/**
* Copyright (C) 2013 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.financial.analytics.model.equity.option;
import java.util.Collections;
import java.util.Set;
import org.slf4j.Logger;
import org.slf4j.LoggerFactory;
import com.opengamma.OpenGammaRuntimeException;
import com.opengamma.analytics.financial.equity.EqyOptBjerksundStenslandPresentValueCalculator;
import com.opengamma.analytics.financial.equity.StaticReplicationDataBundle;
import com.opengamma.analytics.financial.equity.option.EquityIndexFutureOption;
import com.opengamma.analytics.financial.equity.option.EquityIndexOption;
import com.opengamma.analytics.financial.equity.option.EquityOption;
import com.opengamma.analytics.financial.equity.variance.pricing.AffineDividends;
import com.opengamma.analytics.financial.interestrate.InstrumentDerivative;
import com.opengamma.analytics.financial.model.interestrate.curve.ForwardCurve;
import com.opengamma.analytics.financial.model.interestrate.curve.ForwardCurveAffineDividends;
import com.opengamma.analytics.financial.model.option.pricing.analytic.BjerksundStenslandModel;
import com.opengamma.analytics.financial.model.volatility.BlackFormulaRepository;
import com.opengamma.core.value.MarketDataRequirementNames;
import com.opengamma.engine.ComputationTarget;
import com.opengamma.engine.ComputationTargetSpecification;
import com.opengamma.engine.function.FunctionCompilationContext;
import com.opengamma.engine.function.FunctionInputs;
import com.opengamma.engine.target.ComputationTargetReference;
import com.opengamma.engine.target.ComputationTargetType;
import com.opengamma.engine.value.ComputedValue;
import com.opengamma.engine.value.ValueProperties;
import com.opengamma.engine.value.ValueRequirement;
import com.opengamma.engine.value.ValueRequirementNames;
import com.opengamma.engine.value.ValueSpecification;
import com.opengamma.financial.security.FinancialSecurity;
/**
* Calculates the implied volatility of an equity index or equity option using the {@link BjerksundStenslandModel}.<p>
* See {@link ListedEquityOptionBjerksundStenslandFunction}
*/
public class ListedEquityOptionBjerksundStenslandImpliedVolFunction extends ListedEquityOptionBjerksundStenslandFunction {
/** The BjerksundStensland present value calculator */
private static final EqyOptBjerksundStenslandPresentValueCalculator s_pvCalculator = EqyOptBjerksundStenslandPresentValueCalculator.getInstance();
/** Default constructor */
public ListedEquityOptionBjerksundStenslandImpliedVolFunction() {
super(ValueRequirementNames.IMPLIED_VOLATILITY);
}
@Override
protected Set<ComputedValue> computeValues(final InstrumentDerivative derivative, final StaticReplicationDataBundle market, final FunctionInputs inputs, final Set<ValueRequirement> desiredValues,
final ComputationTargetSpecification targetSpec, final ValueProperties resultProperties) {
// Get market price
Double marketPrice = null;
final ComputedValue mktPriceObj = inputs.getComputedValue(MarketDataRequirementNames.MARKET_VALUE);
if (mktPriceObj == null) {
s_logger.info(MarketDataRequirementNames.MARKET_VALUE + " not available," + targetSpec);
} else {
marketPrice = (Double) mktPriceObj.getValue();
}
// Get details of option for impliedVol Call
// If market price is not available. compute from model instead
final double optionPrice;
final double strike;
final double timeToExpiry;
final boolean isCall;
if (derivative instanceof EquityOption) {
final EquityOption option = (EquityOption) derivative;
strike = option.getStrike();
timeToExpiry = option.getTimeToExpiry();
isCall = option.isCall();
if (marketPrice == null) {
