/// <summary>
/// Tests the interpolation in the time and strike dimensions.
/// </summary>
public virtual void volatilityTimeInterpolation()
{
double forward = 1.40;
double timeToExpiry = 0.75;
double strike = 1.50;
double[] vol050 = SMILE_TERM.VolatilityTerm.get(2).Volatility.toArray();
double[] vol100 = SMILE_TERM.VolatilityTerm.get(3).Volatility.toArray();
double[] vol = new double[vol050.Length];
for (int loopvol = 0; loopvol < vol050.Length; loopvol++)
{
vol[loopvol] = Math.Sqrt(((vol050[loopvol] * vol050[loopvol] * TIME_TO_EXPIRY.get(2) + vol100[loopvol] * vol100[loopvol] * TIME_TO_EXPIRY.get(3)) / 2.0) / timeToExpiry);
}
SmileDeltaParameters smile = SmileDeltaParameters.of(timeToExpiry, DELTA, DoubleArray.copyOf(vol));
DoubleArray strikes = smile.strike(forward);
double volExpected = INTERPOLATOR_STRIKE.bind(strikes, DoubleArray.copyOf(vol), FLAT, FLAT).interpolate(strike);
double volComputed = SMILE_TERM.volatility(timeToExpiry, strike, forward);
assertEquals(volComputed, volExpected, TOLERANCE_VOL, "Smile by delta term structure: vol interpolation on strike");
double volTriple = SMILE_TERM.volatility(timeToExpiry, strike, forward);
assertEquals(volTriple, volComputed, TOLERANCE_VOL, "Smile by delta term structure: vol interpolation on strike");
InterpolatedStrikeSmileDeltaTermStructure smileTerm2 = InterpolatedStrikeSmileDeltaTermStructure.of(VOLATILITY_TERM, ACT_360);
double volComputed2 = smileTerm2.volatility(timeToExpiry, strike, forward);
assertEquals(volComputed2, volComputed, TOLERANCE_VOL, "Smile by delta term structure: vol interp on strike");
}
//-------------------------------------------------------------------------
public virtual void constructor()
{
InterpolatedStrikeSmileDeltaTermStructure smileTerm1 = InterpolatedStrikeSmileDeltaTermStructure.of(TIME_TO_EXPIRY, DELTA, ATM, RISK_REVERSAL, STRANGLE, ACT_360);
assertEquals(smileTerm1, SMILE_TERM, "Smile by delta term structure: constructor");
InterpolatedStrikeSmileDeltaTermStructure smileTerm2 = InterpolatedStrikeSmileDeltaTermStructure.of(TIME_TO_EXPIRY, DELTA, ATM, RISK_REVERSAL, STRANGLE, ACT_360, INTERPOLATOR_STRIKE, FLAT, FLAT);
assertEquals(smileTerm2, SMILE_TERM, "Smile by delta term structure: constructor");
}
//-------------------------------------------------------------------------
public virtual void coverage()
{
coverImmutableBean(SMILE_TERM);
InterpolatedStrikeSmileDeltaTermStructure other = InterpolatedStrikeSmileDeltaTermStructure.of(DoubleArray.of(0.1, 0.5), DoubleArray.of(0.25), DoubleMatrix.copyOf(new double[][]
{
new double[] { 0.15, 0.1, 0.12 },
new double[] { 0.1, 0.07, 0.08 }
}), ACT_360, CurveInterpolators.NATURAL_SPLINE, CurveExtrapolators.LINEAR, CurveExtrapolators.LINEAR, CurveInterpolators.NATURAL_SPLINE, CurveExtrapolators.LINEAR, CurveExtrapolators.LINEAR);
