATE = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
private static final ZonedDateTime OPTION_EXP_DATE = ScheduleCalculator.getAdjustedDate(OPTION_PAY_DATE, -SETTLEMENT_DAYS, CALENDAR);
private static final ForexDefinition FOREX_DEFINITION = new ForexDefinition(EUR, USD, OPTION_PAY_DATE, NOTIONAL, STRIKE);
private static final Forex FOREX = FOREX_DEFINITION.toDerivative(REFERENCE_DATE);
private static final ForexOptionDigitalDefinition FOREX_DIGITAL_CALL_DOM_DEFINITION = new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL,
IS_LONG, true);
private static final ForexOptionDigital FOREX_DIGITAL_CALL_DOM = FOREX_DIGITAL_CALL_DOM_DEFINITION.toDerivative(REFERENCE_DATE);
private static final ForexOptionDigitalDefinition FOREX_DIGITAL_CALL_FOR_DEFINITION = new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL,
IS_LONG, false);
private static final ForexOptionDigital FOREX_DIGITAL_CALL_FOR = FOREX_DIGITAL_CALL_FOR_DEFINITION.toDerivative(REFERENCE_DATE);
private static final double TOLERANCE_PV = 1.0E-2;
private static final double TOLERANCE_PV_FLAT = 1.0E+1; // The spread size will create a discrepancy.
private static final double TOLERANCE_CE_FLAT = 1.0E+2; // The spread size will create a discrepancy.
private static final double TOLERANCE_DELTA = 1.0E+2; // 0.01 currency unit for 1 bp
private static final double TOLERANCE_RELATIVE = 1.0E-6;
@Test
/**
* Tests the present value in a flat smile case.
*/
public void presentValueFlat() {
final MultipleCurrencyAmount pvSpread = METHOD_DIGITAL_SPREAD.presentValue(FOREX_DIGITAL_CALL_DOM, SMILE_FLAT_MULTICURVES);
final MultipleCurrencyAmount pvBlack = METHOD_DIGITAL_BLACK.presentValue(FOREX_DIGITAL_CALL_DOM, SMILE_FLAT_MULTICURVES);
assertEquals("Forex Digital option: call spread method - present value", pvBlack.getAmount(USD), pvSpread.getAmount(USD), TOLERANCE_PV_FLAT);
}
@Test
/**
* Tests the present value with an explicit computation.
*/
public void presentValue() {
final double strikeM = STRIKE * (1 - CALL_SPREAD);
final double strikeP = STRIKE * (1 + CALL_SPREAD);
final Forex forexM = new Forex(FOREX.getPaymentCurrency1().withAmount(1.0), FOREX.getPaymentCurrency2().withAmount(-strikeM));
final Forex forexP = new Forex(FOREX.getPaymentCurrency1().withAmount(1.0), FOREX.getPaymentCurrency2().withAmount(-strikeP));
final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, IS_LONG);
final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, IS_LONG);
final MultipleCurrencyAmount pvP = METHOD_VANILLA_BLACK.presentValue(vanillaP, SMILE_MULTICURVES);
final MultipleCurrencyAmount pvM = METHOD_VANILLA_BLACK.presentValue(vanillaM, SMILE_MULTICURVES);
final MultipleCurrencyAmount pvExpected = pvM.plus(pvP.multipliedBy(-1.0))
.multipliedBy(1.0 / (strikeP - strikeM) * Math.abs(FOREX.getPaymentCurrency2().getAmount()));
final MultipleCurrencyAmount pvComputed = METHOD_DIGITAL_SPREAD.presentValue(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
assertEquals("Forex Digital option: call spread method - present value", pvExpected.getAmount(USD), pvComputed.getAmount(USD), TOLERANCE_PV);
}
@Test
/**
* Tests the present value with an explicit computation.
*/
public void presentValueDoubleQuadratic() {
final Interpolator1D interpolator = CombinedInterpolatorExtrapolatorFactory.getInterpolator(Interpolator1DFactory.DOUBLE_QUADRATIC,
Interpolator1DFactory.LINEAR_EXTRAPOLATOR, Interpolator1DFactory.LINEAR_EXTRAPOLATOR);
final SmileDeltaTermStructureParametersStrikeInterpolation smileTerm = FXDataSets.smile3points(REFERENCE_DATE, interpolator);
final BlackForexSmileProviderDiscount smile = new BlackForexSmileProviderDiscount(MULTICURVES, smileTerm, Pairs.of(EUR, USD));
final double strikeM = STRIKE * (1 - CALL_SPREAD);
final double strikeP = STRIKE * (1 + CALL_SPREAD);
final Forex forexM = new Forex(FOREX.getPaymentCurrency1().withAmount(1.0), FOREX.getPaymentCurrency2().withAmount(-strikeM));
final Forex forexP = new Forex(FOREX.getPaymentCurrency1().withAmount(1.0), FOREX.getPaymentCurrency2().withAmount(-strikeP));
final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, IS_LONG);
final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, IS_LONG);
final MultipleCurrencyAmount pvP = METHOD_VANILLA_BLACK.presentValue(vanillaP, smile);
final MultipleCurrencyAmount pvM = METHOD_VANILLA_BLACK.presentValue(vanillaM, smile);
final MultipleCurrencyAmount pvExpected = pvM.plus(pvP.multipliedBy(-1.0))
.multipliedBy(1.0 / (strikeP - strikeM) * Math.abs(FOREX.getPaymentCurrency2().getAmount()));
final MultipleCurrencyAmount pvComputed = METHOD_DIGITAL_SPREAD.presentValue(FOREX_DIGITAL_CALL_DOM, smile);
assertEquals("Forex Digital option: call spread method - present value", pvExpected.getAmount(USD), pvComputed.getAmount(USD), TOLERANCE_PV);
}
@Test
/**
* Tests put call parity.
