internal static global::System.Runtime.InteropServices.HandleRef getCPtr(LocalConstantVol obj) {
return (obj == null) ? new global::System.Runtime.InteropServices.HandleRef(null, global::System.IntPtr.Zero) : obj.swigCPtr;
}
internal static global::System.Runtime.InteropServices.HandleRef getCPtr(LocalConstantVol obj)
{
return((obj == null) ? new global::System.Runtime.InteropServices.HandleRef(null, global::System.IntPtr.Zero) : obj.swigCPtr);
}
public void testFdmHestonVarianceMesher()
{
//Testing FDM Heston variance mesher...
using (SavedSettings backup = new SavedSettings())
{
Date today = new Date(22, 2, 2018);
DayCounter dc = new Actual365Fixed();
Settings.Instance.setEvaluationDate(today);
HestonProcess process = new HestonProcess(new Handle <YieldTermStructure>(Utilities.flatRate(0.02, dc)),
new Handle <YieldTermStructure>(Utilities.flatRate(0.02, dc)),
new Handle <Quote>(new SimpleQuote(100.0)),
0.09, 1.0, 0.09, 0.2, -0.5);
FdmHestonVarianceMesher mesher = new FdmHestonVarianceMesher(5, process, 1.0);
List <double> locations = mesher.locations();
double[] expected = new double[] { 0.0, 6.652314e-02, 9.000000e-02, 1.095781e-01, 2.563610e-01 };
double tol = 1e-6;
double diff;
for (int i = 0; i < locations.Count; ++i)
{
diff = Math.Abs(expected[i] - locations[i]);
if (diff > tol)
{
QAssert.Fail("Failed to reproduce Heston variance mesh"
+ "\n calculated: " + locations[i]
+ "\n expected: " + expected[i]
+ "\n difference " + diff
+ "\n tolerance: " + tol);
}
}
LocalVolTermStructure lVol = new LocalConstantVol(today, 2.5, dc);
FdmHestonLocalVolatilityVarianceMesher constSlvMesher = new FdmHestonLocalVolatilityVarianceMesher(5, process, lVol, 1.0);
double expectedVol = 2.5 * mesher.volaEstimate();
double calculatedVol = constSlvMesher.volaEstimate();
diff = Math.Abs(calculatedVol - expectedVol);
if (diff > tol)
{
QAssert.Fail("Failed to reproduce Heston local volatility variance estimate"
+ "\n calculated: " + calculatedVol
+ "\n expected: " + expectedVol
+ "\n difference " + diff
+ "\n tolerance: " + tol);
}
double alpha = 0.01;
LocalVolTermStructure leverageFct = new ParableLocalVolatility(today, 100.0, alpha, dc);
FdmHestonLocalVolatilityVarianceMesher slvMesher
= new FdmHestonLocalVolatilityVarianceMesher(5, process, leverageFct, 0.5, 1, 0.01);
double initialVolEstimate = new FdmHestonVarianceMesher(5, process, 0.5, 1, 0.01).volaEstimate();
// double vEst = leverageFct.currentLink().localVol(0, 100) * initialVolEstimate;
// Mathematica solution
// N[Integrate[
// alpha*((100*Exp[vEst*x*Sqrt[0.5]] - 100)^2 + 25)*
// PDF[NormalDistribution[0, 1], x], {x ,
// InverseCDF[NormalDistribution[0, 1], 0.01],
// InverseCDF[NormalDistribution[0, 1], 0.99]}]]
double leverageAvg = 0.455881 / (1 - 0.02);
double volaEstExpected =
0.5 * (leverageAvg + leverageFct.localVol(0, 100)) * initialVolEstimate;
double volaEstCalculated = slvMesher.volaEstimate();
if (Math.Abs(volaEstExpected - volaEstCalculated) > 0.001)
{
QAssert.Fail("Failed to reproduce Heston local volatility variance estimate"
+ "\n calculated: " + calculatedVol
+ "\n expected: " + expectedVol
+ "\n difference " + Math.Abs(volaEstExpected - volaEstCalculated)
+ "\n tolerance: " + tol);
}
}
}