coverBeanEquals(SMILE_TERM, other);
}
public virtual void constructor2()
{
double[][] vol = new double[NB_EXP][];
for (int loopexp = 0; loopexp < NB_EXP; loopexp++)
{
vol[loopexp] = VOLATILITY_TERM[loopexp].Volatility.toArray();
}
InterpolatedStrikeSmileDeltaTermStructure smileTermVol1 = InterpolatedStrikeSmileDeltaTermStructure.of(TIME_TO_EXPIRY, DELTA, DoubleMatrix.copyOf(vol), ACT_360);
assertEquals(smileTermVol1, SMILE_TERM, "Smile by delta term structure: constructor");
InterpolatedStrikeSmileDeltaTermStructure smileTermVol2 = InterpolatedStrikeSmileDeltaTermStructure.of(TIME_TO_EXPIRY, DELTA, DoubleMatrix.copyOf(vol), ACT_360, INTERPOLATOR_STRIKE, FLAT, FLAT);
assertEquals(smileTermVol2, SMILE_TERM, "Smile by delta term structure: constructor");
}
public virtual void testWrongDataSize()
{
double[][] vol = new double[NB_EXP][];
for (int loopexp = 0; loopexp < NB_EXP; loopexp++)
{
vol[loopexp] = VOLATILITY_TERM[loopexp].Volatility.toArray();
}
DoubleArray timeShort = DoubleArray.of(0.10, 0.25, 0.50, 1.00, 2.00);
DoubleArray deltaLong = DoubleArray.of(0.10, 0.2, 0.25);
DoubleArray delta0 = DoubleArray.of();
assertThrowsIllegalArg(() => InterpolatedStrikeSmileDeltaTermStructure.of(timeShort, DELTA, DoubleMatrix.copyOf(vol), ACT_360));
assertThrowsIllegalArg(() => InterpolatedStrikeSmileDeltaTermStructure.of(TIME_TO_EXPIRY, deltaLong, DoubleMatrix.copyOf(vol), ACT_360));
assertThrowsIllegalArg(() => InterpolatedStrikeSmileDeltaTermStructure.of(TIME_TO_EXPIRY, delta0, DoubleMatrix.copyOf(vol), ACT_360));
DoubleMatrix shortMat = DoubleMatrix.copyOf(new double[][]
{
new double[] { 0.0300, 0.0100 },
new double[] { 0.0310, 0.0110 },
new double[] { 0.0320, 0.0120 },
new double[] { 0.0330, 0.0130 },
new double[] { 0.0340, 0.0140 }
});
DoubleMatrix vec = DoubleMatrix.copyOf(new double[][]
{
new double[] { 0.0300 },
new double[] { 0.0310 },
new double[] { 0.0320 },
new double[] { 0.0330 },
new double[] { 0.0340 },
new double[] { 0.0340 }
});
assertThrowsIllegalArg(() => InterpolatedStrikeSmileDeltaTermStructure.of(timeShort, DELTA, ATM, RISK_REVERSAL, STRANGLE, ACT_360));
assertThrowsIllegalArg(() => InterpolatedStrikeSmileDeltaTermStructure.of(TIME_TO_EXPIRY, deltaLong, ATM, RISK_REVERSAL, STRANGLE, ACT_360));
assertThrowsIllegalArg(() => InterpolatedStrikeSmileDeltaTermStructure.of(TIME_TO_EXPIRY, DELTA, ATM, shortMat, STRANGLE, ACT_360));
assertThrowsIllegalArg(() => InterpolatedStrikeSmileDeltaTermStructure.of(TIME_TO_EXPIRY, DELTA, ATM, RISK_REVERSAL, shortMat, ACT_360));
assertThrowsIllegalArg(() => InterpolatedStrikeSmileDeltaTermStructure.of(TIME_TO_EXPIRY, DELTA, ATM, RISK_REVERSAL, vec, ACT_360));
}
/// <summary>
/// Tests the interpolation and its derivative with respect to the data by comparison to finite difference.
