public virtual void recovery_test_shiftedBlack()
{
double lambdaT = 0.07;
double lambdaK = 0.07;
double error = 1.0e-5;
ConstantCurve shiftCurve = ConstantCurve.of("Black shift", 0.02);
DirectIborCapletFloorletVolatilityDefinition definition = DirectIborCapletFloorletVolatilityDefinition.of(NAME, USD_LIBOR_3M, ACT_ACT_ISDA, lambdaT, lambdaK, INTERPOLATOR, shiftCurve);
ImmutableList <Period> maturities = createBlackMaturities();
DoubleArray strikes = createBlackStrikes();
DoubleMatrix errorMatrix = DoubleMatrix.filled(maturities.size(), strikes.size(), error);
RawOptionData data = RawOptionData.of(maturities, strikes, STRIKE, createFullBlackDataMatrix(), errorMatrix, BLACK_VOLATILITY);
IborCapletFloorletVolatilityCalibrationResult res = CALIBRATOR.calibrate(definition, CALIBRATION_TIME, data, RATES_PROVIDER);
ShiftedBlackIborCapletFloorletExpiryStrikeVolatilities resVols = (ShiftedBlackIborCapletFloorletExpiryStrikeVolatilities)res.Volatilities;
for (int i = 0; i < NUM_BLACK_STRIKES; ++i)
{
Pair <IList <ResolvedIborCapFloorLeg>, IList <double> > capsAndVols = getCapsBlackVols(i);
IList <ResolvedIborCapFloorLeg> caps = capsAndVols.First;
IList <double> vols = capsAndVols.Second;
int nCaps = caps.Count;
for (int j = 0; j < nCaps; ++j)
{
ConstantSurface volSurface = ConstantSurface.of(Surfaces.blackVolatilityByExpiryStrike("test", ACT_ACT_ISDA), vols[j]);
BlackIborCapletFloorletExpiryStrikeVolatilities constVol = BlackIborCapletFloorletExpiryStrikeVolatilities.of(USD_LIBOR_3M, CALIBRATION_TIME, volSurface);
double priceOrg = LEG_PRICER_BLACK.presentValue(caps[j], RATES_PROVIDER, constVol).Amount;
double priceCalib = LEG_PRICER_BLACK.presentValue(caps[j], RATES_PROVIDER, resVols).Amount;
assertEquals(priceOrg, priceCalib, Math.Max(priceOrg, 1d) * TOL);
}
}
assertTrue(res.ChiSquare > 0d);
assertEquals(resVols.Index, USD_LIBOR_3M);
assertEquals(resVols.Name, definition.Name);
assertEquals(resVols.ValuationDateTime, CALIBRATION_TIME);
assertEquals(resVols.ShiftCurve, definition.ShiftCurve.get());
}
public virtual void recovery_test_normal()
{
double lambdaT = 0.07;
double lambdaK = 0.07;
double error = 1.0e-5;
DirectIborCapletFloorletVolatilityDefinition definition = DirectIborCapletFloorletVolatilityDefinition.of(NAME, USD_LIBOR_3M, ACT_ACT_ISDA, lambdaT, lambdaK, INTERPOLATOR);
ImmutableList <Period> maturities = createNormalMaturities();
DoubleArray strikes = createNormalStrikes();
DoubleMatrix errorMatrix = DoubleMatrix.filled(maturities.size(), strikes.size(), error);
RawOptionData data = RawOptionData.of(maturities, strikes, STRIKE, createFullNormalDataMatrix(), errorMatrix, NORMAL_VOLATILITY);
IborCapletFloorletVolatilityCalibrationResult res = CALIBRATOR.calibrate(definition, CALIBRATION_TIME, data, RATES_PROVIDER);
NormalIborCapletFloorletExpiryStrikeVolatilities resVol = (NormalIborCapletFloorletExpiryStrikeVolatilities)res.Volatilities;
for (int i = 0; i < strikes.size(); ++i)
{
Pair <IList <ResolvedIborCapFloorLeg>, IList <double> > capsAndVols = getCapsNormalVols(i);
IList <ResolvedIborCapFloorLeg> caps = capsAndVols.First;
IList <double> vols = capsAndVols.Second;
int nCaps = caps.Count;
for (int j = 0; j < nCaps; ++j)
{
ConstantSurface volSurface = ConstantSurface.of(Surfaces.normalVolatilityByExpiryStrike("test", ACT_ACT_ISDA), vols[j]);
NormalIborCapletFloorletExpiryStrikeVolatilities constVol = NormalIborCapletFloorletExpiryStrikeVolatilities.of(USD_LIBOR_3M, CALIBRATION_TIME, volSurface);