*/
public void presentValuePutCallParityDomestic() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionDigitalDefinition callDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionDigitalDefinition putDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong);
final ForexOptionDigital call = callDefinition.toDerivative(REFERENCE_DATE);
final ForexOptionDigital put = putDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pvCall = METHOD_DIGITAL_SPREAD.presentValue(call, SMILE_MULTICURVES);
final MultipleCurrencyAmount pvPut = METHOD_DIGITAL_SPREAD.presentValue(put, SMILE_MULTICURVES);
final Double pvCash = Math.abs(put.getUnderlyingForex().getPaymentCurrency2().accept(PVDC, MULTICURVES).getAmount(USD));
assertEquals("Forex Digital option: call spread method - present value", pvCall.getAmount(USD) + pvPut.getAmount(USD), Math.abs(pvCash), TOLERANCE_PV_FLAT);
}
@Test
/**
* Tests put call parity.
*/
public void presentValuePutCallParityForeign() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionDigitalDefinition callDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong, false);
final ForexOptionDigitalDefinition putDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong, false);
final ForexOptionDigital call = callDefinition.toDerivative(REFERENCE_DATE);
final ForexOptionDigital put = putDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pvCall = METHOD_DIGITAL_SPREAD.presentValue(call, SMILE_MULTICURVES);
final MultipleCurrencyAmount pvPut = METHOD_DIGITAL_SPREAD.presentValue(put, SMILE_MULTICURVES);
final Double pvCash = Math.abs(put.getUnderlyingForex().getPaymentCurrency1().accept(PVDC, MULTICURVES).getAmount(EUR));
assertEquals("Forex Digital option: call spread method - present value", pvCall.getAmount(EUR) + pvPut.getAmount(EUR), Math.abs(pvCash), TOLERANCE_PV_FLAT);
}
@Test
/**
* Tests the present value long/short parity.
*/
public void presentValueLongShort() {
final ForexOptionDigitalDefinition forexOptionShortDefinition = new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, !IS_LONG);
final ForexOptionDigital forexOptionShort = forexOptionShortDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pvShort = METHOD_DIGITAL_SPREAD.presentValue(forexOptionShort, SMILE_MULTICURVES);
final MultipleCurrencyAmount pvLong = METHOD_DIGITAL_SPREAD.presentValue(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
assertEquals("Forex Digital option: present value long/short parity", pvLong.getAmount(USD), -pvShort.getAmount(USD), 1E-2);
final MultipleCurrencyAmount ceShort = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionShort, SMILE_MULTICURVES);
final MultipleCurrencyAmount ceLong = METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
assertEquals("Forex Digital option: currency exposure long/short parity", ceLong.getAmount(USD), -ceShort.getAmount(USD), 1E-2);
assertEquals("Forex Digital option: currency exposure long/short parity", ceLong.getAmount(EUR), -ceShort.getAmount(EUR), 1E-2);
}
@Test
/**
* Tests the currency exposure in a flat smile case.
*/
public void currencyExposureFlatDomestic() {
final MultipleCurrencyAmount ceSpread = METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_DIGITAL_CALL_DOM, SMILE_FLAT_MULTICURVES);
final MultipleCurrencyAmount ceBlack = METHOD_DIGITAL_BLACK.currencyExposure(FOREX_DIGITAL_CALL_DOM, SMILE_FLAT_MULTICURVES);
assertEquals("Forex Digital option: call spread method - currency exposure", ceBlack.getAmount(USD), ceSpread.getAmount(USD), TOLERANCE_CE_FLAT);
assertEquals("Forex Digital option: call spread method - currency exposure", ceBlack.getAmount(EUR), ceSpread.getAmount(EUR), TOLERANCE_CE_FLAT);
}
@Test
/**
* Tests the currency exposure with an explicit computation.
*/
public void currencyExposureDomestic() {
final double spread = 0.0001; // Relative spread.
final double strikeM = STRIKE * (1 - spread);
final double strikeP = STRIKE * (1 + spread);
final Forex forexM = new Forex(FOREX.getPaymentCurrency1().withAmount(1.0), FOREX.getPaymentCurrency2().withAmount(-strikeM));
final Forex forexP = new Forex(FOREX.getPaymentCurrency1().withAmount(1.0), FOREX.getPaymentCurrency2().withAmount(-strikeP));
final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, IS_LONG);
final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, IS_LONG);
final MultipleCurrencyAmount ceP = METHOD_VANILLA_BLACK.currencyExposure(vanillaP, SMILE_MULTICURVES);
final MultipleCurrencyAmount ceM = METHOD_VANILLA_BLACK.currencyExposure(vanillaM, SMILE_MULTICURVES);
final MultipleCurrencyAmount ceExpected = ceM.plus(ceP.multipliedBy(-1.0))
.multipliedBy(1.0 / (strikeP - strikeM) * Math.abs(FOREX.getPaymentCurrency2().getAmount()));
final MultipleCurrencyAmount ceComputed = METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
assertEquals("Forex Digital option: call spread method - currency exposure", ceExpected.getAmount(USD), ceComputed.getAmount(USD), TOLERANCE_PV);
assertEquals("Forex Digital option: call spread method - currency exposure", ceExpected.getAmount(EUR), ceComputed.getAmount(EUR), TOLERANCE_PV);
}
@Test
/**
* Tests the currency exposure with an explicit computation.
