public virtual void test_localVolatilityFromImpliedVolatility()
{
double r = 0.05;
double q = 0.01;
System.Func <double, double> interestRate = (double?x) =>
{
return(r);
};
System.Func <double, double> dividendRate = (double?x) =>
{
return(q);
};
foreach (double strike in TEST_STRIKES)
{
foreach (double time in TEST_TIMES)
{
double computedVol = CALC.localVolatilityFromImpliedVolatility(VOL_SURFACE, SPOT, interestRate, dividendRate).zValue(time, strike);
double expectedVol = volFromFormula(r, q, time, strike, VOL_SURFACE);
assertEquals(computedVol, expectedVol, FD_EPS);
UnitParameterSensitivity computedSensi = CALC.localVolatilityFromImpliedVolatility(VOL_SURFACE, SPOT, interestRate, dividendRate).zValueParameterSensitivity(time, strike);
for (int i = 0; i < VOLS.size(); ++i)
{
InterpolatedNodalSurface surfaceUp = VOL_SURFACE.withZValues(VOLS.with(i, VOLS.get(i) + FD_EPS));
InterpolatedNodalSurface surfaceDw = VOL_SURFACE.withZValues(VOLS.with(i, VOLS.get(i) - FD_EPS));
double volUp = CALC.localVolatilityFromImpliedVolatility(surfaceUp, SPOT, interestRate, dividendRate).zValue(time, strike);
double volDw = CALC.localVolatilityFromImpliedVolatility(surfaceDw, SPOT, interestRate, dividendRate).zValue(time, strike);
double expectedSensi = 0.5 * (volUp - volDw) / FD_EPS;
assertEquals(computedSensi.Sensitivity.get(i), expectedSensi, FD_EPS * 10d);
}
}
}
}
private System.Func <DoubleArray, DoubleArray> getPriceFunction(IList <ResolvedIborCapFloorLeg> capList, RatesProvider ratesProvider, System.Func <Surface, IborCapletFloorletVolatilities> volatilitiesFunction, InterpolatedNodalSurface baseSurface)
{
int nCaps = capList.Count;
System.Func <DoubleArray, DoubleArray> priceFunction = (DoubleArray capletVols) =>
{
IborCapletFloorletVolatilities newVols = volatilitiesFunction(baseSurface.withZValues(capletVols));
return(DoubleArray.of(nCaps, n => LegPricer.presentValue(capList[n], ratesProvider, newVols).Amount));
};
return(priceFunction);
}
private System.Func <DoubleArray, DoubleMatrix> getJacobianFunction(IList <ResolvedIborCapFloorLeg> capList, RatesProvider ratesProvider, System.Func <Surface, IborCapletFloorletVolatilities> volatilitiesFunction, InterpolatedNodalSurface baseSurface)
{
int nCaps = capList.Count;
int nNodes = baseSurface.ParameterCount;
System.Func <DoubleArray, DoubleMatrix> jacobianFunction = (DoubleArray capletVols) =>
{
IborCapletFloorletVolatilities newVols = volatilitiesFunction(baseSurface.withZValues(capletVols));
return(DoubleMatrix.ofArrayObjects(nCaps, nNodes, n => newVols.parameterSensitivity(LegPricer.presentValueSensitivityModelParamsVolatility(capList[n], ratesProvider, newVols).build()).Sensitivities.get(0).Sensitivity));
};
return(jacobianFunction);
}