double priceOrg = LEG_PRICER_NORMAL.presentValue(caps[j], RATES_PROVIDER, constVol).Amount;
double priceCalib = LEG_PRICER_NORMAL.presentValue(caps[j], RATES_PROVIDER, resVol).Amount;
assertEquals(priceOrg, priceCalib, Math.Max(priceOrg, 1d) * TOL);
}
}
}
public virtual void test_createMetadata()
{
DirectIborCapletFloorletVolatilityDefinition @base = DirectIborCapletFloorletVolatilityDefinition.of(NAME, USD_LIBOR_3M, ACT_ACT_ISDA, LAMBDA_EXPIRY, LAMBDA_STRIKE, INTERPOLATOR);
assertEquals(@base.createMetadata(SAMPLE_BLACK), Surfaces.blackVolatilityByExpiryStrike(NAME.Name, ACT_ACT_ISDA));
assertEquals(@base.createMetadata(SAMPLE_NORMAL), Surfaces.normalVolatilityByExpiryStrike(NAME.Name, ACT_ACT_ISDA));
assertThrowsIllegalArg(() => @base.createMetadata(RawOptionData.of(EXPIRIES, STRIKES, STRIKE, DATA, ValueType.PRICE)));
}
//-------------------------------------------------------------------------
public virtual void coverage()
{
DirectIborCapletFloorletVolatilityDefinition test1 = DirectIborCapletFloorletVolatilityDefinition.of(NAME, USD_LIBOR_3M, ACT_ACT_ISDA, LAMBDA_EXPIRY, LAMBDA_STRIKE, INTERPOLATOR, SHIFT_CURVE);
coverImmutableBean(test1);
DirectIborCapletFloorletVolatilityDefinition test2 = DirectIborCapletFloorletVolatilityDefinition.of(IborCapletFloorletVolatilitiesName.of("other"), GBP_LIBOR_3M, ACT_365F, 0.01, 0.02, GridSurfaceInterpolator.of(CurveInterpolators.LINEAR, CurveInterpolators.LINEAR));
coverBeanEquals(test1, test2);
}
public virtual void test_builder()
{
DirectIborCapletFloorletVolatilityDefinition test = DirectIborCapletFloorletVolatilityDefinition.builder().name(NAME).index(USD_LIBOR_3M).dayCount(ACT_ACT_ISDA).lambdaExpiry(LAMBDA_EXPIRY).lambdaStrike(LAMBDA_STRIKE).interpolator(INTERPOLATOR).shiftCurve(SHIFT_CURVE).build();
assertEquals(test.DayCount, ACT_ACT_ISDA);
assertEquals(test.Index, USD_LIBOR_3M);
assertEquals(test.Interpolator, INTERPOLATOR);
assertEquals(test.LambdaExpiry, LAMBDA_EXPIRY);
assertEquals(test.LambdaStrike, LAMBDA_STRIKE);
assertEquals(test.Name, NAME);
assertEquals(test.ShiftCurve.get(), SHIFT_CURVE);
}
public virtual void test_of_shift()
{
DirectIborCapletFloorletVolatilityDefinition test = DirectIborCapletFloorletVolatilityDefinition.of(NAME, USD_LIBOR_3M, ACT_ACT_ISDA, LAMBDA_EXPIRY, LAMBDA_STRIKE, INTERPOLATOR, SHIFT_CURVE);
assertEquals(test.DayCount, ACT_ACT_ISDA);
assertEquals(test.Index, USD_LIBOR_3M);
assertEquals(test.Interpolator, INTERPOLATOR);
assertEquals(test.LambdaExpiry, LAMBDA_EXPIRY);
assertEquals(test.LambdaStrike, LAMBDA_STRIKE);
assertEquals(test.Name, NAME);
assertEquals(test.ShiftCurve.get(), SHIFT_CURVE);
}
public override bool Equals(object obj)
{
if (obj == this)
{
return(true);
}
if (obj != null && obj.GetType() == this.GetType())
{
DirectIborCapletFloorletVolatilityDefinition other = (DirectIborCapletFloorletVolatilityDefinition)obj;
return(JodaBeanUtils.equal(name, other.name) && JodaBeanUtils.equal(index, other.index) && JodaBeanUtils.equal(dayCount, other.dayCount) && JodaBeanUtils.equal(lambdaExpiry, other.lambdaExpiry) && JodaBeanUtils.equal(lambdaStrike, other.lambdaStrike) && JodaBeanUtils.equal(interpolator, other.interpolator) && JodaBeanUtils.equal(shiftCurve, other.shiftCurve));
}
return(false);
}
public virtual void test_computePenaltyMatrix()
{
DirectIborCapletFloorletVolatilityDefinition @base = DirectIborCapletFloorletVolatilityDefinition.of(NAME, USD_LIBOR_3M, ACT_ACT_ISDA, LAMBDA_EXPIRY, LAMBDA_STRIKE, INTERPOLATOR);
