public void Initialisation()
{
_discountFactor = 0.94617d;
_forwardRate = 0.0743100d;
_notional = 1.0E+08d;
_optionExpiry = 0.50959d;
_optionType = BlackCapletFlooret.OptionType.Caplet;
_sigma = 9.43000d / 100d;
_strike = 0.075d;
_tau = 0.25205d;
_validateArguments = true;
_capletFlooretObj = new BlackCapletFlooret
(_notional,
_optionExpiry,
_optionType,
_strike,
_tau,
_validateArguments);
}
public void TestBlackCapletFlooretDataValidation()
{
#region Test that an Incorrect Notional is Detected
try
{
_notional = 0d;
_capletFlooretObj =
new BlackCapletFlooret
(_notional,
_optionExpiry,
_optionType,
_strike,
_tau,
_validateArguments);
}
catch (ArgumentException e)
{
const string ErrorMessage =
"Notional for a Caplet/Flooret must be positive";
Assert.AreEqual(ErrorMessage, e.Message);
}
#endregion
#region Test that Zero Time to Expiry is Acceptable
Initialisation();
_optionExpiry = 0d;
_capletFlooretObj =
new BlackCapletFlooret
(_notional,
_optionExpiry,
_optionType,
_strike,
_tau,
_validateArguments);
Assert.IsNotNull(_capletFlooretObj);
#endregion
#region Test that an Incorrect Expiry is Detected
try
{
Initialisation();
_optionExpiry = -0.5d;
_capletFlooretObj =
new BlackCapletFlooret
(_notional,
_optionExpiry,
_optionType,
_strike,
_tau,
_validateArguments);
}
catch (ArgumentException e)
{
const string ErrorMessage =
"Expiry for a Caplet/Flooret cannot be negative";
Assert.AreEqual(ErrorMessage, e.Message);
}
#endregion
#region Test that an Incorrect Strike is Detected
try
{
Initialisation();
_strike = 0d;
_capletFlooretObj =
new BlackCapletFlooret
(_notional,
_optionExpiry,
_optionType,
_strike,
_tau,
_validateArguments);
}
catch (ArgumentException e)
{
const string ErrorMessage =
"Strike for a Caplet/Flooret must be positive";
Assert.AreEqual(ErrorMessage, e.Message);
}
#endregion
#region Test that an Incorrect Year Fraction is Detected
try
{
Initialisation();
_tau = 0d;
_capletFlooretObj =
new BlackCapletFlooret
(_notional,
_optionExpiry,
_optionType,
_strike,
_tau,
_validateArguments);
}
catch (ArgumentException e)
{
const string ErrorMessage =
"Year fraction for a Caplet/Flooret must be positive";
Assert.AreEqual(ErrorMessage, e.Message);
}
#endregion
}
public void TestComputePrice()
{
#region Test #1: Computation of Price Near Expiry
// Instantiate a Caplet that has an expiry less than one day.
_optionType = BlackCapletFlooret.OptionType.Caplet;
_notional = 1.0E+08d;
_optionExpiry = 1.36986E-03d;
_strike = 7.50d / 100d;
_tau = 0.25205d;
_capletFlooretObj = new BlackCapletFlooret
(_notional,
_optionExpiry,
_optionType,
_strike,
_tau,
_validateArguments);
Assert.IsNotNull(_capletFlooretObj);
// Price the Caplet.
_discountFactor = 0.99617d;
_forwardRate = 8.53100d / 100d;
_sigma = 9.43000d / 100d;
_actual = _capletFlooretObj.ComputePrice
(_discountFactor,
_forwardRate,
_sigma,
_validateArguments);
_expected = 258868.27d;
Assert.AreEqual(_expected,
_actual,
_tolerance);
#endregion
#region Test #2: Computation of a Caplet Price
_optionType = BlackCapletFlooret.OptionType.Caplet;
_notional = 1.0E+08d;
_optionExpiry = 0.50959d;
_strike = 7.50d / 100d;
_tau = 0.25205d;
_capletFlooretObj = new BlackCapletFlooret
(_notional,
_optionExpiry,
_optionType,
_strike,
_tau,
_validateArguments);
Assert.IsNotNull(_capletFlooretObj);
// Price the Caplet.
_discountFactor = 0.94617d;
_forwardRate = 7.43100d / 100d;
_sigma = 9.43000d / 100d;
_actual = _capletFlooretObj.ComputePrice
(_discountFactor,
_forwardRate,
_sigma,
_validateArguments);
_expected = 40027.17d;
_tolerance = 2.0d;
Assert.AreEqual(_expected,
_actual,
_tolerance);
#endregion
#region Test #3: Computation of a Flooret Price
_optionType = BlackCapletFlooret.OptionType.Flooret;
_notional = 1.0E+08d;
_optionExpiry = 0.50959d;
_strike = 7.50d / 100d;
_tau = 0.25205d;
_capletFlooretObj = new BlackCapletFlooret
(_notional,
_optionExpiry,
_optionType,
_strike,
_tau,
_validateArguments);
Assert.IsNotNull(_capletFlooretObj);
// Price the Flooret.
_discountFactor = 0.94617d;
_forwardRate = 7.43100d / 100d;
_sigma = 9.43000d / 100d;
_actual = _capletFlooretObj.ComputePrice
(_discountFactor,
_forwardRate,
_sigma,
_validateArguments);
_expected = 56482.43d;
_tolerance = 2.0d;
Assert.AreEqual(_expected,
_actual,
_tolerance);
#endregion
}