/// </summary>
public virtual void volatilityAjoint()
{
double forward = 1.40;
double[] timeToExpiry = new double[] { 0.75, 1.00, 2.50 };
double[] strike = new double[] { 1.50, 1.70, 2.20 };
double[] tolerance = new double[] { 3e-2, 1e-1, 1e-5 };
int nbTest = strike.Length;
double shift = 0.00001;
for (int looptest = 0; looptest < nbTest; looptest++)
{
double vol = SMILE_TERM.volatility(timeToExpiry[looptest], strike[looptest], forward);
//JAVA TO C# CONVERTER NOTE: The following call to the 'RectangularArrays' helper class reproduces the rectangular array initialization that is automatic in Java:
//ORIGINAL LINE: double[][] bucketTest = new double[TIME_TO_EXPIRY.size()][2 * DELTA.size() + 1];
double[][] bucketTest = RectangularArrays.ReturnRectangularDoubleArray(TIME_TO_EXPIRY.size(), 2 * DELTA.size() + 1);
VolatilityAndBucketedSensitivities volComputed = SMILE_TERM.volatilityAndSensitivities(timeToExpiry[looptest], strike[looptest], forward);
DoubleMatrix bucketSensi = volComputed.Sensitivities;
assertEquals(volComputed.Volatility, vol, 1.0E-10, "Smile by delta term structure: volatility adjoint");
SmileDeltaParameters[] volData = new SmileDeltaParameters[TIME_TO_EXPIRY.size()];
double[] volBumped = new double[2 * DELTA.size() + 1];
for (int loopexp = 0; loopexp < TIME_TO_EXPIRY.size(); loopexp++)
{
for (int loopsmile = 0; loopsmile < 2 * DELTA.size() + 1; loopsmile++)
{
Array.Copy(SMILE_TERM.VolatilityTerm.toArray(), 0, volData, 0, TIME_TO_EXPIRY.size());
Array.Copy(SMILE_TERM.VolatilityTerm.get(loopexp).Volatility.toArray(), 0, volBumped, 0, 2 * DELTA.size() + 1);
volBumped[loopsmile] += shift;
volData[loopexp] = SmileDeltaParameters.of(TIME_TO_EXPIRY.get(loopexp), DELTA, DoubleArray.copyOf(volBumped));
InterpolatedStrikeSmileDeltaTermStructure smileTermBumped = InterpolatedStrikeSmileDeltaTermStructure.of(ImmutableList.copyOf(volData), ACT_360);
bucketTest[loopexp][loopsmile] = (smileTermBumped.volatility(timeToExpiry[looptest], strike[looptest], forward) - volComputed.Volatility) / shift;
assertEquals(bucketSensi.get(loopexp, loopsmile), bucketTest[loopexp][loopsmile], tolerance[looptest], "Smile by delta term structure: (test: " + looptest + ") volatility bucket sensitivity " + loopexp + " - " + loopsmile);
}
}
}
}
//-------------------------------------------------------------------------
// bumping a node point at (nodeExpiry, nodeDelta)
private double nodeSensitivity(BlackFxOptionSmileVolatilities provider, CurrencyPair pair, ZonedDateTime expiry, double strike, double forward, double nodeExpiry, double nodeDelta)
{
double strikeMod = provider.CurrencyPair.Equals(pair) ? strike : 1.0 / strike;
double forwardMod = provider.CurrencyPair.Equals(pair) ? forward : 1.0 / forward;
InterpolatedStrikeSmileDeltaTermStructure smileTerm = (InterpolatedStrikeSmileDeltaTermStructure)provider.Smile;
double[] times = smileTerm.Expiries.toArray();
