Java tutorial
/** * Copyright (C) 2012 - present by OpenGamma Inc. and the OpenGamma group of companies * * Please see distribution for license. */ package com.opengamma.analytics.financial.interestrate.payments.method; import org.apache.commons.lang.Validate; import com.opengamma.analytics.financial.interestrate.CashFlowEquivalentCalculator; import com.opengamma.analytics.financial.interestrate.InstrumentDerivative; import com.opengamma.analytics.financial.interestrate.YieldCurveBundle; import com.opengamma.analytics.financial.interestrate.annuity.derivative.AnnuityPaymentFixed; import com.opengamma.analytics.financial.interestrate.method.PricingMethod; import com.opengamma.analytics.financial.interestrate.payments.derivative.CapFloorCMS; import com.opengamma.analytics.financial.interestrate.payments.derivative.Payment; import com.opengamma.analytics.financial.interestrate.swap.derivative.SwapFixedCoupon; import com.opengamma.analytics.financial.model.interestrate.HullWhiteOneFactorPiecewiseConstantInterestRateModel; import com.opengamma.analytics.financial.model.interestrate.definition.HullWhiteOneFactorPiecewiseConstantDataBundle; import com.opengamma.analytics.math.statistics.distribution.NormalDistribution; import com.opengamma.analytics.math.statistics.distribution.ProbabilityDistribution; import com.opengamma.util.money.CurrencyAmount; /** * Pricing method of a CMS coupon in the Hull-White (extended Vasicek) model by approximation. * <P> Reference: M. Henrard. CMS Swaps and Caps in One-Factor Gaussian Models, SSRN working paper 985551, February 2008. * Available at http://ssrn.com/abstract=985551 * @deprecated {@link com.opengamma.analytics.financial.interestrate.payments.provider.CapFloorCMSHullWhiteApproximationMethod} */ @Deprecated public final class CapFloorCMSHullWhiteApproximationMethod implements PricingMethod { /** * The method unique instance. */ private static final CapFloorCMSHullWhiteApproximationMethod INSTANCE = new CapFloorCMSHullWhiteApproximationMethod(); /** * Return the unique instance of the class. * @return The instance. */ public static CapFloorCMSHullWhiteApproximationMethod getInstance() { return INSTANCE; } /** * Private constructor. */ private CapFloorCMSHullWhiteApproximationMethod() { } /** * The model used in computations. */ private static final HullWhiteOneFactorPiecewiseConstantInterestRateModel MODEL = new HullWhiteOneFactorPiecewiseConstantInterestRateModel(); /** * The cash flow equivalent calculator used in computations. */ private static final CashFlowEquivalentCalculator CFEC = CashFlowEquivalentCalculator.getInstance(); /** * The normal distribution implementation. */ private static final ProbabilityDistribution<Double> NORMAL = new NormalDistribution(0, 1); public CurrencyAmount presentValue(final CapFloorCMS cms, final HullWhiteOneFactorPiecewiseConstantDataBundle hwData) { Validate.notNull(cms); Validate.notNull(hwData); final double expiryTime = cms.getFixingTime(); final SwapFixedCoupon<? extends Payment> swap = cms.getUnderlyingSwap(); final double dfPayment = hwData.getCurve(swap.getFirstLeg().getDiscountCurve()) .getDiscountFactor(cms.getPaymentTime()); final int nbFixed = cms.getUnderlyingSwap().getFixedLeg().getNumberOfPayments(); final double[] alphaFixed = new double[nbFixed]; final double[] dfFixed = new double[nbFixed]; final double[] discountedCashFlowFixed = new double[nbFixed]; for (int