public void testSwaptionPricing() { //"Testing forward swap and swaption pricing..."); //SavedSettings backup; const int size = 10; const int steps = 8*size; #if QL_USE_INDEXED_COUPON const double tolerance = 1e-6; #else const double tolerance = 1e-12; #endif List<Date> dates = new List<Date>(); List<double> rates = new List<double>(); dates.Add(new Date(4,9,2005)); dates.Add(new Date(4,9,2011)); rates.Add(0.04); rates.Add(0.08); IborIndex index = makeIndex(dates, rates); LiborForwardModelProcess process = new LiborForwardModelProcess(size, index); LmCorrelationModel corrModel = new LmExponentialCorrelationModel(size, 0.5); LmVolatilityModel volaModel = new LmLinearExponentialVolatilityModel(process.fixingTimes(), 0.291, 1.483, 0.116, 0.00001); // set-up pricing engine process.setCovarParam((LfmCovarianceParameterization) new LfmCovarianceProxy(volaModel, corrModel)); // set-up a small Monte-Carlo simulation to price swations List<double> tmp = process.fixingTimes(); TimeGrid grid=new TimeGrid(tmp ,steps); List<int> location=new List<int>(); for (int i=0; i < tmp.Count; ++i) { location.Add(grid.index(tmp[i])) ; } ulong seed=42; const int nrTrails = 5000; LowDiscrepancy.icInstance = new InverseCumulativeNormal(); IRNG rsg = (InverseCumulativeRsg<RandomSequenceGenerator<MersenneTwisterUniformRng> ,InverseCumulativeNormal>) new PseudoRandom().make_sequence_generator(process.factors()*(grid.size()-1),seed); MultiPathGenerator<IRNG> generator=new MultiPathGenerator<IRNG>(process, grid, rsg, false); LiborForwardModel liborModel = new LiborForwardModel(process, volaModel, corrModel); Calendar calendar = index.fixingCalendar(); DayCounter dayCounter = index.forwardingTermStructure().link.dayCounter(); BusinessDayConvention convention = index.businessDayConvention(); Date settlement = index.forwardingTermStructure().link.referenceDate(); SwaptionVolatilityMatrix m = liborModel.getSwaptionVolatilityMatrix(); for (int i=1; i < size; ++i) { for (int j=1; j <= size-i; ++j) { Date fwdStart = settlement + new Period(6*i, TimeUnit.Months); Date fwdMaturity = fwdStart + new Period(6*j, TimeUnit.Months); Schedule schedule =new Schedule(fwdStart, fwdMaturity, index.tenor(), calendar, convention, convention, DateGeneration.Rule.Forward, false); double swapRate = 0.0404; VanillaSwap forwardSwap = new VanillaSwap(VanillaSwap.Type.Receiver, 1.0, schedule, swapRate, dayCounter, schedule, index, 0.0, index.dayCounter()); forwardSwap.setPricingEngine(new DiscountingSwapEngine(index.forwardingTermStructure())); // check forward pricing first double expected = forwardSwap.fairRate(); double calculated = liborModel.S_0(i-1,i+j-1); if (Math.Abs(expected - calculated) > tolerance) Assert.Fail("Failed to reproduce fair forward swap rate" + "\n calculated: " + calculated + "\n expected: " + expected); swapRate = forwardSwap.fairRate(); forwardSwap = new VanillaSwap(VanillaSwap.Type.Receiver, 1.0, schedule, swapRate, dayCounter, schedule, index, 0.0, index.dayCounter()); forwardSwap.setPricingEngine(new DiscountingSwapEngine(index.forwardingTermStructure())); if (i == j && i<=size/2) { IPricingEngine engine = new LfmSwaptionEngine(liborModel, index.forwardingTermStructure()); Exercise exercise = new EuropeanExercise(process.fixingDates()[i]); Swaption swaption = new Swaption(forwardSwap, exercise); swaption.setPricingEngine(engine); GeneralStatistics stat = new GeneralStatistics(); for (int n=0; n<nrTrails; ++n) { Sample<MultiPath> path = (n%2!=0) ? generator.antithetic() : generator.next(); //Sample<MultiPath> path = generator.next(); List<double> rates_ = new InitializedList<double>(size); for (int k=0; k<process.size(); ++k) { rates_[k] = path.value[k][location[i]]; } List<double> dis = process.discountBond(rates_); double npv=0.0; for (int k=i; k < i+j; ++k) { npv += (swapRate - rates_[k]) * ( process.accrualEndTimes()[k] - process.accrualStartTimes()[k])*dis[k]; } stat.add(Math.Max(npv, 0.0)); } if (Math.Abs(swaption.NPV() - stat.mean()) > stat.errorEstimate()*2.35) Assert.Fail("Failed to reproduce swaption npv" + "\n calculated: " + stat.mean() + "\n expected: " + swaption.NPV()); } } } }
public void testSimpleCovarianceModels() { //"Testing simple covariance models..."; //SavedSettings backup; const int size = 10; const double tolerance = 1e-14; int i; LmCorrelationModel corrModel=new LmExponentialCorrelationModel(size, 0.1); Matrix recon = corrModel.correlation(0.0,null) - corrModel.pseudoSqrt(0.0,null)*Matrix.transpose(corrModel.pseudoSqrt(0.0,null)); for (i=0; i<size; ++i) { for (int j=0; j<size; ++j) { if (Math.Abs(recon[i,j]) > tolerance) Assert.Fail("Failed to reproduce correlation matrix" + "\n calculated: " + recon[i,j] + "\n expected: " + 0); } } List<double> fixingTimes=new InitializedList<double>(size); for (i=0; i<size; ++i) { fixingTimes[i] = 0.5*i; } const double a=0.2; const double b=0.1; const double c=2.1; const double d=0.3; LmVolatilityModel volaModel=new LmLinearExponentialVolatilityModel(fixingTimes, a, b, c, d); LfmCovarianceProxy covarProxy=new LfmCovarianceProxy(volaModel, corrModel); LiborForwardModelProcess process=new LiborForwardModelProcess(size, makeIndex()); LiborForwardModel liborModel=new LiborForwardModel(process, volaModel, corrModel); for (double t=0; t<4.6; t+=0.31) { recon = covarProxy.covariance(t,null) - covarProxy.diffusion(t,null)*Matrix.transpose(covarProxy.diffusion(t,null)); for (int k=0; k<size; ++k) { for (int j=0; j<size; ++j) { if (Math.Abs(recon[k,j]) > tolerance) Assert.Fail("Failed to reproduce correlation matrix" + "\n calculated: " + recon[k,j] + "\n expected: " + 0); } } Vector volatility = volaModel.volatility(t,null); for (int k=0; k<size; ++k) { double expected = 0; if (k>2*t) { double T = fixingTimes[k]; expected=(a*(T-t)+d)*Math.Exp(-b*(T-t)) + c; } if (Math.Abs(expected - volatility[k]) > tolerance) Assert.Fail("Failed to reproduce volatities" + "\n calculated: " + volatility[k] + "\n expected: " + expected); } } }