int nTimes = times.Length;
SmileDeltaParameters[] volTermUp = new SmileDeltaParameters[nTimes];
SmileDeltaParameters[] volTermDw = new SmileDeltaParameters[nTimes];
int deltaIndex = -1;
for (int i = 0; i < nTimes; ++i)
{
DoubleArray deltas = smileTerm.VolatilityTerm.get(i).Delta;
int nDeltas = deltas.size();
int nDeltasTotal = 2 * nDeltas + 1;
double[] deltasTotal = new double[nDeltasTotal];
deltasTotal[nDeltas] = 0.5d;
for (int j = 0; j < nDeltas; ++j)
{
deltasTotal[j] = 1d - deltas.get(j);
deltasTotal[2 * nDeltas - j] = deltas.get(j);
}
double[] volsUp = smileTerm.VolatilityTerm.get(i).Volatility.toArray();
double[] volsDw = smileTerm.VolatilityTerm.get(i).Volatility.toArray();
if (Math.Abs(times[i] - nodeExpiry) < TOLERANCE)
{
for (int j = 0; j < nDeltasTotal; ++j)
{
if (Math.Abs(deltasTotal[j] - nodeDelta) < TOLERANCE)
{
deltaIndex = j;
volsUp[j] += EPS;
volsDw[j] -= EPS;
}
}
}
volTermUp[i] = SmileDeltaParameters.of(times[i], deltas, DoubleArray.copyOf(volsUp));
volTermDw[i] = SmileDeltaParameters.of(times[i], deltas, DoubleArray.copyOf(volsDw));
}
InterpolatedStrikeSmileDeltaTermStructure smileTermUp = InterpolatedStrikeSmileDeltaTermStructure.of(ImmutableList.copyOf(volTermUp), ACT_365F);
InterpolatedStrikeSmileDeltaTermStructure smileTermDw = InterpolatedStrikeSmileDeltaTermStructure.of(ImmutableList.copyOf(volTermDw), ACT_365F);
BlackFxOptionSmileVolatilities provUp = BlackFxOptionSmileVolatilities.of(NAME, CURRENCY_PAIR, VAL_DATE_TIME, smileTermUp);
BlackFxOptionSmileVolatilities provDw = BlackFxOptionSmileVolatilities.of(NAME, CURRENCY_PAIR, VAL_DATE_TIME, smileTermDw);
double volUp = provUp.volatility(pair, expiry, strike, forward);
double volDw = provDw.volatility(pair, expiry, strike, forward);
double totalSensi = 0.5 * (volUp - volDw) / EPS;
double expiryTime = provider.relativeTime(expiry);
SmileDeltaParameters singleSmile = smileTerm.smileForExpiry(expiryTime);
double[] strikesUp = singleSmile.strike(forwardMod).toArray();
double[] strikesDw = strikesUp.Clone();
double[] vols = singleSmile.Volatility.toArray();
strikesUp[deltaIndex] += EPS;
strikesDw[deltaIndex] -= EPS;
double volStrikeUp = LINEAR.bind(DoubleArray.ofUnsafe(strikesUp), DoubleArray.ofUnsafe(vols), FLAT, FLAT).interpolate(strikeMod);
double volStrikeDw = LINEAR.bind(DoubleArray.ofUnsafe(strikesDw), DoubleArray.ofUnsafe(vols), FLAT, FLAT).interpolate(strikeMod);
double sensiStrike = 0.5 * (volStrikeUp - volStrikeDw) / EPS;
SmileDeltaParameters singleSmileUp = smileTermUp.smileForExpiry(expiryTime);
double strikeUp = singleSmileUp.strike(forwardMod).get(deltaIndex);
SmileDeltaParameters singleSmileDw = smileTermDw.smileForExpiry(expiryTime);
double strikeDw = singleSmileDw.strike(forwardMod).get(deltaIndex);
double sensiVol = 0.5 * (strikeUp - strikeDw) / EPS;
return(totalSensi - sensiStrike * sensiVol);
}
