/**
* 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 static org.testng.AssertJUnit.assertEquals;
import java.util.Arrays;
import org.testng.annotations.Test;
import org.threeten.bp.Period;
import org.threeten.bp.ZonedDateTime;
import cern.jet.random.engine.MersenneTwister;
import com.opengamma.analytics.financial.instrument.index.GeneratorSwapFixedIbor;
import com.opengamma.analytics.financial.instrument.index.GeneratorSwapFixedIborMaster;
import com.opengamma.analytics.financial.instrument.index.IborIndex;
import com.opengamma.analytics.financial.instrument.swap.SwapFixedIborDefinition;
import com.opengamma.analytics.financial.instrument.swaption.SwaptionPhysicalFixedIborDefinition;
import com.opengamma.analytics.financial.interestrate.annuity.derivative.AnnuityPaymentFixed;
import com.opengamma.analytics.financial.interestrate.payments.derivative.Coupon;
import com.opengamma.analytics.financial.interestrate.swap.derivative.SwapFixedCoupon;
import com.opengamma.analytics.financial.interestrate.swap.provider.SwapFixedCouponDiscountingMethod;
import com.opengamma.analytics.financial.interestrate.swaption.derivative.SwaptionPhysicalFixedIbor;
import com.opengamma.analytics.financial.model.interestrate.HullWhiteOneFactorPiecewiseConstantInterestRateModel;
import com.opengamma.analytics.financial.model.interestrate.definition.HullWhiteOneFactorPiecewiseConstantParameters;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.BlackFunctionData;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.NormalFunctionData;
import com.opengamma.analytics.financial.model.volatility.BlackImpliedVolatilityFormula;
import com.opengamma.analytics.financial.model.volatility.NormalImpliedVolatilityFormula;
import com.opengamma.analytics.financial.montecarlo.provider.HullWhiteMonteCarloMethod;
import com.opengamma.analytics.financial.provider.calculator.discounting.CashFlowEquivalentCalculator;
import com.opengamma.analytics.financial.provider.calculator.discounting.ParRateDiscountingCalculator;
import com.opengamma.analytics.financial.provider.calculator.discounting.PresentValueCurveSensitivityDiscountingCalculator;
import com.opengamma.analytics.financial.provider.calculator.discounting.PresentValueDiscountingCalculator;
import com.opengamma.analytics.financial.provider.calculator.hullwhite.PresentValueCurveSensitivityHullWhiteCalculator;
import com.opengamma.analytics.financial.provider.calculator.hullwhite.PresentValueHullWhiteCalculator;
import com.opengamma.analytics.financial.provider.description.HullWhiteDataSets;
import com.opengamma.analytics.financial.provider.description.MulticurveProviderDiscountDataSets;
import com.opengamma.analytics.financial.provider.description.interestrate.HullWhiteOneFactorProviderDiscount;
import com.opengamma.analytics.financial.provider.description.interestrate.HullWhiteOneFactorProviderInterface;
import com.opengamma.analytics.financial.provider.description.interestrate.MulticurveProviderDiscount;
import com.opengamma.analytics.financial.provider.sensitivity.hullwhite.ParameterSensitivityHullWhiteDiscountInterpolatedFDCalculator;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MultipleCurrencyMulticurveSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MultipleCurrencyParameterSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.parameter.ParameterSensitivityParameterCalculator;
import com.opengamma.analytics.financial.schedule.ScheduleCalculator;
import com.opengamma.analytics.financial.util.AssertSensitivityObjects;
import com.opengamma.analytics.math.random.NormalRandomNumberGenerator;
import com.opengamma.analytics.math.statistics.distribution.NormalDistribution;
import com.opengamma.analytics.math.statistics.distribution.ProbabilityDistribution;
import com.opengamma.financial.convention.calendar.Calendar;
import com.opengamma.util.money.Currency;
import com.opengamma.util.money.MultipleCurrencyAmount;
import com.opengamma.util.test.TestGroup;
import com.opengamma.util.time.DateUtils;
/**
* Tests related to the pricing of physical delivery swaption in Hull-White one factor model.
