com.opengamma.analytics.financial.interestrate.SABRTermStructureParameters.java Source code

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Here is the source code for com.opengamma.analytics.financial.interestrate.SABRTermStructureParameters.java

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/**
 * Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies
 * 
 * Please see distribution for license.
 */
package com.opengamma.analytics.financial.interestrate;

import java.util.LinkedHashMap;

import org.apache.commons.lang.Validate;

import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.EuropeanVanillaOption;
import com.opengamma.analytics.financial.model.volatility.VolatilityModel1D;
import com.opengamma.analytics.financial.model.volatility.smile.function.SABRFormulaData;
import com.opengamma.analytics.financial.model.volatility.smile.function.SABRHaganVolatilityFunction;
import com.opengamma.analytics.financial.model.volatility.smile.function.VolatilityFunctionProvider;
import com.opengamma.analytics.math.curve.Curve;
import com.opengamma.analytics.math.function.Function1D;

/**
 * 
 */
public class SABRTermStructureParameters implements VolatilityModel1D {

    private static final String ALPHA = "alpha";
    private static final String BETA = "beta";
    private static final String NU = "nu";
    private static final String RHO = "rho";
    private static final VolatilityFunctionProvider<SABRFormulaData> DEFUALT_SABR = new SABRHaganVolatilityFunction();

    private final Curve<Double, Double> _alpha;
    private final Curve<Double, Double> _beta;
    private final Curve<Double, Double> _nu;
    private final Curve<Double, Double> _rho;

    private final VolatilityFunctionProvider<SABRFormulaData> _sabrFunction;

    public SABRTermStructureParameters(final LinkedHashMap<String, Curve<Double, Double>> curveBundle) {
        Validate.notNull(curveBundle, "null curve bundle");
        Curve<Double, Double> alpha = curveBundle.get(ALPHA);
        Curve<Double, Double> beta = curveBundle.get(BETA);
        Curve<Double, Double> nu = curveBundle.get(NU);
        Curve<Double, Double> rho = curveBundle.get(RHO);
        validate(alpha, beta, rho, nu);
        _alpha = alpha;
        _beta = beta;
        _nu = nu;
        _rho = rho;
        _sabrFunction = DEFUALT_SABR;
    }

    public SABRTermStructureParameters(final Curve<Double, Double> alpha, final Curve<Double, Double> beta,
            final Curve<Double, Double> rho, final Curve<Double, Double> nu) {
        this(alpha, beta, rho, nu, DEFUALT_SABR);
    }

    public SABRTermStructureParameters(final Curve<Double, Double> alpha, final Curve<Double, Double> beta,
            final Curve<Double, Double> rho, final Curve<Double, Double> nu,
            VolatilityFunctionProvider<SABRFormulaData> sabrFunction) {
        validate(alpha, beta, rho, nu);
        Validate.notNull(sabrFunction, "null sabrFunction");
        _alpha = alpha;
        _beta = beta;
        _nu = nu;
        _rho = rho;
        _sabrFunction = sabrFunction;
    }

    private static void validate(final Curve<Double, Double> alpha, final Curve<Double, Double> beta,
            final Curve<Double, Double> rho, final Curve<Double, Double> nu) {
        Validate.notNull(alpha, "null aplha");
        Validate.notNull(beta, "null beta");
        Validate.notNull(nu, "null nu");
        Validate.notNull(rho, "null rho");
    }

    public double getAlpha(final double timeToExpiry) {
        return _alpha.getYValue(timeToExpiry);
    }

    public double getBeta(final double timeToExpiry) {
        return _beta.getYValue(timeToExpiry);
    }

    public double getRho(final double timeToExpiry) {
        return _rho.getYValue(timeToExpiry);
    }

    public double getNu(final double timeToExpiry) {
        return _nu.getYValue(timeToExpiry);
    }

    /**
     * get the Black volatility for a given forward/strike/time-to-expiry
     * @param fwdKT Array of values of forward, strike and time-to-expiry <b>in that order</b>
     * @return The (Black) volatility
     */
    @Override
    public Double getVolatility(double[] fwdKT) {
        Validate.notNull(fwdKT, "null fwdKT");
        Validate.isTrue(fwdKT.length == 3, "length must be 3");
        return getVolatility(fwdKT[0], fwdKT[1], fwdKT[2]);
    }

    /**
     * get the Black volatility for a given forward/strike/time-to-expiry
     * @param fwd The Forward
     * @param strike The Strike
     * @param timeToExpiry The time-to-expiry
     * @return The (Black) volatility
     */
    @Override
    public double getVolatility(final double fwd, final double strike, final double timeToExpiry) {
        final SABRFormulaData data = new SABRFormulaData(getAlpha(timeToExpiry), getBeta(timeToExpiry),
                getRho(timeToExpiry), getNu(timeToExpiry));
        final EuropeanVanillaOption option = new EuropeanVanillaOption(strike, timeToExpiry, true);
        final Function1D<SABRFormulaData, Double> func = _sabrFunction.getVolatilityFunction(option, fwd);
        double vol = func.evaluate(data);
        //The SABR Hagan formula can produce negative vols
        return Math.max(0, vol);
    }

}