*/
public void currencyExposureForeign() {
final double strikeM = STRIKE * (1 - CALL_SPREAD);
final double strikeP = STRIKE * (1 + CALL_SPREAD);
final double amountPaid = Math.abs(FOREX_DIGITAL_CALL_FOR.getUnderlyingForex().getPaymentCurrency1().getAmount());
final double strikeRelM = 1.0 / strikeP;
final double strikeRelP = 1.0 / strikeM;
final double amount = amountPaid / (strikeRelP - strikeRelM);
final Forex forexM = new Forex(FOREX_DIGITAL_CALL_FOR.getUnderlyingForex().getPaymentCurrency2().withAmount(amount), FOREX_DIGITAL_CALL_FOR.getUnderlyingForex()
.getPaymentCurrency1().withAmount(-strikeRelM * amount));
final Forex forexP = new Forex(FOREX_DIGITAL_CALL_FOR.getUnderlyingForex().getPaymentCurrency2().withAmount(amount), FOREX_DIGITAL_CALL_FOR.getUnderlyingForex()
.getPaymentCurrency1().withAmount(-strikeRelP * amount));
final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, FOREX_DIGITAL_CALL_FOR.getExpirationTime(), !IS_CALL, false);
final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, FOREX_DIGITAL_CALL_FOR.getExpirationTime(), !IS_CALL, true);
final MultipleCurrencyAmount ceP = METHOD_VANILLA_BLACK.currencyExposure(vanillaP, SMILE_MULTICURVES);
final MultipleCurrencyAmount ceM = METHOD_VANILLA_BLACK.currencyExposure(vanillaM, SMILE_MULTICURVES);
final MultipleCurrencyAmount ceExpected = ceM.plus(ceP);
final MultipleCurrencyAmount ceComputed = METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_DIGITAL_CALL_FOR, SMILE_MULTICURVES);
assertEquals("Forex Digital option: call spread method - currency exposure", ceExpected.getAmount(USD), ceComputed.getAmount(USD), TOLERANCE_PV);
assertEquals("Forex Digital option: call spread method - currency exposure", ceExpected.getAmount(EUR), ceComputed.getAmount(EUR), TOLERANCE_PV);
}
@Test
/**
* Tests the currency exposure with a FD rate shift.
*/
public void currencyExposureForeign2() {
final double shift = 0.000005;
final FXMatrix fxMatrixP = new FXMatrix(EUR, USD, SPOT + shift);
final MulticurveProviderDiscount multicurvesP = MULTICURVES.copy();
multicurvesP.setForexMatrix(fxMatrixP);
final BlackForexSmileProviderDiscount smileP = new BlackForexSmileProviderDiscount(multicurvesP, SMILE_TERM_FLAT, Pairs.of(EUR, USD));
final MultipleCurrencyAmount ce = METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_DIGITAL_CALL_FOR, SMILE_FLAT_MULTICURVES);
final MultipleCurrencyAmount pv = METHOD_DIGITAL_SPREAD.presentValue(FOREX_DIGITAL_CALL_FOR, SMILE_FLAT_MULTICURVES);
final MultipleCurrencyAmount pvP = METHOD_DIGITAL_SPREAD.presentValue(FOREX_DIGITAL_CALL_FOR, smileP);
assertEquals("Forex Digital option: call spread method - currency exposure - PL EUR", pvP.getAmount(EUR) - pv.getAmount(EUR), ce.getAmount(USD)
* (1.0 / (SPOT + shift) - 1 / SPOT), TOLERANCE_PV);
assertEquals("Forex Digital option: call spread method - currency exposure - PL USD", pvP.getAmount(EUR) * (SPOT + shift) - pv.getAmount(EUR) * SPOT,
ce.getAmount(EUR) * (SPOT + shift - SPOT), TOLERANCE_PV);
}
@Test
/**
* Tests the currency exposure against the present value.
*/
public void currencyExposureVsPresentValue() {
final MultipleCurrencyAmount pv = METHOD_DIGITAL_SPREAD.presentValue(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
final MultipleCurrencyAmount ce = METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
assertEquals("Forex Digital option: call spread method - currency exposure vs present value", ce.getAmount(USD) + ce.getAmount(EUR) * SPOT, pv.getAmount(USD),
TOLERANCE_PV);
}
@Test
/**
* Tests the put/call parity currency exposure.
*/
public void currencyExposurePutCallParityDomestic() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionDigitalDefinition forexOptionDefinitionCall = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionDigitalDefinition forexOptionDefinitionPut = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong);
final ForexOptionDigital forexOptionCall = forexOptionDefinitionCall.toDerivative(REFERENCE_DATE);
final ForexOptionDigital forexOptionPut = forexOptionDefinitionPut.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount currencyExposureCall = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionCall, SMILE_MULTICURVES);
final MultipleCurrencyAmount currencyExposurePut = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionPut, SMILE_MULTICURVES);
final MultipleCurrencyAmount pvCash = forexOptionPut.getUnderlyingForex().getPaymentCurrency2().accept(PVDC, MULTICURVES);
assertEquals("Forex Digital option: currency exposure put/call parity foreign", 0, currencyExposureCall.getAmount(EUR) + currencyExposurePut.getAmount(EUR),
TOLERANCE_PV);
assertEquals("Forex Digital option: currency exposure put/call parity domestic", Math.abs(pvCash.getAmount(USD)), currencyExposureCall.getAmount(USD)
+ currencyExposurePut.getAmount(USD), TOLERANCE_PV);
}
@Test
/**
* Tests the put/call parity currency exposure.
