com.opengamma.analytics.financial.model.interestrate.VasicekInterestRateModel.java Source code

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

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/**
 * Copyright (C) 2009 - present by OpenGamma Inc. and the OpenGamma group of companies
 *
 * Please see distribution for license.
 */
package com.opengamma.analytics.financial.model.interestrate;

import org.apache.commons.lang.Validate;
import org.threeten.bp.ZonedDateTime;

import com.opengamma.analytics.financial.model.interestrate.definition.VasicekDataBundle;
import com.opengamma.analytics.math.function.Function1D;
import com.opengamma.util.time.DateUtils;

/**
 * 
 */
public class VasicekInterestRateModel implements DiscountBondModel<VasicekDataBundle> {

    @Override
    public Function1D<VasicekDataBundle, Double> getDiscountBondFunction(final ZonedDateTime time,
            final ZonedDateTime maturity) {
        Validate.notNull(time);
        Validate.notNull(maturity);
        return new Function1D<VasicekDataBundle, Double>() {

            @Override
            public Double evaluate(final VasicekDataBundle data) {
                Validate.notNull(data);
                final double lt = data.getLongTermInterestRate();
                final double speed = data.getReversionSpeed();
                final double dt = DateUtils.getDifferenceInYears(time, maturity);
                final double t = DateUtils.getDifferenceInYears(data.getDate(), time);
                final double sigma = data.getShortRateVolatility(t);
                final double r = data.getShortRate(t);
                final double sigmaSq = sigma * sigma;
                final double speedSq = speed * speed;
                final double rInfinity = lt - 0.5 * sigmaSq / speedSq;
                final double factor = 1 - Math.exp(-speed * dt);
                final double a = rInfinity * (factor / speed - dt)
                        - sigmaSq * factor * factor / (4 * speedSq * speed);
                final double b = factor / speed;
                return Math.exp(a - r * b);
            }

        };
    }
}