*/
@Test(groups = TestGroup.UNIT)
public class SwaptionPhysicalFixedIborHullWhiteMethodTest {
private static final MulticurveProviderDiscount MULTICURVES = MulticurveProviderDiscountDataSets.createMulticurveEurUsd();
private static final IborIndex EURIBOR6M = MulticurveProviderDiscountDataSets.getIndexesIborMulticurveEurUsd()[1];
private static final Currency EUR = EURIBOR6M.getCurrency();
private static final Calendar CALENDAR = MulticurveProviderDiscountDataSets.getEURCalendar();
private static final HullWhiteOneFactorPiecewiseConstantParameters HW_PARAMETERS = HullWhiteDataSets.createHullWhiteParameters();
private static final HullWhiteOneFactorProviderDiscount HW_MULTICURVES = new HullWhiteOneFactorProviderDiscount(MULTICURVES, HW_PARAMETERS, EUR);
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 7, 7);
// Swaption 5Yx5Y
private static final int SPOT_LAG = EURIBOR6M.getSpotLag();
private static final int SWAP_TENOR_YEAR = 5;
private static final Period SWAP_TENOR = Period.ofYears(SWAP_TENOR_YEAR);
private static final GeneratorSwapFixedIbor EUR1YEURIBOR6M = GeneratorSwapFixedIborMaster.getInstance().getGenerator("EUR1YEURIBOR6M", CALENDAR);
private static final ZonedDateTime EXPIRY_DATE = DateUtils.getUTCDate(2016, 7, 7);
private static final boolean IS_LONG = true;
private static final ZonedDateTime SETTLEMENT_DATE = ScheduleCalculator.getAdjustedDate(EXPIRY_DATE, SPOT_LAG, CALENDAR);
private static final double NOTIONAL = 100000000; //100m
private static final double RATE = 0.0175;
private static final boolean FIXED_IS_PAYER = true;
private static final SwapFixedIborDefinition SWAP_PAYER_DEFINITION = SwapFixedIborDefinition.from(SETTLEMENT_DATE, SWAP_TENOR, EUR1YEURIBOR6M, NOTIONAL, RATE, FIXED_IS_PAYER);
private static final SwapFixedIborDefinition SWAP_RECEIVER_DEFINITION = SwapFixedIborDefinition.from(SETTLEMENT_DATE, SWAP_TENOR, EUR1YEURIBOR6M, NOTIONAL, RATE, !FIXED_IS_PAYER);
private static final SwaptionPhysicalFixedIborDefinition SWAPTION_LONG_PAYER_DEFINITION = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE, SWAP_PAYER_DEFINITION, true, IS_LONG);
private static final SwaptionPhysicalFixedIborDefinition SWAPTION_LONG_RECEIVER_DEFINITION = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE, SWAP_RECEIVER_DEFINITION, false, IS_LONG);
private static final SwaptionPhysicalFixedIborDefinition SWAPTION_SHORT_PAYER_DEFINITION = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE, SWAP_PAYER_DEFINITION, true, !IS_LONG);
private static final SwaptionPhysicalFixedIborDefinition SWAPTION_SHORT_RECEIVER_DEFINITION = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE, SWAP_RECEIVER_DEFINITION, false, !IS_LONG);
private static final SwapFixedCoupon<Coupon> SWAP_RECEIVER = SWAP_RECEIVER_DEFINITION.toDerivative(REFERENCE_DATE);
private static final SwaptionPhysicalFixedIbor SWAPTION_LONG_PAYER = SWAPTION_LONG_PAYER_DEFINITION.toDerivative(REFERENCE_DATE);
private static final SwaptionPhysicalFixedIbor SWAPTION_LONG_RECEIVER = SWAPTION_LONG_RECEIVER_DEFINITION.toDerivative(REFERENCE_DATE);
private static final SwaptionPhysicalFixedIbor SWAPTION_SHORT_PAYER = SWAPTION_SHORT_PAYER_DEFINITION.toDerivative(REFERENCE_DATE);
private static final SwaptionPhysicalFixedIbor SWAPTION_SHORT_RECEIVER = SWAPTION_SHORT_RECEIVER_DEFINITION.toDerivative(REFERENCE_DATE);
// Calculator
private static final SwaptionPhysicalFixedIborHullWhiteMethod METHOD_HW = SwaptionPhysicalFixedIborHullWhiteMethod.getInstance();
private static final SwapFixedCouponDiscountingMethod METHOD_SWAP = SwapFixedCouponDiscountingMethod.getInstance();
private static final CashFlowEquivalentCalculator CFEC = CashFlowEquivalentCalculator.getInstance();
private static final ParRateDiscountingCalculator PRDC = ParRateDiscountingCalculator.getInstance();
private static final PresentValueDiscountingCalculator PVDC = PresentValueDiscountingCalculator.getInstance();
private static final PresentValueCurveSensitivityDiscountingCalculator PVCSDC = PresentValueCurveSensitivityDiscountingCalculator.getInstance();
private static final PresentValueHullWhiteCalculator PVHWC = PresentValueHullWhiteCalculator.getInstance();
private static final PresentValueCurveSensitivityHullWhiteCalculator PVCSHWC = PresentValueCurveSensitivityHullWhiteCalculator.getInstance();
private static final double SHIFT = 1.0E-6;
private static final ParameterSensitivityParameterCalculator<HullWhiteOneFactorProviderInterface> PS_HW_C = new ParameterSensitivityParameterCalculator<>(PVCSHWC);
private static final ParameterSensitivityHullWhiteDiscountInterpolatedFDCalculator PS_HW_FDC = new ParameterSensitivityHullWhiteDiscountInterpolatedFDCalculator(PVHWC, SHIFT);
private static final SwaptionPhysicalFixedIborHullWhiteNumericalIntegrationMethod METHOD_HW_INTEGRATION = SwaptionPhysicalFixedIborHullWhiteNumericalIntegrationMethod.getInstance();
private static final SwaptionPhysicalFixedIborHullWhiteApproximationMethod METHOD_HW_APPROXIMATION = SwaptionPhysicalFixedIborHullWhiteApproximationMethod.getInstance();
private static final int NB_PATH = 12500;
private static final HullWhiteMonteCarloMethod METHOD_HW_MONTECARLO = new HullWhiteMonteCarloMethod(new NormalRandomNumberGenerator(0.0, 1.0), NB_PATH);
private static final HullWhiteOneFactorPiecewiseConstantInterestRateModel MODEL = new HullWhiteOneFactorPiecewiseConstantInterestRateModel();
private static final ProbabilityDistribution<Double> NORMAL = new NormalDistribution(0, 1);
private static final double TOLERANCE_PV = 1.0E-2;
private static final double TOLERANCE_PV_DELTA = 1.0E+0; //Testing note: Sensitivity is for a movement of 1. 1E+2 = 1 cent for a 1 bp move.