*/
public void currencyExposurePutCallParityForeign() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionDigitalDefinition forexOptionDefinitionCall = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong, false);
final ForexOptionDigitalDefinition forexOptionDefinitionPut = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong, false);
final ForexOptionDigital forexOptionCall = forexOptionDefinitionCall.toDerivative(REFERENCE_DATE);
final ForexOptionDigital forexOptionPut = forexOptionDefinitionPut.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount currencyExposureCall = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionCall, SMILE_MULTICURVES);
final MultipleCurrencyAmount currencyExposurePut = METHOD_DIGITAL_SPREAD.currencyExposure(forexOptionPut, SMILE_MULTICURVES);
final MultipleCurrencyAmount pvCash = forexOptionPut.getUnderlyingForex().getPaymentCurrency1().accept(PVDC, MULTICURVES);
assertEquals("Forex Digital option: currency exposure put/call parity foreign", 0, currencyExposureCall.getAmount(USD) + currencyExposurePut.getAmount(USD),
TOLERANCE_PV);
assertEquals("Forex Digital option: currency exposure put/call parity domestic", Math.abs(pvCash.getAmount(EUR)), currencyExposureCall.getAmount(EUR)
+ currencyExposurePut.getAmount(EUR), TOLERANCE_PV);
}
@Test
/**
* Tests the gamma for Forex option. Payment in domestic currency.
*/
public void gammaDomestic() {
final double strikeM = STRIKE * (1 - CALL_SPREAD);
final double strikeP = STRIKE * (1 + CALL_SPREAD);
final double notional = Math.abs(FOREX.getPaymentCurrency2().getAmount()) / (strikeP - strikeM);
final Forex forexM = new Forex(FOREX.getPaymentCurrency1().withAmount(notional), FOREX.getPaymentCurrency2().withAmount(-notional * strikeM));
final Forex forexP = new Forex(FOREX.getPaymentCurrency1().withAmount(notional), FOREX.getPaymentCurrency2().withAmount(-notional * strikeP));
final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, IS_LONG);
final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, !IS_LONG);
final CurrencyAmount gammaP = METHOD_VANILLA_BLACK.gamma(vanillaP, SMILE_MULTICURVES, true);
final CurrencyAmount gammaM = METHOD_VANILLA_BLACK.gamma(vanillaM, SMILE_MULTICURVES, true);
final CurrencyAmount gammaExpected = gammaM.plus(gammaP);
final CurrencyAmount gammaComputed = METHOD_DIGITAL_SPREAD.gamma(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
assertEquals("Forex Digital option: call spread method - gamma", gammaExpected.getAmount(), gammaComputed.getAmount(), TOLERANCE_PV);
}
@Test
/**
* Tests the gamma for Forex option. Payment in foreign currency.
*/
public void gammaForeign() {
final ForexOptionDigitalDefinition digitalForeignDefinition = new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, IS_LONG, false);
final ForexOptionDigital digitalForeign = digitalForeignDefinition.toDerivative(REFERENCE_DATE);
final double strikeM = STRIKE * (1 - CALL_SPREAD);
final double strikeP = STRIKE * (1 + CALL_SPREAD);
final double amountPaid = Math.abs(digitalForeign.getUnderlyingForex().getPaymentCurrency1().getAmount());
final double strikeRelM = 1.0 / strikeP;
final double strikeRelP = 1.0 / strikeM;
final double amount = amountPaid / (strikeRelP - strikeRelM);
final Forex forexM = new Forex(digitalForeign.getUnderlyingForex().getPaymentCurrency2().withAmount(amount), digitalForeign.getUnderlyingForex()
.getPaymentCurrency1().withAmount(-strikeRelM * amount));
final Forex forexP = new Forex(digitalForeign.getUnderlyingForex().getPaymentCurrency2().withAmount(amount), digitalForeign.getUnderlyingForex()
.getPaymentCurrency1().withAmount(-strikeRelP * amount));
final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, digitalForeign.getExpirationTime(), !IS_CALL, false);
final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, digitalForeign.getExpirationTime(), !IS_CALL, true);
final CurrencyAmount gammaP = METHOD_VANILLA_BLACK.gamma(vanillaP, SMILE_MULTICURVES, false);
final CurrencyAmount gammaM = METHOD_VANILLA_BLACK.gamma(vanillaM, SMILE_MULTICURVES, false);
final CurrencyAmount gammaExpected = gammaM.plus(gammaP);
final CurrencyAmount gammaComputed = METHOD_DIGITAL_SPREAD.gamma(digitalForeign, SMILE_MULTICURVES);
assertEquals("Forex Digital option: call spread method - gamma", gammaExpected.getAmount(), gammaComputed.getAmount(), TOLERANCE_PV);
}
@Test
/**
* Tests the gamma for Forex option. Payment in domestic currency.
*/
public void gammaSpotDomestic() {
final double strikeM = STRIKE * (1 - CALL_SPREAD);
final double strikeP = STRIKE * (1 + CALL_SPREAD);
final double notional = Math.abs(FOREX.getPaymentCurrency2().getAmount()) / (strikeP - strikeM);
final Forex forexM = new Forex(FOREX.getPaymentCurrency1().withAmount(notional), FOREX.getPaymentCurrency2().withAmount(-notional * strikeM));
final Forex forexP = new Forex(FOREX.getPaymentCurrency1().withAmount(notional), FOREX.getPaymentCurrency2().withAmount(-notional * strikeP));
final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, IS_LONG);
final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, !IS_LONG);
final CurrencyAmount gammaP = METHOD_VANILLA_BLACK.gammaSpot(vanillaP, SMILE_MULTICURVES, true);
final CurrencyAmount gammaM = METHOD_VANILLA_BLACK.gammaSpot(vanillaM, SMILE_MULTICURVES, true);
final CurrencyAmount gammaExpected = gammaM.plus(gammaP);
final CurrencyAmount gammaComputed = METHOD_DIGITAL_SPREAD.gammaSpot(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
assertEquals("Forex Digital option: call spread method - gamma spot", gammaExpected.getAmount(), gammaComputed.getAmount(), TOLERANCE_PV);
}
@Test
/**
* Tests the gamma for Forex option. Payment in foreign currency.