static FxOptionVolatilitiesMarketDataFunctionTest()
{
ImmutableList.Builder <FxOptionVolatilitiesNode> volNodeBuilder = ImmutableList.builder();
ImmutableMap.Builder <QuoteId, double> marketQuoteBuilder = ImmutableMap.builder();
ImmutableMap.Builder <QuoteId, MarketDataBox <double> > scenarioMarketQuoteBuilder = ImmutableMap.builder();
ImmutableList.Builder <FixedOvernightSwapCurveNode> usdNodeBuilder = ImmutableList.builder();
ImmutableList.Builder <FxSwapCurveNode> gbpNodeBuilder = ImmutableList.builder();
for (int i = 0; i < VOL_TENORS.Count; ++i)
{
for (int j = 0; j < STRIKES.Count; ++j)
{
QuoteId quoteId = QuoteId.of(StandardId.of("OG", VOL_TENORS[i].ToString() + "_" + STRIKES[j].Label + "_" + VALUE_TYPES[j].ToString()));
volNodeBuilder.add(FxOptionVolatilitiesNode.of(GBP_USD, SPOT_OFFSET, BDA, VALUE_TYPES[j], quoteId, VOL_TENORS[i], STRIKES[j]));
marketQuoteBuilder.put(quoteId, VOL_QUOTES[i][j]);
scenarioMarketQuoteBuilder.put(quoteId, MarketDataBox.ofScenarioValues(VOL_QUOTES[i][j], VOL_QUOTES_1[i][j]));
}
}
for (int i = 0; i < USD_QUOTES.Count; ++i)
{
QuoteId quoteId = QuoteId.of(StandardId.of("OG", USD.ToString() + "-OIS-" + USD_TENORS[i].ToString()));
usdNodeBuilder.add(FixedOvernightSwapCurveNode.of(FixedOvernightSwapTemplate.of(USD_TENORS[i], FixedOvernightSwapConventions.USD_FIXED_TERM_FED_FUND_OIS), quoteId));
marketQuoteBuilder.put(quoteId, USD_QUOTES[i]);
scenarioMarketQuoteBuilder.put(quoteId, MarketDataBox.ofScenarioValues(USD_QUOTES[i], USD_QUOTES_1[i]));
}
for (int i = 0; i < GBP_QUOTES.Count; ++i)
{
QuoteId quoteId = QuoteId.of(StandardId.of("OG", GBP_USD.ToString() + "-FX-" + GBP_PERIODS[i].ToString()));
gbpNodeBuilder.add(FxSwapCurveNode.of(FxSwapTemplate.of(GBP_PERIODS[i], FxSwapConventions.GBP_USD), quoteId));
marketQuoteBuilder.put(quoteId, GBP_QUOTES[i]);
scenarioMarketQuoteBuilder.put(quoteId, MarketDataBox.ofScenarioValues(GBP_QUOTES[i], GBP_QUOTES_1[i]));
}
VOL_NODES = volNodeBuilder.build();
USD_NODES = usdNodeBuilder.build();
GBP_NODES = gbpNodeBuilder.build();
MARKET_QUOTES = marketQuoteBuilder.build();
SCENARIO_MARKET_QUOTES = scenarioMarketQuoteBuilder.build();
IList <double> expiry = VOL_TENORS.Select(t => ACT_365F.relativeYearFraction(VALUATION_DATE, BDA.adjust(SPOT_OFFSET.adjust(VALUATION_DATE, REF_DATA).plus(t), REF_DATA))).ToList();
int nSmiles = expiry.Count;
double[] atm = new double[nSmiles];
//JAVA TO C# CONVERTER NOTE: The following call to the 'RectangularArrays' helper class reproduces the rectangular array initialization that is automatic in Java:
//ORIGINAL LINE: double[][] rr = new double[nSmiles][2];
double[][] rr = RectangularArrays.ReturnRectangularDoubleArray(nSmiles, 2);
//JAVA TO C# CONVERTER NOTE: The following call to the 'RectangularArrays' helper class reproduces the rectangular array initialization that is automatic in Java:
//ORIGINAL LINE: double[][] str = new double[nSmiles][2];