@Test
/**
* Test the present value.
*/
public void presentValueExplicit() {
final MultipleCurrencyAmount pv = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final double timeToExpiry = SWAPTION_LONG_PAYER.getTimeToExpiry();
final AnnuityPaymentFixed cfe = CFEC.visitSwap(SWAPTION_LONG_PAYER.getUnderlyingSwap(), MULTICURVES);
final int numberOfPayments = cfe.getNumberOfPayments();
final double alpha[] = new double[numberOfPayments];
final double disccf[] = new double[numberOfPayments];
for (int loopcf = 0; loopcf < numberOfPayments; loopcf++) {
alpha[loopcf] = MODEL.alpha(HW_PARAMETERS, 0.0, timeToExpiry, timeToExpiry, cfe.getNthPayment(loopcf).getPaymentTime());
disccf[loopcf] = MULTICURVES.getDiscountFactor(EUR, cfe.getNthPayment(loopcf).getPaymentTime()) * cfe.getNthPayment(loopcf).getAmount();
}
final double kappa = MODEL.kappa(disccf, alpha);
double pvExpected = 0.0;
for (int loopcf = 0; loopcf < numberOfPayments; loopcf++) {
pvExpected += disccf[loopcf] * NORMAL.getCDF(-kappa - alpha[loopcf]);
}
assertEquals("Swaption physical - Hull-White - present value", pvExpected, pv.getAmount(EUR), 1E-2);
final MultipleCurrencyAmount pv2 = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, cfe, HW_MULTICURVES);
assertEquals("Swaption physical - Hull-White - present value", pv, pv2);
}
@Test
/**
* Tests long/short parity.
*/
public void longShortParityExplicit() {
final MultipleCurrencyAmount pvLong = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final MultipleCurrencyAmount pvShort = METHOD_HW.presentValue(SWAPTION_SHORT_PAYER, HW_MULTICURVES);
assertEquals("Swaption physical - Hull-White - present value - long/short parity", pvLong.getAmount(EUR), -pvShort.getAmount(EUR), TOLERANCE_PV);
}
@Test
/**
* Tests payer/receiver/swap parity.
*/
public void payerReceiverParityExplicit() {
final MultipleCurrencyAmount pvReceiverLong = METHOD_HW.presentValue(SWAPTION_LONG_RECEIVER, HW_MULTICURVES);
final MultipleCurrencyAmount pvPayerShort = METHOD_HW.presentValue(SWAPTION_SHORT_PAYER, HW_MULTICURVES);
final MultipleCurrencyAmount pvSwap = SWAP_RECEIVER.accept(PVDC, MULTICURVES);
assertEquals("Swaption physical - Hull-White - present value - payer/receiver/swap parity", pvReceiverLong.getAmount(EUR) + pvPayerShort.getAmount(EUR), pvSwap.getAmount(EUR), TOLERANCE_PV);
}
@Test
/**
* Tests the method against the present value calculator.
*/
public void presentValueMethodVsCalculator() {
final MultipleCurrencyAmount pvMethod = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final MultipleCurrencyAmount pvCalculator = SWAPTION_LONG_PAYER.accept(PVHWC, HW_MULTICURVES);
assertEquals("SwaptionPhysicalFixedIborSABRMethod: present value : method and calculator", pvMethod, pvCalculator);
}
@Test
/**
* Compare explicit formula with numerical integration.