*/
public void gammaSpotForeign() {
final ForexOptionDigitalDefinition digitalForeignDefinition = new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, IS_LONG, false);
final ForexOptionDigital digitalForeign = digitalForeignDefinition.toDerivative(REFERENCE_DATE);
final double strikeM = STRIKE * (1 - CALL_SPREAD);
final double strikeP = STRIKE * (1 + CALL_SPREAD);
final double amountPaid = Math.abs(digitalForeign.getUnderlyingForex().getPaymentCurrency1().getAmount());
final double strikeRelM = 1.0 / strikeP;
final double strikeRelP = 1.0 / strikeM;
final double amount = amountPaid / (strikeRelP - strikeRelM);
final Forex forexM = new Forex(digitalForeign.getUnderlyingForex().getPaymentCurrency2().withAmount(amount), digitalForeign.getUnderlyingForex()
.getPaymentCurrency1().withAmount(-strikeRelM * amount));
final Forex forexP = new Forex(digitalForeign.getUnderlyingForex().getPaymentCurrency2().withAmount(amount), digitalForeign.getUnderlyingForex()
.getPaymentCurrency1().withAmount(-strikeRelP * amount));
final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, digitalForeign.getExpirationTime(), !IS_CALL, false);
final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, digitalForeign.getExpirationTime(), !IS_CALL, true);
final CurrencyAmount gammaP = METHOD_VANILLA_BLACK.gammaSpot(vanillaP, SMILE_MULTICURVES, false);
final CurrencyAmount gammaM = METHOD_VANILLA_BLACK.gammaSpot(vanillaM, SMILE_MULTICURVES, false);
final CurrencyAmount gammaExpected = gammaM.plus(gammaP);
final CurrencyAmount gammaComputed = METHOD_DIGITAL_SPREAD.gammaSpot(digitalForeign, SMILE_MULTICURVES);
assertEquals("Forex Digital option: call spread method - gamma spot", gammaExpected.getAmount(), gammaComputed.getAmount(), TOLERANCE_PV);
}
// @Test
// /**
// * Tests the gamma for Forex option. Payment in foreign currency.
// */
// public void gammaSpotMethodVsCalculator() {
// final GammaSpotCallSpreadBlackForexCalculator calculator = new GammaSpotCallSpreadBlackForexCalculator(CALL_SPREAD);
// final ForexOptionDigitalDefinition digitalForeignDefinition = new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, IS_LONG, false);
// final ForexOptionDigital digitalForeign = digitalForeignDefinition.toDerivative(REFERENCE_DATE);
// final CurrencyAmount gammaForeignMethod = METHOD_DIGITAL_SPREAD.gammaSpot(digitalForeign, SMILE_MULTICURVES);
// final CurrencyAmount gammaForeignCalculator = digitalForeign.accept(calculator, SMILE_MULTICURVES);
// assertEquals("Forex Digital option: call spread method - gamma spot", gammaForeignCalculator.getAmount(), gammaForeignMethod.getAmount(), TOLERANCE_PV);
// final CurrencyAmount gammaDomesticMethod = METHOD_DIGITAL_SPREAD.gammaSpot(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
// final CurrencyAmount gammaDomesticCalculator = FOREX_DIGITAL_CALL_DOM.accept(calculator, SMILE_MULTICURVES);
// assertEquals("Forex Digital option: call spread method - gamma spot", gammaDomesticCalculator.getAmount(), gammaDomesticMethod.getAmount(), TOLERANCE_PV);
// }
@Test
/**
* Tests the relative gamma for Forex option.
*/
public void gammaRelative() {
final CurrencyAmount gamma = METHOD_DIGITAL_SPREAD.gamma(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
final double gammaRelativeExpected = gamma.getAmount() / Math.abs(FOREX_DIGITAL_CALL_DOM.getUnderlyingForex().getPaymentCurrency2().getAmount());
final double gammaRelativeComputed = METHOD_DIGITAL_SPREAD.gammaRelative(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
assertEquals("Forex: relative gamma", gammaRelativeExpected, gammaRelativeComputed, TOLERANCE_RELATIVE);
}
@Test
/**
* Tests the present value curve sensitivity.
*/
public void presentValueCurveSensitivity() {
final double spread = 0.0001; // Relative spread.
final double strikeM = STRIKE * (1 - spread);
final double strikeP = STRIKE * (1 + spread);
final Forex forexM = new Forex(FOREX.getPaymentCurrency1().withAmount(1.0), FOREX.getPaymentCurrency2().withAmount(-strikeM));
final Forex forexP = new Forex(FOREX.getPaymentCurrency1().withAmount(1.0), FOREX.getPaymentCurrency2().withAmount(-strikeP));
final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, IS_LONG);
final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, !IS_LONG);
final MultipleCurrencyMulticurveSensitivity pvcsP = METHOD_VANILLA_BLACK.presentValueCurveSensitivity(vanillaP, SMILE_MULTICURVES);
final MultipleCurrencyMulticurveSensitivity pvcsM = METHOD_VANILLA_BLACK.presentValueCurveSensitivity(vanillaM, SMILE_MULTICURVES);
final MultipleCurrencyMulticurveSensitivity pvcsExpected = pvcsM.plus(pvcsP).multipliedBy(
1.0 / (strikeP - strikeM) * Math.abs(FOREX.getPaymentCurrency2().getAmount()));
final MultipleCurrencyMulticurveSensitivity pvcsComputed = METHOD_DIGITAL_SPREAD.presentValueCurveSensitivity(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
AssertSensitivityObjects.assertEquals("Forex Digital option: call spread method - present value", pvcsExpected, pvcsComputed, TOLERANCE_DELTA);
}
@Test
/**
* Tests the present value curve sensitivity.
