public void testSabrVols()
{
// Testing swaption volatility cube (sabr interpolation)
CommonVars vars = new CommonVars();
List <List <Handle <Quote> > > parametersGuess = new InitializedList <List <Handle <Quote> > >(
vars.cube.tenors.options.Count * vars.cube.tenors.swaps.Count);
for (int i = 0; i < vars.cube.tenors.options.Count * vars.cube.tenors.swaps.Count; i++)
{
parametersGuess[i] = new InitializedList <Handle <Quote> >(4);
parametersGuess[i][0] = new Handle <Quote>(new SimpleQuote(0.2));
parametersGuess[i][1] = new Handle <Quote>(new SimpleQuote(0.5));
parametersGuess[i][2] = new Handle <Quote>(new SimpleQuote(0.4));
parametersGuess[i][3] = new Handle <Quote>(new SimpleQuote(0.0));
}
List <bool> isParameterFixed = new InitializedList <bool>(4, false);
SwaptionVolCube1x volCube = new SwaptionVolCube1x
(vars.atmVolMatrix, vars.cube.tenors.options, vars.cube.tenors.swaps, vars.cube.strikeSpreads,
vars.cube.volSpreadsHandle, vars.swapIndexBase, vars.shortSwapIndexBase, vars.vegaWeighedSmileFit,
parametersGuess, isParameterFixed, true);
double tolerance = 3.0e-4;
vars.makeAtmVolTest(volCube, tolerance);
tolerance = 12.0e-4;
vars.makeVolSpreadsTest(volCube, tolerance);
}
public void testObservability()
{
// Testing volatility cube observability
CommonVars vars = new CommonVars();
List <List <Handle <Quote> > > parametersGuess =
new InitializedList <List <Handle <Quote> > >(vars.cube.tenors.options.Count * vars.cube.tenors.swaps.Count);
for (int i = 0; i < vars.cube.tenors.options.Count * vars.cube.tenors.swaps.Count; i++)
{
parametersGuess[i] = new InitializedList <Handle <Quote> >(4);
parametersGuess[i][0] = new Handle <Quote>(new SimpleQuote(0.2));
parametersGuess[i][1] = new Handle <Quote>(new SimpleQuote(0.5));
parametersGuess[i][2] = new Handle <Quote>(new SimpleQuote(0.4));
parametersGuess[i][3] = new Handle <Quote>(new SimpleQuote(0.0));
}
List <bool> isParameterFixed = new InitializedList <bool>(4, false);
SwaptionVolCube1x volCube1_0, volCube1_1;
// VolCube created before change of reference date
volCube1_0 = new SwaptionVolCube1x(vars.atmVolMatrix,
vars.cube.tenors.options,
vars.cube.tenors.swaps,
vars.cube.strikeSpreads,
vars.cube.volSpreadsHandle,
vars.swapIndexBase,
vars.shortSwapIndexBase,
vars.vegaWeighedSmileFit,
parametersGuess,
isParameterFixed,
true);
Date referenceDate = Settings.evaluationDate();
Settings.setEvaluationDate(vars.conventions.calendar.advance(referenceDate, new Period(1, TimeUnit.Days),
vars.conventions.optionBdc));
// VolCube created after change of reference date
volCube1_1 = new SwaptionVolCube1x(vars.atmVolMatrix,
vars.cube.tenors.options,
vars.cube.tenors.swaps,
vars.cube.strikeSpreads,
vars.cube.volSpreadsHandle,
vars.swapIndexBase,
vars.shortSwapIndexBase,
vars.vegaWeighedSmileFit,
parametersGuess,
isParameterFixed,
true);
double dummyStrike = 0.03;
for (int i = 0; i < vars.cube.tenors.options.Count; i++)
{
for (int j = 0; j < vars.cube.tenors.swaps.Count; j++)
{
for (int k = 0; k < vars.cube.strikeSpreads.Count; k++)
{
double v0 = volCube1_0.volatility(vars.cube.tenors.options[i],
vars.cube.tenors.swaps[j],
dummyStrike + vars.cube.strikeSpreads[k],
false);
double v1 = volCube1_1.volatility(vars.cube.tenors.options[i],
vars.cube.tenors.swaps[j],
dummyStrike + vars.cube.strikeSpreads[k],
false);
if (Math.Abs(v0 - v1) > 1e-14)
{
QAssert.Fail(" option tenor = " + vars.cube.tenors.options[i] +
" swap tenor = " + vars.cube.tenors.swaps[j] +
" strike = " + (dummyStrike + vars.cube.strikeSpreads[k]) +
" v0 = " + (v0) +
" v1 = " + (v1) +
" error = " + Math.Abs(v1 - v0));
}
}
}
}
Settings.setEvaluationDate(referenceDate);
SwaptionVolCube2 volCube2_0, volCube2_1;
// VolCube created before change of reference date
volCube2_0 = new SwaptionVolCube2(vars.atmVolMatrix,
vars.cube.tenors.options,
vars.cube.tenors.swaps,
vars.cube.strikeSpreads,
vars.cube.volSpreadsHandle,
vars.swapIndexBase,
vars.shortSwapIndexBase,
vars.vegaWeighedSmileFit);
Settings.setEvaluationDate(vars.conventions.calendar.advance(referenceDate, new Period(1, TimeUnit.Days),
vars.conventions.optionBdc));
// VolCube created after change of reference date
volCube2_1 = new SwaptionVolCube2(vars.atmVolMatrix,
vars.cube.tenors.options,
vars.cube.tenors.swaps,
vars.cube.strikeSpreads,
vars.cube.volSpreadsHandle,
vars.swapIndexBase,
vars.shortSwapIndexBase,
vars.vegaWeighedSmileFit);
for (int i = 0; i < vars.cube.tenors.options.Count; i++)
{
for (int j = 0; j < vars.cube.tenors.swaps.Count; j++)
{
for (int k = 0; k < vars.cube.strikeSpreads.Count; k++)
{
double v0 = volCube2_0.volatility(vars.cube.tenors.options[i],
vars.cube.tenors.swaps[j],
dummyStrike + vars.cube.strikeSpreads[k],
false);
double v1 = volCube2_1.volatility(vars.cube.tenors.options[i],
vars.cube.tenors.swaps[j],
dummyStrike + vars.cube.strikeSpreads[k],
false);
if (Math.Abs(v0 - v1) > 1e-14)
{
QAssert.Fail(" option tenor = " + vars.cube.tenors.options[i] +
" swap tenor = " + vars.cube.tenors.swaps[j] +
" strike = " + (dummyStrike + vars.cube.strikeSpreads[k]) +
" v0 = " + (v0) +
" v1 = " + (v1) +
" error = " + Math.Abs(v1 - v0));
}
}
}
}
Settings.setEvaluationDate(referenceDate);
}