*/
public void presentValueNumericalIntegration() {
final MultipleCurrencyAmount pvPayerLongExplicit = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final MultipleCurrencyAmount pvPayerLongIntegration = METHOD_HW_INTEGRATION.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
assertEquals("Swaption physical - Hull-White - present value - explicit/numerical integration", pvPayerLongExplicit.getAmount(EUR), pvPayerLongIntegration.getAmount(EUR), TOLERANCE_PV);
final MultipleCurrencyAmount pvPayerShortExplicit = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final MultipleCurrencyAmount pvPayerShortIntegration = METHOD_HW_INTEGRATION.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
assertEquals("Swaption physical - Hull-White - present value - explicit/numerical integration", pvPayerShortExplicit.getAmount(EUR), pvPayerShortIntegration.getAmount(EUR), TOLERANCE_PV);
final MultipleCurrencyAmount pvReceiverLongExplicit = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final MultipleCurrencyAmount pvReceiverLongIntegration = METHOD_HW_INTEGRATION.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
assertEquals("Swaption physical - Hull-White - present value - explicit/numerical integration", pvReceiverLongExplicit.getAmount(EUR), pvReceiverLongIntegration.getAmount(EUR), TOLERANCE_PV);
final MultipleCurrencyAmount pvReceiverShortExplicit = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final MultipleCurrencyAmount pvReceiverShortIntegration = METHOD_HW_INTEGRATION.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
assertEquals("Swaption physical - Hull-White - present value - explicit/numerical integration", pvReceiverShortExplicit.getAmount(EUR), pvReceiverShortIntegration.getAmount(EUR), TOLERANCE_PV);
}
@Test
/**
* Compare explicit formula with approximated formula.
*/
public void presentValueApproximation() {
final BlackImpliedVolatilityFormula implied = new BlackImpliedVolatilityFormula();
final double forward = SWAPTION_LONG_PAYER.getUnderlyingSwap().accept(ParRateDiscountingCalculator.getInstance(), MULTICURVES);
final double pvbp = METHOD_SWAP.presentValueBasisPoint(SWAPTION_LONG_PAYER.getUnderlyingSwap(), MULTICURVES);
final MultipleCurrencyAmount pvPayerLongExplicit = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final MultipleCurrencyAmount pvPayerLongApproximation = METHOD_HW_APPROXIMATION.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final BlackFunctionData data = new BlackFunctionData(forward, pvbp, 0.20);
final double volExplicit = implied.getImpliedVolatility(data, SWAPTION_LONG_PAYER, pvPayerLongExplicit.getAmount(EUR));
final double volApprox = implied.getImpliedVolatility(data, SWAPTION_LONG_PAYER, pvPayerLongApproximation.getAmount(EUR));
assertEquals("Swaption physical - Hull-White - present value - explicit/approximation", pvPayerLongExplicit.getAmount(EUR), pvPayerLongApproximation.getAmount(EUR), 5.0E+2);
assertEquals("Swaption physical - Hull-White - present value - explicit/approximation", volExplicit, volApprox, 2.5E-4); // 0.025%
final MultipleCurrencyAmount pvReceiverLongExplicit = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final MultipleCurrencyAmount pvReceiverLongApproximation = METHOD_HW_APPROXIMATION.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
assertEquals("Swaption physical - Hull-White - present value - explicit/numerical integration", pvReceiverLongExplicit.getAmount(EUR), pvReceiverLongApproximation.getAmount(EUR), 5.0E+2);
}
@Test
/**
* Approximation analysis.
*/
public void presentValueApproximationAnalysis() {
final NormalImpliedVolatilityFormula implied = new NormalImpliedVolatilityFormula();
final int nbStrike = 20;
final double[] pvExplicit = new double[nbStrike + 1];
final double[] pvApproximation = new double[nbStrike + 1];
final double[] strike = new double[nbStrike + 1];
final double[] volExplicit = new double[nbStrike + 1];
final double[] volApprox = new double[nbStrike + 1];
final double strikeRange = 0.010;
final SwapFixedCoupon<Coupon> swap = SWAP_PAYER_DEFINITION.toDerivative(REFERENCE_DATE);
final double forward = swap.accept(PRDC, MULTICURVES);
final double pvbp = METHOD_SWAP.presentValueBasisPoint(swap, MULTICURVES);
for (int loopstrike = 0; loopstrike <= nbStrike; loopstrike++) {
strike[loopstrike] = forward - strikeRange + 3 * strikeRange * loopstrike / nbStrike; // From forward-strikeRange to forward+2*strikeRange
final SwapFixedIborDefinition swapDefinition = SwapFixedIborDefinition.from(SETTLEMENT_DATE, SWAP_TENOR, EUR1YEURIBOR6M, NOTIONAL, strike[loopstrike], FIXED_IS_PAYER);
final SwaptionPhysicalFixedIborDefinition swaptionDefinition = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE, swapDefinition, FIXED_IS_PAYER, IS_LONG);
final SwaptionPhysicalFixedIbor swaption = swaptionDefinition.toDerivative(REFERENCE_DATE);
pvExplicit[loopstrike] = METHOD_HW.presentValue(swaption, HW_MULTICURVES).getAmount(EUR);
pvApproximation[loopstrike] = METHOD_HW_APPROXIMATION.presentValue(swaption, HW_MULTICURVES).getAmount(EUR);
final NormalFunctionData data = new NormalFunctionData(forward, pvbp, 0.01);
volExplicit[loopstrike] = implied.getImpliedVolatility(data, swaption, pvExplicit[loopstrike]);
volApprox[loopstrike] = implied.getImpliedVolatility(data, swaption, pvApproximation[loopstrike]);
assertEquals("Swaption physical - Hull-White - implied volatility - explicit/approximation", volExplicit[loopstrike], volApprox[loopstrike], 1.0E-3); // 0.10%
}
}
@Test(enabled = true)
/**
* Compare explicit formula with Monte-Carlo and long/short and payer/receiver parities.