*/
public void presentValueBlackVolatilitySensitivity() {
final double strikeM = STRIKE * (1 - CALL_SPREAD);
final double strikeP = STRIKE * (1 + CALL_SPREAD);
final Forex forexM = new Forex(FOREX.getPaymentCurrency1().withAmount(1.0), FOREX.getPaymentCurrency2().withAmount(-strikeM));
final Forex forexP = new Forex(FOREX.getPaymentCurrency1().withAmount(1.0), FOREX.getPaymentCurrency2().withAmount(-strikeP));
final ForexOptionVanilla vanillaM = new ForexOptionVanilla(forexM, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, IS_LONG);
final ForexOptionVanilla vanillaP = new ForexOptionVanilla(forexP, FOREX_DIGITAL_CALL_DOM.getExpirationTime(), IS_CALL, IS_LONG);
final PresentValueForexBlackVolatilitySensitivity pvbvP = METHOD_VANILLA_BLACK.presentValueBlackVolatilitySensitivity(vanillaP, SMILE_MULTICURVES);
final PresentValueForexBlackVolatilitySensitivity pvbvM = METHOD_VANILLA_BLACK.presentValueBlackVolatilitySensitivity(vanillaM, SMILE_MULTICURVES);
final PresentValueForexBlackVolatilitySensitivity pvbvExpected = pvbvM.plus(pvbvP.multipliedBy(-1.0)).multipliedBy(
1.0 / (strikeP - strikeM) * Math.abs(FOREX.getPaymentCurrency2().getAmount()));
final PresentValueForexBlackVolatilitySensitivity pvbvComputed = METHOD_DIGITAL_SPREAD.presentValueBlackVolatilitySensitivity(FOREX_DIGITAL_CALL_DOM,
SMILE_MULTICURVES);
assertEquals("Forex Digital option: call spread method - present value volatility sensitivity", pvbvComputed.getVega().getMap().size(), 2);
assertTrue("Forex Digital option: call spread method - present value volatility sensitivity",
PresentValueForexBlackVolatilitySensitivity.compare(pvbvExpected, pvbvComputed, TOLERANCE_DELTA));
}
@Test
/**
* Tests the present value. Spread change.
*/
public void presentValueSpreadChange() {
final double spread1 = 0.0001;
final double spread2 = 0.0002;
final ForexOptionDigitalCallSpreadBlackSmileMethod methodCallSpreadBlack1 = new ForexOptionDigitalCallSpreadBlackSmileMethod(spread1);
final ForexOptionDigitalCallSpreadBlackSmileMethod methodCallSpreadBlack2 = new ForexOptionDigitalCallSpreadBlackSmileMethod(spread2);
final MultipleCurrencyAmount pv1 = methodCallSpreadBlack1.presentValue(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
final MultipleCurrencyAmount pv2 = methodCallSpreadBlack2.presentValue(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
assertEquals("Forex Digital option: call spread method - present value", pv1.getAmount(USD), pv2.getAmount(USD), 10.0);
// MultipleCurrencyAmount pvBlack = METHOD_DIGITAL_BLACK.presentValue(FOREX_CALL_OPTION, SMILE_BUNDLE);
// assertEquals("Forex Digital option: call spread method - present value", pvBlack.getAmount(USD), pv2.getAmount(USD), 10.0); // Should fail
}
// @Test
// /**
// * Tests the present value. Method vs Calculator.
// */
// public void presentValueMethodVCalculator() {
// final MultipleCurrencyAmount pv1 = METHOD_DIGITAL_SPREAD.presentValue(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
// final PresentValueCallSpreadBlackForexCalculator calculator = new PresentValueCallSpreadBlackForexCalculator(CALL_SPREAD);
// final MultipleCurrencyAmount pvCalculator = FOREX_DIGITAL_CALL_DOM.accept(calculator, SMILE_MULTICURVES);
// assertEquals("Forex Digital option: call spread method - present value", pv1.getAmount(USD), pvCalculator.getAmount(USD), TOLERANCE_PV);
// }
// @Test
// /**
// * Tests the currency exposure. Method vs Calculator.
// */
// public void currencyExposureMethodVCalculator() {
// final MultipleCurrencyAmount ceMethod = METHOD_DIGITAL_SPREAD.currencyExposure(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
// final CurrencyExposureCallSpreadBlackForexCalculator calculator = new CurrencyExposureCallSpreadBlackForexCalculator(CALL_SPREAD);
// final MultipleCurrencyAmount ceCalculator = FOREX_DIGITAL_CALL_DOM.accept(calculator, SMILE_MULTICURVES);
// assertEquals("Forex Digital option: call spread method - currency exposure", ceMethod.getAmount(USD), ceCalculator.getAmount(USD), TOLERANCE_PV);
// assertEquals("Forex Digital option: call spread method - currency exposure", ceMethod.getAmount(EUR), ceCalculator.getAmount(EUR), TOLERANCE_PV);
// }
// @Test
// /**
// * Tests the present value curve sensitivity. Method vs Calculator.
// */
// public void presentValueCurveSensitivityMethodVCalculator() {
// final MultipleCurrencyInterestRateCurveSensitivity pvcsMethod = METHOD_DIGITAL_SPREAD.presentValueCurveSensitivity(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
// final PresentValueCurveSensitivityCallSpreadBlackForexCalculator calculator = new PresentValueCurveSensitivityCallSpreadBlackForexCalculator(CALL_SPREAD);
// final MultipleCurrencyInterestRateCurveSensitivity pvcsCalculator = FOREX_DIGITAL_CALL_DOM.accept(calculator, SMILE_MULTICURVES);
// AssertSensivityObjects.assertEquals("Forex Digital option: call spread method - present value", pvcsMethod, pvcsCalculator, TOLERANCE_DELTA);
// }
// @Test
// /**
// * Tests the present value volatility sensitivity. Method vs Calculator.