DoubleArray strikes1 = DoubleArray.of(0.1);
DoubleArray expiries1 = DoubleArray.of(1d, 2d, 5d);
assertThrowsIllegalArg(() => @base.computePenaltyMatrix(strikes1, expiries1));
DoubleArray strikes2 = DoubleArray.of(0.01, 0.05, 0.1);
DoubleArray expiries2 = DoubleArray.of(2d);
assertThrowsIllegalArg(() => @base.computePenaltyMatrix(strikes2, expiries2));
DoubleArray strikes3 = DoubleArray.of(0.05, 0.1, 0.15);
DoubleArray expiries3 = DoubleArray.of(1d, 2d, 5d);
DoubleMatrix computed = @base.computePenaltyMatrix(strikes3, expiries3);
DoubleMatrix expected = PenaltyMatrixGenerator.getPenaltyMatrix(new double[][] { expiries3.toArray(), strikes3.toArray() }, new int[] { 2, 2 }, new double[] { LAMBDA_EXPIRY, LAMBDA_STRIKE });
assertEquals(computed, expected);
}
public virtual void recovery_test_normalFlat()
{
double lambdaT = 0.01;
double lambdaK = 0.01;
double error = 1.0e-3;
DirectIborCapletFloorletVolatilityDefinition definition = DirectIborCapletFloorletVolatilityDefinition.of(NAME, USD_LIBOR_3M, ACT_ACT_ISDA, lambdaT, lambdaK, INTERPOLATOR);
ImmutableList <Period> maturities = createBlackMaturities();
DoubleArray strikes = createBlackStrikes();
DoubleMatrix errorMatrix = DoubleMatrix.filled(maturities.size(), strikes.size(), error);
RawOptionData data = RawOptionData.of(maturities, strikes, STRIKE, createFullFlatBlackDataMatrix(), errorMatrix, NORMAL_VOLATILITY);
IborCapletFloorletVolatilityCalibrationResult res = CALIBRATOR.calibrate(definition, CALIBRATION_TIME, data, RATES_PROVIDER);
NormalIborCapletFloorletExpiryStrikeVolatilities resVol = (NormalIborCapletFloorletExpiryStrikeVolatilities)res.Volatilities;
Surface resSurface = resVol.Surface;
int nParams = resSurface.ParameterCount;
for (int i = 0; i < nParams; ++i)
{
assertEquals(resSurface.getParameter(i), 0.5, 1.0e-12);
}
}
public virtual void test_serialization()
{
DirectIborCapletFloorletVolatilityDefinition test = DirectIborCapletFloorletVolatilityDefinition.of(NAME, USD_LIBOR_3M, ACT_ACT_ISDA, LAMBDA_EXPIRY, LAMBDA_STRIKE, INTERPOLATOR, SHIFT_CURVE);
assertSerialization(test);
}
//-------------------------------------------------------------------------
public override IborCapletFloorletVolatilityCalibrationResult calibrate(IborCapletFloorletVolatilityDefinition definition, ZonedDateTime calibrationDateTime, RawOptionData capFloorData, RatesProvider ratesProvider)
{
ArgChecker.isTrue(ratesProvider.ValuationDate.Equals(calibrationDateTime.toLocalDate()), "valuationDate of ratesProvider should be coherent to calibrationDateTime");
ArgChecker.isTrue(definition is DirectIborCapletFloorletVolatilityDefinition, "definition should be DirectIborCapletFloorletVolatilityDefinition");
DirectIborCapletFloorletVolatilityDefinition directDefinition = (DirectIborCapletFloorletVolatilityDefinition)definition;
// unpack cap data, create node caps
IborIndex index = directDefinition.Index;
LocalDate calibrationDate = calibrationDateTime.toLocalDate();
LocalDate baseDate = index.EffectiveDateOffset.adjust(calibrationDate, ReferenceData);
LocalDate startDate = baseDate.plus(index.Tenor);
System.Func <Surface, IborCapletFloorletVolatilities> volatilitiesFunction = this.volatilitiesFunction(directDefinition, calibrationDateTime, capFloorData);
SurfaceMetadata metadata = directDefinition.createMetadata(capFloorData);
IList <Period> expiries = capFloorData.Expiries;
DoubleArray strikes = capFloorData.Strikes;