*/
public void presentValueMonteCarlo() {
HullWhiteMonteCarloMethod methodMC;
methodMC = new HullWhiteMonteCarloMethod(new NormalRandomNumberGenerator(0.0, 1.0, new MersenneTwister()), NB_PATH);
// Seed fixed to the DEFAULT_SEED for testing purposes.
final MultipleCurrencyAmount pvPayerLongExplicit = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final MultipleCurrencyAmount pvPayerLongMC = methodMC.presentValue(SWAPTION_LONG_PAYER, EUR, HW_MULTICURVES);
assertEquals("Swaption physical - Hull-White - Monte Carlo", pvPayerLongExplicit.getAmount(EUR), pvPayerLongMC.getAmount(EUR), 1.0E+4);
final double pvMCPreviousRun = 4221400.891;
assertEquals("Swaption physical - Hull-White - Monte Carlo", pvMCPreviousRun, pvPayerLongMC.getAmount(EUR), TOLERANCE_PV);
methodMC = new HullWhiteMonteCarloMethod(new NormalRandomNumberGenerator(0.0, 1.0, new MersenneTwister()), NB_PATH);
final MultipleCurrencyAmount pvPayerShortMC = methodMC.presentValue(SWAPTION_SHORT_PAYER, EUR, HW_MULTICURVES);
assertEquals("Swaption physical - Hull-White - Monte Carlo", -pvPayerLongMC.getAmount(EUR), pvPayerShortMC.getAmount(EUR), TOLERANCE_PV);
final MultipleCurrencyAmount pvReceiverLongMC = methodMC.presentValue(SWAPTION_LONG_RECEIVER, EUR, HW_MULTICURVES);
final MultipleCurrencyAmount pvSwap = SWAP_RECEIVER.accept(PVDC, MULTICURVES);
assertEquals("Swaption physical - Hull-White - Monte Carlo - payer/receiver/swap parity", pvReceiverLongMC.getAmount(EUR) + pvPayerShortMC.getAmount(EUR), pvSwap.getAmount(EUR), 1.0E+5);
}
@Test
/**
* Tests the Hull-White parameters sensitivity for the explicit formula.
*/
public void presentValueHullWhiteSensitivityExplicit() {
final double[] hwSensitivity = METHOD_HW.presentValueHullWhiteSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final int nbVolatility = HW_PARAMETERS.getVolatility().length;
final double shiftVol = 1.0E-6;
final double[] volatilityBumped = new double[nbVolatility];
System.arraycopy(HW_PARAMETERS.getVolatility(), 0, volatilityBumped, 0, nbVolatility);
final double[] volatilityTime = new double[nbVolatility - 1];
System.arraycopy(HW_PARAMETERS.getVolatilityTime(), 1, volatilityTime, 0, nbVolatility - 1);
final double[] pvBumpedPlus = new double[nbVolatility];
final double[] pvBumpedMinus = new double[nbVolatility];
final HullWhiteOneFactorPiecewiseConstantParameters parametersBumped = new HullWhiteOneFactorPiecewiseConstantParameters(HW_PARAMETERS.getMeanReversion(), volatilityBumped, volatilityTime);
final HullWhiteOneFactorProviderDiscount bundleBumped = new HullWhiteOneFactorProviderDiscount(MULTICURVES, parametersBumped, EUR);
for (int loopvol = 0; loopvol < nbVolatility; loopvol++) {
volatilityBumped[loopvol] += shiftVol;
parametersBumped.setVolatility(volatilityBumped);
pvBumpedPlus[loopvol] = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, bundleBumped).getAmount(EUR);
volatilityBumped[loopvol] -= 2 * shiftVol;
parametersBumped.setVolatility(volatilityBumped);
pvBumpedMinus[loopvol] = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, bundleBumped).getAmount(EUR);
assertEquals(
"Swaption - Hull-White sensitivity adjoint: derivative " + loopvol + " - difference:" + ((pvBumpedPlus[loopvol] - pvBumpedMinus[loopvol]) / (2 * shiftVol) - hwSensitivity[loopvol]),
(pvBumpedPlus[loopvol] - pvBumpedMinus[loopvol]) / (2 * shiftVol), hwSensitivity[loopvol], TOLERANCE_PV_DELTA);
volatilityBumped[loopvol] = HW_PARAMETERS.getVolatility()[loopvol];
}
}
@Test
/**
* Tests long/short parity.