// */
// public void presentValueBlackVolatilitySensitivityMethodVCalculator() {
// final PresentValueForexBlackVolatilitySensitivity pvbvMethod = METHOD_DIGITAL_SPREAD.presentValueBlackVolatilitySensitivity(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
// final PresentValueBlackVolatilitySensitivityCallSpreadBlackForexCalculator calculator = new PresentValueBlackVolatilitySensitivityCallSpreadBlackForexCalculator(CALL_SPREAD);
// final PresentValueForexBlackVolatilitySensitivity pvbvCalculator = FOREX_DIGITAL_CALL_DOM.accept(calculator, SMILE_MULTICURVES);
// assertTrue("Forex Digital option: call spread method - present value volatility sensitivity", PresentValueForexBlackVolatilitySensitivity.compare(pvbvMethod, pvbvCalculator, TOLERANCE_DELTA));
// }
@Test
/**
* Tests present value volatility node sensitivity.
*/
public void presentValueBlackVolatilityNodeSensitivity() {
final double strikeM = STRIKE * (1 - CALL_SPREAD);
final double strikeP = STRIKE * (1 + CALL_SPREAD);
final PresentValueForexBlackVolatilityNodeSensitivityDataBundle sensi = METHOD_DIGITAL_SPREAD.presentValueBlackVolatilityNodeSensitivity(FOREX_DIGITAL_CALL_DOM,
SMILE_MULTICURVES);
assertEquals("Forex vanilla option: vega node size", SMILE_TERM.getNumberExpiration(), sensi.getVega().getData().length);
assertEquals("Forex vanilla option: vega node size", SMILE_TERM.getNumberStrike(), sensi.getVega().getData()[0].length);
final Pair<Currency, Currency> currencyPair = Pairs.of(EUR, USD);
assertEquals("Forex vanilla option: vega", currencyPair, sensi.getCurrencyPair());
final PresentValueForexBlackVolatilitySensitivity pointSensitivity = METHOD_DIGITAL_SPREAD.presentValueBlackVolatilitySensitivity(FOREX_DIGITAL_CALL_DOM,
SMILE_MULTICURVES);
final double df = MULTICURVES.getDiscountFactor(USD, TimeCalculator.getTimeBetween(REFERENCE_DATE, OPTION_PAY_DATE));
final double forward = SPOT * MULTICURVES.getDiscountFactor(EUR, TimeCalculator.getTimeBetween(REFERENCE_DATE, OPTION_PAY_DATE)) / df;
final VolatilityAndBucketedSensitivities volAndSensitivitiesDown = SMILE_TERM.getVolatilityAndSensitivities(FOREX_DIGITAL_CALL_DOM.getExpirationTime(), strikeM,
forward);
final VolatilityAndBucketedSensitivities volAndSensitivitiesUp = SMILE_TERM.getVolatilityAndSensitivities(FOREX_DIGITAL_CALL_DOM.getExpirationTime(), strikeP,
forward);
final double[][] nodeWeightM = volAndSensitivitiesDown.getBucketedSensitivities();
final double[][] nodeWeightP = volAndSensitivitiesUp.getBucketedSensitivities();
final DoublesPair pointM = DoublesPair.of(FOREX_DIGITAL_CALL_DOM.getExpirationTime(), strikeM);
final DoublesPair pointP = DoublesPair.of(FOREX_DIGITAL_CALL_DOM.getExpirationTime(), strikeP);
for (int loopexp = 0; loopexp < SMILE_TERM.getNumberExpiration(); loopexp++) {
for (int loopstrike = 0; loopstrike < SMILE_TERM.getNumberStrike(); loopstrike++) {
assertEquals("Forex vanilla digital: vega node", nodeWeightM[loopexp][loopstrike] * pointSensitivity.getVega().getMap().get(pointM)
+ nodeWeightP[loopexp][loopstrike] * pointSensitivity.getVega().getMap().get(pointP), sensi.getVega().getData()[loopexp][loopstrike], TOLERANCE_DELTA);
}
}
}
// @Test
// /**
// * Tests present value volatility node sensitivity.
// */
// public void presentValueBlackVolatilityNodeSensitivityMethodVCalculator() {
// final PresentValueForexBlackVolatilityNodeSensitivityDataBundle pvbnsMethod = METHOD_DIGITAL_SPREAD.presentValueBlackVolatilityNodeSensitivity(FOREX_DIGITAL_CALL_DOM, SMILE_MULTICURVES);
// final PresentValueBlackVolatilityNodeSensitivityCallSpreadBlackForexCalculator calculator = new PresentValueBlackVolatilityNodeSensitivityCallSpreadBlackForexCalculator(STANDARD_SPREAD);
// final PresentValueForexBlackVolatilityNodeSensitivityDataBundle pvbnsCalculator = FOREX_DIGITAL_CALL_DOM.accept(calculator, SMILE_MULTICURVES);
// assertTrue("Forex Digital option: call spread method - Black node sensitivity", PresentValueForexBlackVolatilityNodeSensitivityDataBundle.compare(pvbnsMethod, pvbnsCalculator, TOLERANCE_DELTA));
// }
// @Test
// /**
// * Tests the Theta (1 day change of pv) for forex options transactions.