optionPrice = derivative.accept(s_pvCalculator, market) / option.getUnitAmount();
} else {
optionPrice = marketPrice;
}
} else if (derivative instanceof EquityIndexOption) {
final EquityIndexOption option = (EquityIndexOption) derivative;
strike = option.getStrike();
timeToExpiry = option.getTimeToExpiry();
isCall = option.isCall();
if (marketPrice == null) {
optionPrice = derivative.accept(s_pvCalculator, market) / option.getUnitAmount();
} else {
optionPrice = marketPrice;
}
} else if (derivative instanceof EquityIndexFutureOption) {
final EquityIndexFutureOption option = (EquityIndexFutureOption) derivative;
strike = option.getStrike();
timeToExpiry = option.getExpiry();
isCall = option.isCall();
if (marketPrice == null) {
optionPrice = derivative.accept(s_pvCalculator, market) / option.getPointValue();
} else {
optionPrice = marketPrice;
}
} else {
throw new OpenGammaRuntimeException("Unexpected InstrumentDerivative type");
}
final double volatility = market.getVolatilitySurface().getVolatility(timeToExpiry, strike);
Double impliedVol = null;
if (derivative instanceof EquityOption) {
final double spot = market.getForwardCurve().getSpot();
final double discountRate = market.getDiscountCurve().getInterestRate(timeToExpiry);
final BjerksundStenslandModel model = new BjerksundStenslandModel();
double costOfCarry = discountRate;
double modSpot = spot;
final ForwardCurve fCurve = market.getForwardCurve();
if (fCurve instanceof ForwardCurveAffineDividends) {
final AffineDividends div = ((ForwardCurveAffineDividends) fCurve).getDividends();
final int number = div.getNumberOfDividends();
int i = 0;
while (i < number && div.getTau(i) < timeToExpiry) {
modSpot = modSpot * (1. - div.getBeta(i)) - div.getAlpha(i) * market.getDiscountCurve().getDiscountFactor(div.getTau(i));
++i;
}
} else {
costOfCarry = Math.log(fCurve.getForward(timeToExpiry) / spot) / timeToExpiry;
}
try {
if (timeToExpiry < 7. / 365.) {
impliedVol = BlackFormulaRepository.impliedVolatility(optionPrice / market.getDiscountCurve().getDiscountFactor(timeToExpiry), fCurve.getForward(timeToExpiry), strike, timeToExpiry, isCall);
} else {
impliedVol = model.impliedVolatility(optionPrice, modSpot, strike, discountRate, costOfCarry, timeToExpiry, isCall, Math.min(volatility * 1.5, 0.2));
}
} catch (final IllegalArgumentException e) {
if (inputs.getComputedValue(MarketDataRequirementNames.MARKET_VALUE) == null) {
impliedVol = null;
} else {
s_logger.warn(MarketDataRequirementNames.IMPLIED_VOLATILITY + " undefined" + targetSpec);
impliedVol = 0.;
}
}
} else {
impliedVol = volatility;
}
final ValueSpecification resultSpec = new ValueSpecification(getValueRequirementNames()[0], targetSpec, resultProperties);
return Collections.singleton(new ComputedValue(resultSpec, impliedVol));
}
@Override
public Set<ValueRequirement> getRequirements(final FunctionCompilationContext context, final ComputationTarget target, final ValueRequirement desiredValue) {
final Set<ValueRequirement> requirements = super.getRequirements(context, target, desiredValue);
if (requirements == null) {
return null;
}
// Add live market_value of the option
final FinancialSecurity security = (FinancialSecurity) target.getSecurity();
final ComputationTargetReference securityTarget = new ComputationTargetSpecification(ComputationTargetType.SECURITY, security.getUniqueId());
final ValueRequirement securityValueReq = new ValueRequirement(MarketDataRequirementNames.MARKET_VALUE, securityTarget);
requirements.add(securityValueReq);
return requirements;
}
/** The logger */
private static final Logger s_logger = LoggerFactory.getLogger(ListedEquityOptionBjerksundStenslandImpliedVolFunction.class);
}