*/
public void presentValueHullWhiteSensitivitylongShortParityExplicit() {
final double[] pvhwsLong = METHOD_HW.presentValueHullWhiteSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final double[] pvhwsShort = METHOD_HW.presentValueHullWhiteSensitivity(SWAPTION_SHORT_PAYER, HW_MULTICURVES);
for (int loophw = 0; loophw < pvhwsLong.length; loophw++) {
assertEquals("Swaption physical - Hull-White - presentValueHullWhiteSensitivity - long/short parity", pvhwsLong[loophw], -pvhwsShort[loophw], TOLERANCE_PV_DELTA);
}
}
@Test
/**
* Tests payer/receiver/swap parity.
*/
public void presentValueHullWhiteSensitivitypayerReceiverParityExplicit() {
final double[] pvhwsReceiverLong = METHOD_HW.presentValueHullWhiteSensitivity(SWAPTION_LONG_RECEIVER, HW_MULTICURVES);
final double[] pvhwsPayerShort = METHOD_HW.presentValueHullWhiteSensitivity(SWAPTION_SHORT_PAYER, HW_MULTICURVES);
for (int loophw = 0; loophw < pvhwsReceiverLong.length; loophw++) {
assertEquals("Swaption physical - Hull-White - present value - payer/receiver/swap parity", 0, pvhwsReceiverLong[loophw] + pvhwsPayerShort[loophw], TOLERANCE_PV_DELTA);
}
}
@Test
/**
* Tests present value curve sensitivity when the valuation date is on trade date.
*/
public void presentValueCurveSensitivity() {
final MultipleCurrencyParameterSensitivity pvpsExact = PS_HW_C.calculateSensitivity(SWAPTION_SHORT_RECEIVER, HW_MULTICURVES, HW_MULTICURVES.getMulticurveProvider().getAllNames());
final MultipleCurrencyParameterSensitivity pvpsFD = PS_HW_FDC.calculateSensitivity(SWAPTION_SHORT_RECEIVER, HW_MULTICURVES);
AssertSensitivityObjects.assertEquals("SwaptionPhysicalFixedIborSABRMethod: presentValueCurveSensitivity ", pvpsExact, pvpsFD, TOLERANCE_PV_DELTA);
}
@Test(enabled = false)
/**
* Tests present value curve sensitivity when the valuation date is on trade date.
*/
public void presentValueCurveSensitivityStability() {
// 5Yx5Y
final MultipleCurrencyParameterSensitivity pvpsExact = PS_HW_C.calculateSensitivity(SWAPTION_SHORT_RECEIVER, HW_MULTICURVES, HW_MULTICURVES.getMulticurveProvider().getAllNames());
final double derivativeExact = pvpsExact.totalSensitivity(MULTICURVES.getFxRates(), EUR);
final double startingShift = 1.0E-4;
final double ratio = Math.sqrt(2.0);
final int nbShift = 55;
final double[] eps = new double[nbShift + 1];
final double[] derivative_FD = new double[nbShift];
final double[] diff = new double[nbShift];
eps[0] = startingShift;
for (int loopshift = 0; loopshift < nbShift; loopshift++) {
final ParameterSensitivityHullWhiteDiscountInterpolatedFDCalculator fdShift = new ParameterSensitivityHullWhiteDiscountInterpolatedFDCalculator(PVHWC, eps[loopshift]);
final MultipleCurrencyParameterSensitivity pvpsFD = fdShift.calculateSensitivity(SWAPTION_SHORT_RECEIVER, HW_MULTICURVES);
derivative_FD[loopshift] = pvpsFD.totalSensitivity(MULTICURVES.getFxRates(), EUR);
diff[loopshift] = derivative_FD[loopshift] - derivativeExact;
eps[loopshift + 1] = eps[loopshift] / ratio;
}
// 1Mx5Y
final Period expirationPeriod = Period.ofDays(1); // Period.ofDays(1); Period.ofDays(7); Period.ofMonths(1); Period.ofYears(1); Period.ofYears(10);
final ZonedDateTime expiryDateExp = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, expirationPeriod, EURIBOR6M, CALENDAR);
final ZonedDateTime settlementDateExp = ScheduleCalculator.getAdjustedDate(expiryDateExp, SPOT_LAG, CALENDAR);
final double ATM = 0.0151; // 1W: 1.52% - 1M: 1.52% - 1Y: 1.51% - 10Y: 1.51%
final SwapFixedIborDefinition swapExpx5YDefinition = SwapFixedIborDefinition.from(settlementDateExp, SWAP_TENOR, EUR1YEURIBOR6M, NOTIONAL, ATM, !FIXED_IS_PAYER);
final SwaptionPhysicalFixedIborDefinition swaptionExpx5YDefinition = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE, swapExpx5YDefinition, !FIXED_IS_PAYER, !IS_LONG);
final SwaptionPhysicalFixedIbor swaptionExpx5Y = swaptionExpx5YDefinition.toDerivative(REFERENCE_DATE);
// final double forward = swaptionExpx5Y.getUnderlyingSwap().accept(PRDC, MULTICURVES);
final MultipleCurrencyParameterSensitivity pvpsExactExp = PS_HW_C.calculateSensitivity(swaptionExpx5Y, HW_MULTICURVES, HW_MULTICURVES.getMulticurveProvider().getAllNames());
final double derivativeExactExp = pvpsExactExp.totalSensitivity(MULTICURVES.getFxRates(), EUR);
final double[] derivative_FDExp = new double[nbShift];
final double[] diffExp = new double[nbShift];
for (int loopshift = 0; loopshift < nbShift; loopshift++) {
final ParameterSensitivityHullWhiteDiscountInterpolatedFDCalculator fdShift = new ParameterSensitivityHullWhiteDiscountInterpolatedFDCalculator(PVHWC, eps[loopshift]);
final MultipleCurrencyParameterSensitivity pvpsFD = fdShift.calculateSensitivity(swaptionExpx5Y, HW_MULTICURVES);
derivative_FDExp[loopshift] = pvpsFD.totalSensitivity(MULTICURVES.getFxRates(), EUR);
diffExp[loopshift] = derivative_FDExp[loopshift] - derivativeExactExp;
}
// int t = 0;
// t++;
}
@Test
/**
* Tests long/short parity.