// */
// public void thetaBeforeExpiration() {
// final MultipleCurrencyAmount theta = THETAC.getTheta(FOREX_DIGITAL_CALL_DOM_DEFINITION, REFERENCE_DATE, CURVES_NAME, SMILE_MULTICURVES, PVC_CALLSPREAD, 1);
// final ForexOptionDigital swapToday = FOREX_DIGITAL_CALL_DOM_DEFINITION.toDerivative(REFERENCE_DATE, CURVES_NAME);
// final ForexOptionDigital swapTomorrow = FOREX_DIGITAL_CALL_DOM_DEFINITION.toDerivative(REFERENCE_DATE.plusDays(1), CURVES_NAME);
// final MultipleCurrencyAmount pvToday = swapToday.accept(PVC_CALLSPREAD, SMILE_MULTICURVES);
// final YieldCurveBundle tomorrowData = FX_OPTION_ROLLDOWN.rollDown(SMILE_MULTICURVES, TimeCalculator.getTimeBetween(REFERENCE_DATE, REFERENCE_DATE.plusDays(1)));
// final MultipleCurrencyAmount pvTomorrow = swapTomorrow.accept(PVC_CALLSPREAD, tomorrowData);
// final MultipleCurrencyAmount thetaExpected = pvTomorrow.plus(pvToday.multipliedBy(-1.0));
// assertEquals("ThetaCalculator: forex option", thetaExpected.getAmount(USD), theta.getAmount(USD), TOLERANCE_PV);
// }
@Test(enabled = false)
/**
* Analyzes the profile for digital options.
*/
public void profile() {
final Interpolator1D interpolator = CombinedInterpolatorExtrapolatorFactory.getInterpolator(Interpolator1DFactory.DOUBLE_QUADRATIC,
Interpolator1DFactory.LINEAR_EXTRAPOLATOR, Interpolator1DFactory.LINEAR_EXTRAPOLATOR);
final SmileDeltaTermStructureParametersStrikeInterpolation smileTerm = FXDataSets.smile5points(REFERENCE_DATE, interpolator);
final BlackForexSmileProviderDiscount smile = new BlackForexSmileProviderDiscount(MULTICURVES, smileTerm, Pairs.of(EUR, USD));
final int nbStrike = 100;
final double range = 0.40; // Spot = 1.40
final double shift = 2 * range / nbStrike;
final double[] strike = new double[nbStrike + 1];
final ForexOptionDigital[] forexOptionDigital = new ForexOptionDigital[nbStrike + 1];
final ForexOptionVanilla[] forexOptionVanilla = new ForexOptionVanilla[nbStrike + 1];
for (int loopstrike = 0; loopstrike <= nbStrike; loopstrike++) {
strike[loopstrike] = SPOT - range + loopstrike * shift;
final ForexDefinition forexDefinitonUSD = ForexDefinition.fromAmounts(EUR, USD, OPTION_EXP_DATE, -NOTIONAL / strike[loopstrike], NOTIONAL);
final ForexDefinition forexDefinitonEUR = ForexDefinition.fromAmounts(EUR, USD, OPTION_EXP_DATE, -1.0, strike[loopstrike]);
final ForexOptionDigitalDefinition forexOptionDigitalDefiniton = new ForexOptionDigitalDefinition(forexDefinitonUSD, OPTION_EXP_DATE, IS_CALL, IS_LONG);
final ForexOptionVanillaDefinition forexOptionVanillaDefiniton = new ForexOptionVanillaDefinition(forexDefinitonEUR, OPTION_EXP_DATE, IS_CALL, IS_LONG);
forexOptionDigital[loopstrike] = forexOptionDigitalDefiniton.toDerivative(REFERENCE_DATE);
forexOptionVanilla[loopstrike] = forexOptionVanillaDefiniton.toDerivative(REFERENCE_DATE);
}
final double[] pvDigitalSpread = new double[nbStrike + 1];
final double[] pvDigitalBlack = new double[nbStrike + 1];
final double[] pvVanillaBlack = new double[nbStrike + 1];
final double[] gammaDigitalSpread = new double[nbStrike + 1];
for (int loopstrike = 0; loopstrike <= nbStrike; loopstrike++) {
pvDigitalSpread[loopstrike] = METHOD_DIGITAL_SPREAD.presentValue(forexOptionDigital[loopstrike], smile).getAmount(USD);
pvDigitalBlack[loopstrike] = METHOD_DIGITAL_BLACK.presentValue(forexOptionDigital[loopstrike], smile).getAmount(USD);
pvVanillaBlack[loopstrike] = METHOD_VANILLA_BLACK.presentValue(forexOptionVanilla[loopstrike], smile).getAmount(USD);
gammaDigitalSpread[loopstrike] = METHOD_DIGITAL_SPREAD.gamma(forexOptionDigital[loopstrike], smile).getAmount();
}
final double dfDomestic = MULTICURVES.getDiscountFactor(USD, forexOptionDigital[0].getUnderlyingForex().getPaymentTime());
final double dfForeign = MULTICURVES.getDiscountFactor(EUR, forexOptionDigital[0].getUnderlyingForex().getPaymentTime());
final double forward = SPOT * dfForeign / dfDomestic;
final double[] volBlack = new double[nbStrike + 1];
for (int loopstrike = 0; loopstrike <= nbStrike; loopstrike++) {
volBlack[loopstrike] = smile.getVolatility(EUR, USD, forexOptionDigital[loopstrike].getExpirationTime(), strike[loopstrike], forward);
}
final double[] density = new double[nbStrike - 1];
for (int loopstrike = 0; loopstrike < nbStrike - 1; loopstrike++) {
density[loopstrike] = (pvVanillaBlack[loopstrike + 2] + pvVanillaBlack[loopstrike] - 2 * pvVanillaBlack[loopstrike + 1]) / (shift * shift);
}
}
}