loopcf = 0; loopcf < nbFixed; loopcf++) { alphaFixed[loopcf] = MODEL.alpha(hwData.getHullWhiteParameter(), 0.0, expiryTime, expiryTime, swap.getFixedLeg().getNthPayment(loopcf).getPaymentTime()); dfFixed[loopcf] = hwData.getCurve(swap.getFixedLeg().getNthPayment(loopcf).getFundingCurveName()) .getDiscountFactor(swap.getFixedLeg().getNthPayment(loopcf).getPaymentTime()); discountedCashFlowFixed[loopcf] = dfFixed[loopcf] * swap.getFixedLeg().getNthPayment(loopcf).getPaymentYearFraction() * swap.getFixedLeg().getNthPayment(loopcf).getNotional(); } final AnnuityPaymentFixed cfeIbor = swap.getSecondLeg().accept(CFEC, hwData); final double[] alphaIbor = new double[cfeIbor.getNumberOfPayments()]; final double[] dfIbor = new double[cfeIbor.getNumberOfPayments()]; final double[] discountedCashFlowIbor = new double[cfeIbor.getNumberOfPayments()]; for (int loopcf = 0; loopcf < cfeIbor.getNumberOfPayments(); loopcf++) { alphaIbor[loopcf] = MODEL.alpha(hwData.getHullWhiteParameter(), 0.0, expiryTime, expiryTime, cfeIbor.getNthPayment(loopcf).getPaymentTime()); dfIbor[loopcf] = hwData.getCurve(cfeIbor.getDiscountCurve()) .getDiscountFactor(cfeIbor.getNthPayment(loopcf).getPaymentTime()); discountedCashFlowIbor[loopcf] = dfIbor[loopcf] * cfeIbor.getNthPayment(loopcf).getAmount(); } final double alphaPayment = MODEL.alpha(hwData.getHullWhiteParameter(), 0.0, expiryTime, expiryTime, cms.getPaymentTime()); final double x0 = -alphaPayment; final double a0 = MODEL.swapRate(x0, discountedCashFlowFixed, alphaFixed, discountedCashFlowIbor, alphaIbor) - cms.getStrike(); final double a1 = MODEL.swapRateDx1(x0, discountedCashFlowFixed, alphaFixed, discountedCashFlowIbor, alphaIbor); final double a2 = MODEL.swapRateDx2(x0, discountedCashFlowFixed, alphaFixed, discountedCashFlowIbor, alphaIbor); // AnnuityPaymentFixed cfe = CFEC.visit(swap.withCoupon(cms.getStrike()), hwData); // double[] alpha = new double[cfe.getNumberOfPayments()]; // double[] df = new double[cfe.getNumberOfPayments()]; // double[] discountedCashFlow = new double[cfe.getNumberOfPayments()]; // for (int loopcf = 0; loopcf < cfe.getNumberOfPayments(); loopcf++) { // alpha[loopcf] = MODEL.alpha(hwData.getHullWhiteParameter(), 0.0, expiryTime, expiryTime, cfe.getNthPayment(loopcf).getPaymentTime()); // df[loopcf] = hwData.getCurve(cfe.getDiscountCurve()).getDiscountFactor(cfe.getNthPayment(loopcf).getPaymentTime()); // discountedCashFlow[loopcf] = df[loopcf] * cfe.getNthPayment(loopcf).getAmount(); // } // double kappaTest = MODEL.kappa(discountedCashFlow, alpha); final double kappa = -a0 / a1 - alphaPayment; // approximation final double kappatilde = kappa + alphaPayment; final double omega = (cms.isCap() ? 1.0 : -1.0); final double s2pi = 1.0 / Math.sqrt(2.0 * Math.PI); double pv = omega * (a0 + a2 / 2) * NORMAL.getCDF(-omega * kappatilde) + s2pi * Math.exp(-kappatilde * kappatilde / 2) * (a1 + a2 * kappatilde); pv *= dfPayment * cms.getNotional() * cms.getPaymentYearFraction(); return CurrencyAmount.of(cms.getCurrency(), pv); } @Override public CurrencyAmount presentValue(final InstrumentDerivative instrument, final YieldCurveBundle curves) { Validate.isTrue(instrument instanceof CapFloorCMS, "Coupon CMS"); Validate.isTrue(curves instanceof HullWhiteOneFactorPiecewiseConstantDataBundle, "Curves with HW data"); return presentValue((CapFloorCMS) instrument, (HullWhiteOneFactorPiecewiseConstantDataBundle) curves); } }