*/
public void presentValueCurveSensitivityLongShortParityExplicit() {
final MultipleCurrencyMulticurveSensitivity pvhwsLong = METHOD_HW.presentValueCurveSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES);
final MultipleCurrencyMulticurveSensitivity pvhwsShort = METHOD_HW.presentValueCurveSensitivity(SWAPTION_SHORT_PAYER, HW_MULTICURVES);
AssertSensitivityObjects.assertEquals("Swaption physical - Hull-White - presentValueCurveSensitivity - long/short parity", pvhwsLong, pvhwsShort.multipliedBy(-1.0), TOLERANCE_PV_DELTA);
}
@Test
/**
* Tests payer/receiver/swap parity.
*/
public void presentValueCurveSensitivityPayerReceiverParityExplicit() {
final MultipleCurrencyMulticurveSensitivity pvhwsReceiverLong = METHOD_HW.presentValueCurveSensitivity(SWAPTION_LONG_RECEIVER, HW_MULTICURVES);
final MultipleCurrencyMulticurveSensitivity pvhwsPayerShort = METHOD_HW.presentValueCurveSensitivity(SWAPTION_SHORT_PAYER, HW_MULTICURVES);
final MultipleCurrencyMulticurveSensitivity pvSwap = SWAP_RECEIVER.accept(PVCSDC, MULTICURVES);
AssertSensitivityObjects.assertEquals("Swaption physical - Hull-White - presentValueCurveSensitivity - payer/receiver/swap parity", pvSwap.cleaned(TOLERANCE_PV_DELTA),
pvhwsReceiverLong.plus(pvhwsPayerShort).cleaned(TOLERANCE_PV_DELTA), TOLERANCE_PV_DELTA);
}
@Test
/**
* Tests the curve sensitivity in Monte Carlo approach.
*/
public void presentValueCurveSensitivityMonteCarlo() {
final double toleranceDelta = 1.0E+6; // 100 USD by bp
final MultipleCurrencyMulticurveSensitivity pvcsExplicit = METHOD_HW.presentValueCurveSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES).cleaned(TOLERANCE_PV_DELTA);
final HullWhiteMonteCarloMethod methodMC = new HullWhiteMonteCarloMethod(new NormalRandomNumberGenerator(0.0, 1.0, new MersenneTwister()), NB_PATH);
final MultipleCurrencyMulticurveSensitivity pvcsMC = methodMC.presentValueCurveSensitivity(SWAPTION_LONG_PAYER, EUR, HW_MULTICURVES).cleaned(TOLERANCE_PV_DELTA);
AssertSensitivityObjects.assertEquals("Swaption physical - Hull-White - presentValueCurveSensitivity - payer/receiver/swap parity", pvcsExplicit, pvcsMC, toleranceDelta);
}
@Test(enabled = false)
/**
* Tests of performance. "enabled = false" for the standard testing.
*/
public void performance() {
long startTime, endTime;
final int nbTest = 1000;
MultipleCurrencyAmount pvPayerLongExplicit = MultipleCurrencyAmount.of(EUR, 0.0);
MultipleCurrencyAmount pvPayerLongIntegration = MultipleCurrencyAmount.of(EUR, 0.0);
MultipleCurrencyAmount pvPayerLongApproximation = MultipleCurrencyAmount.of(EUR, 0.0);
@SuppressWarnings("unused")
MultipleCurrencyAmount pvPayerLongMC = MultipleCurrencyAmount.of(EUR, 0.0);
double[] pvhws = METHOD_HW.presentValueHullWhiteSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES);
MultipleCurrencyMulticurveSensitivity pvcs = METHOD_HW.presentValueCurveSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES);
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvPayerLongExplicit = METHOD_HW.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
}
endTime = System.currentTimeMillis();
System.out.println(nbTest + " pv swaption Hull-White explicit method: " + (endTime - startTime) + " ms");
// Performance note: HW price: 19-Nov-2012: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 380 ms for 10000 swaptions.