int nExpiries = expiries.Count;
IList <double> timeList = new List <double>();
IList <double> strikeList = new List <double>();
IList <double> volList = new List <double>();
IList <ResolvedIborCapFloorLeg> capList = new List <ResolvedIborCapFloorLeg>();
IList <double> priceList = new List <double>();
IList <double> errorList = new List <double>();
DoubleMatrix errorMatrix = capFloorData.Error.orElse(DoubleMatrix.filled(nExpiries, strikes.size(), 1d));
int[] startIndex = new int[nExpiries + 1];
for (int i = 0; i < nExpiries; ++i)
{
LocalDate endDate = baseDate.plus(expiries[i]);
DoubleArray volatilityForTime = capFloorData.Data.row(i);
DoubleArray errorForTime = errorMatrix.row(i);
reduceRawData(directDefinition, ratesProvider, capFloorData.Strikes, volatilityForTime, errorForTime, startDate, endDate, metadata, volatilitiesFunction, timeList, strikeList, volList, capList, priceList, errorList);
startIndex[i + 1] = volList.Count;
ArgChecker.isTrue(startIndex[i + 1] > startIndex[i], "no valid option data for {}", expiries[i]);
}
// create caplet nodes and initial caplet vol surface
ResolvedIborCapFloorLeg cap = capList[capList.Count - 1];
int nCaplets = cap.CapletFloorletPeriods.size();
DoubleArray capletExpiries = DoubleArray.of(nCaplets, n => directDefinition.DayCount.relativeYearFraction(calibrationDate, cap.CapletFloorletPeriods.get(n).FixingDateTime.toLocalDate()));
Triple <DoubleArray, DoubleArray, DoubleArray> capletNodes;
DoubleArray initialVols = DoubleArray.copyOf(volList);
if (directDefinition.ShiftCurve.Present)
{
metadata = Surfaces.blackVolatilityByExpiryStrike(directDefinition.Name.Name, directDefinition.DayCount);
Curve shiftCurve = directDefinition.ShiftCurve.get();
if (capFloorData.DataType.Equals(NORMAL_VOLATILITY))
{
initialVols = DoubleArray.of(capList.Count, n => volList[n] / (ratesProvider.iborIndexRates(index).rate(capList[n].FinalPeriod.IborRate.Observation) + shiftCurve.yValue(timeList[n])));
}
InterpolatedNodalSurface capVolSurface = InterpolatedNodalSurface.of(metadata, DoubleArray.copyOf(timeList), DoubleArray.copyOf(strikeList), initialVols, INTERPOLATOR);
capletNodes = createCapletNodes(capVolSurface, capletExpiries, strikes, directDefinition.ShiftCurve.get());
volatilitiesFunction = createShiftedBlackVolatilitiesFunction(index, calibrationDateTime, shiftCurve);
}
else
{
InterpolatedNodalSurface capVolSurface = InterpolatedNodalSurface.of(metadata, DoubleArray.copyOf(timeList), DoubleArray.copyOf(strikeList), initialVols, INTERPOLATOR);
capletNodes = createCapletNodes(capVolSurface, capletExpiries, strikes);
}
InterpolatedNodalSurface baseSurface = InterpolatedNodalSurface.of(metadata, capletNodes.First, capletNodes.Second, capletNodes.Third, INTERPOLATOR);
DoubleMatrix penaltyMatrix = directDefinition.computePenaltyMatrix(strikes, capletExpiries);
// solve least square
LeastSquareResults res = solver.solve(DoubleArray.copyOf(priceList), DoubleArray.copyOf(errorList), getPriceFunction(capList, ratesProvider, volatilitiesFunction, baseSurface), getJacobianFunction(capList, ratesProvider, volatilitiesFunction, baseSurface), capletNodes.Third, penaltyMatrix, POSITIVE);
InterpolatedNodalSurface resSurface = InterpolatedNodalSurface.of(metadata, capletNodes.First, capletNodes.Second, res.FitParameters, directDefinition.Interpolator);
return(IborCapletFloorletVolatilityCalibrationResult.ofLeastSquare(volatilitiesFunction(resSurface), res.ChiSq));
}