double[][] str = RectangularArrays.ReturnRectangularDoubleArray(nSmiles, 2);
for (int i = 0; i < nSmiles; ++i)
{
atm[i] = VOL_QUOTES[i][0];
rr[i][0] = VOL_QUOTES[i][1];
rr[i][1] = VOL_QUOTES[i][3];
str[i][0] = VOL_QUOTES[i][2];
str[i][1] = VOL_QUOTES[i][4];
}
InterpolatedStrikeSmileDeltaTermStructure term = InterpolatedStrikeSmileDeltaTermStructure.of(DoubleArray.copyOf(expiry), DoubleArray.of(0.1, 0.25), DoubleArray.copyOf(atm), DoubleMatrix.copyOf(rr), DoubleMatrix.copyOf(str), ACT_365F, LINEAR, FLAT, FLAT, PCHIP, FLAT, FLAT);
EXP_VOLS = BlackFxOptionSmileVolatilities.of(VOL_NAME, GBP_USD, VALUATION_DATE.atTime(VALUATION_TIME).atZone(ZONE), term);
for (int i = 0; i < nSmiles; ++i)
{
atm[i] = VOL_QUOTES_1[i][0];
rr[i][0] = VOL_QUOTES_1[i][1];
rr[i][1] = VOL_QUOTES_1[i][3];
str[i][0] = VOL_QUOTES_1[i][2];
str[i][1] = VOL_QUOTES_1[i][4];
}
InterpolatedStrikeSmileDeltaTermStructure term1 = InterpolatedStrikeSmileDeltaTermStructure.of(DoubleArray.copyOf(expiry), DoubleArray.of(0.1, 0.25), DoubleArray.copyOf(atm), DoubleMatrix.copyOf(rr), DoubleMatrix.copyOf(str), ACT_365F, LINEAR, FLAT, FLAT, PCHIP, FLAT, FLAT);
EXP_VOLS_1 = BlackFxOptionSmileVolatilities.of(VOL_NAME, GBP_USD, VALUATION_DATE_1.atTime(VALUATION_TIME_1).atZone(ZONE), term1);
ImmutableList.Builder <FxOptionVolatilitiesNode> nodeBuilder = ImmutableList.builder();
ImmutableMap.Builder <QuoteId, double> quoteBuilder = ImmutableMap.builder();
for (int i = 0; i < SURFACE_TENORS.Count; ++i)
{
for (int j = 0; j < SURFACE_STRIKES.Count; ++j)
{
QuoteId quoteId = QuoteId.of(StandardId.of("OG", GBP_USD.ToString() + "_" + SURFACE_TENORS[i].ToString() + "_" + SURFACE_STRIKES[j]));
quoteBuilder.put(quoteId, SURFACE_VOL_QUOTES[i][j]);
nodeBuilder.add(FxOptionVolatilitiesNode.of(GBP_USD, SPOT_OFFSET, BDA, ValueType.BLACK_VOLATILITY, quoteId, SURFACE_TENORS[i], SimpleStrike.of(SURFACE_STRIKES[j])));
}
}
SURFACE_NODES = nodeBuilder.build();
SURFACE_QUOTES = quoteBuilder.build();
IList <double> expiry = new List <double>();
IList <double> strike = new List <double>();
IList <double> vols = new List <double>();
for (int i = 0; i < SURFACE_TENORS.Count; ++i)
{
for (int j = 0; j < SURFACE_STRIKES.Count; ++j)
{
double yearFraction = ACT_365F.relativeYearFraction(VALUATION_DATE, BDA.adjust(SPOT_OFFSET.adjust(VALUATION_DATE, REF_DATA).plus(SURFACE_TENORS[i]), REF_DATA));
expiry.Add(yearFraction);
strike.Add(SURFACE_STRIKES[j]);
vols.Add(SURFACE_VOL_QUOTES[i][j]);
}
}
SurfaceInterpolator interp = GridSurfaceInterpolator.of(LINEAR, PCHIP);
InterpolatedNodalSurface surface = InterpolatedNodalSurface.ofUnsorted(Surfaces.blackVolatilityByExpiryStrike(VOL_NAME.Name, ACT_365F), DoubleArray.copyOf(expiry), DoubleArray.copyOf(strike), DoubleArray.copyOf(vols), interp);
SURFACE_EXP_VOLS = BlackFxOptionSurfaceVolatilities.of(VOL_NAME, GBP_USD, VALUATION_DATE.atTime(VALUATION_TIME).atZone(ZONE), surface);
}