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvhws = METHOD_HW.presentValueHullWhiteSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES);
}
endTime = System.currentTimeMillis();
System.out.println(nbTest + " HW sensitivity swaption Hull-White explicit method: " + (endTime - startTime) + " ms");
// Performance note: HW sensitivity (3): 19-Nov-2012: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 430 ms for 10000 swaptions.
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvcs = METHOD_HW.presentValueCurveSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES);
}
endTime = System.currentTimeMillis();
System.out.println(nbTest + " curve sensitivity swaption Hull-White explicit method: " + (endTime - startTime) + " ms");
// Performance note: curve sensitivity (40): 19-Nov-2012: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 855 ms for 10000 swaptions.
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvhws = METHOD_HW.presentValueHullWhiteSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES);
pvcs = METHOD_HW.presentValueCurveSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES);
pvhws = METHOD_HW.presentValueHullWhiteSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES);
}
endTime = System.currentTimeMillis();
System.out.println(nbTest + " price/delta/vega swaption Hull-White explicit method: " + (endTime - startTime) + " ms");
// Performance note: present value/delta/vega: 19-Nov-2012: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 1730 ms for 10000 swaptions.
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvPayerLongIntegration = METHOD_HW_INTEGRATION.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
}
endTime = System.currentTimeMillis();
System.out.println(nbTest + " swaption Hull-White numerical integration method: " + (endTime - startTime) + " ms");
// Performance note: HW numerical integration: 19-Nov-2012: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 1700 ms for 10000 swaptions.
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvPayerLongApproximation = METHOD_HW_APPROXIMATION.presentValue(SWAPTION_LONG_PAYER, HW_MULTICURVES);
}
endTime = System.currentTimeMillis();
System.out.println(nbTest + " swaption Hull-White approximation method: " + (endTime - startTime) + " ms");
// Performance note: HW approximation: 19-Nov-2012: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 250 ms for 10000 swaptions.
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvPayerLongMC = METHOD_HW_MONTECARLO.presentValue(SWAPTION_LONG_PAYER, EUR, HW_MULTICURVES);
}
endTime = System.currentTimeMillis();
System.out.println(nbTest + " swaption Hull-White Monte Carlo method (" + NB_PATH + " paths): " + (endTime - startTime) + " ms");
// Performance note: HW approximation: 18-Aug-11: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 9200 ms for 1000 swaptions (12500 paths).
final double difference = pvPayerLongExplicit.getAmount(EUR) - pvPayerLongIntegration.getAmount(EUR);
final double difference2 = pvPayerLongExplicit.getAmount(EUR) - pvPayerLongApproximation.getAmount(EUR);
// double difference3 = pvPayerLongExplicit.getAmount(CUR) - pvPayerLongMC.getAmount(CUR);
System.out.println("Difference explicit-integration: " + difference);
System.out.println("Difference explicit-approximation: " + difference2);
// System.out.println("Difference explicit-Monte Carlo: " + difference3);
System.out.println("Curve sensitivity: " + pvcs.toString());
System.out.println("HW sensitivity: " + Arrays.toString(pvhws));
}
@Test(enabled = false)
/**
* Tests of performance. "enabled = false" for the standard testing.
*/
public void performanceCurveSensitivity() {
long startTime, endTime;
final int nbTest = 25;
MultipleCurrencyAmount pvMC = MultipleCurrencyAmount.of(EUR, 0.0);
final MultipleCurrencyMulticurveSensitivity pvcsExplicit = METHOD_HW.presentValueCurveSensitivity(SWAPTION_LONG_PAYER, HW_MULTICURVES);
MultipleCurrencyMulticurveSensitivity pvcsMC = pvcsExplicit;
final HullWhiteMonteCarloMethod methodMC = new HullWhiteMonteCarloMethod(new NormalRandomNumberGenerator(0.0, 1.0, new MersenneTwister()), NB_PATH);
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvMC = METHOD_HW_MONTECARLO.presentValue(SWAPTION_LONG_PAYER, EUR, HW_MULTICURVES);
}
endTime = System.currentTimeMillis();
System.out.println(nbTest + " swaption Hull-White Monte Carlo method (" + NB_PATH + " paths): " + (endTime - startTime) + " ms / price:" + pvMC.toString());
// Performance note: HW approximation: 03-Dec-2012: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 250 ms for 25 swaptions (12500 paths).
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pvcsMC = methodMC.presentValueCurveSensitivity(SWAPTION_LONG_PAYER, EUR, HW_MULTICURVES);
}
endTime = System.currentTimeMillis();
System.out.println(nbTest + " curve sensitivity swaption Hull-White MC method: (" + NB_PATH + " paths) " + (endTime - startTime) + " ms / risk:" + pvcsMC.toString());
// Performance note: curve sensitivity (40): 03-Dec-2012: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 600 ms for 25 swaptions (12500 paths).
}
}