//-------------------------------------------------------------------------
public override NodalCurve calibrate(IList <ResolvedCdsTrade> calibrationCDSs, DoubleArray premiums, DoubleArray pointsUpfront, CurveName name, LocalDate valuationDate, CreditDiscountFactors discountFactors, RecoveryRates recoveryRates, ReferenceData refData)
{
int n = calibrationCDSs.Count;
double[] guess = new double[n];
double[] t = new double[n];
double[] lgd = new double[n];
for (int i = 0; i < n; i++)
{
LocalDate endDate = calibrationCDSs[i].Product.ProtectionEndDate;
t[i] = discountFactors.relativeYearFraction(endDate);
lgd[i] = 1d - recoveryRates.recoveryRate(endDate);
guess[i] = (premiums.get(i) + pointsUpfront.get(i) / t[i]) / lgd[i];
}
DoubleArray times = DoubleArray.ofUnsafe(t);
CurveMetadata baseMetadata = DefaultCurveMetadata.builder().xValueType(ValueType.YEAR_FRACTION).yValueType(ValueType.ZERO_RATE).curveName(name).dayCount(discountFactors.DayCount).build();
NodalCurve creditCurve = n == 1 ? ConstantNodalCurve.of(baseMetadata, t[0], guess[0]) : InterpolatedNodalCurve.of(baseMetadata, times, DoubleArray.ofUnsafe(guess), CurveInterpolators.PRODUCT_LINEAR, CurveExtrapolators.FLAT, CurveExtrapolators.PRODUCT_LINEAR);
for (int i = 0; i < n; i++)
{
System.Func <double, double> func = getPriceFunction(i, calibrationCDSs[i], premiums.get(i), pointsUpfront.get(i), valuationDate, creditCurve, discountFactors, recoveryRates, refData);
double[] bracket = BRACKER.getBracketedPoints(func, 0.8 * guess[i], 1.25 * guess[i], 0.0, double.PositiveInfinity);
double zeroRate = bracket[0] > bracket[1] ? ROOTFINDER.getRoot(func, bracket[1], bracket[0]) : ROOTFINDER.getRoot(func, bracket[0], bracket[1]); //Negative guess handled
creditCurve = creditCurve.withParameter(i, zeroRate);
}
return(creditCurve);
}
//-------------------------------------------------------------------------
private double[] computesFittingParameters()
{
double[] param = new double[3]; // Implementation note: called a,b,c in the note.
// Computes derivatives at cut-off.
double[] vD = new double[6];
//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[][] vD2 = new double[2][2];
double[][] vD2 = RectangularArrays.ReturnRectangularDoubleArray(2, 2);
volatilityK = sabrFunction.volatilityAdjoint2(forward, cutOffStrike, timeToExpiry, sabrData, vD, vD2);
Pair <ValueDerivatives, double[][]> pa2 = BlackFormulaRepository.priceAdjoint2(forward, cutOffStrike, timeToExpiry, volatilityK, true);
double[] bsD = pa2.First.Derivatives.toArrayUnsafe();
double[][] bsD2 = pa2.Second;
priceK[0] = pa2.First.Value;
priceK[1] = bsD[1] + bsD[3] * vD[1];
priceK[2] = bsD2[1][1] + bsD2[1][2] * vD[1] + (bsD2[2][1] + bsD2[2][2] * vD[1]) * vD[1] + bsD[3] * vD2[1][1];
if (Math.Abs(priceK[0]) < SMALL_PRICE && Math.Abs(priceK[1]) < SMALL_PRICE && Math.Abs(priceK[2]) < SMALL_PRICE)
{
// Implementation note: If value and its derivatives is too small, then parameters are such that the extrapolated price is "very small".
return(new double[] { -100.0, 0, 0 });
}
System.Func <double, double> toSolveC = getCFunction(priceK, cutOffStrike, mu);
BracketRoot bracketer = new BracketRoot();
double accuracy = 1.0E-5;
RidderSingleRootFinder rootFinder = new RidderSingleRootFinder(accuracy);
double[] range = bracketer.getBracketedPoints(toSolveC, -1.0, 1.0);
param[2] = rootFinder.getRoot(toSolveC, range[0], range[1]).Value;
param[1] = -2 * param[2] / cutOffStrike - (priceK[1] / priceK[0] * cutOffStrike + mu) * cutOffStrike;
param[0] = Math.Log(priceK[0] / Math.Pow(cutOffStrike, -mu)) - param[1] / cutOffStrike - param[2] / (cutOffStrike * cutOffStrike);
return(param);
}
public YieldTermStructure fitSwap(int curveIndex, BasicFixedLeg swap, YieldTermStructure curve, double swapRate)
{
int nPayments = swap._nPayments;
int nNodes = curve.nJumps_;
double t1 = curveIndex == 0 ? 0.0 : curve.t[curveIndex - 1];
double t2 = curveIndex == nNodes - 1 ? double.PositiveInfinity : curve.t[curveIndex + 1];
double temp = 0;
double temp2 = 0;
int i1 = 0;
int i2 = nPayments;
double[] paymentAmounts = new double[nPayments];
for (int i = 0; i < nPayments; i++)
{
double t = swap.getPaymentTime(i);
paymentAmounts[i] = swap.getPaymentAmounts(i, swapRate);
if (t <= t1)
{
double df = Math.Exp(-curve.getRT_(t));
temp += paymentAmounts[i] * df;
temp2 -= paymentAmounts[i] * curve.getSingleNodeDiscountFactorSensitivity(t, curveIndex);
i1++;
}
else if (t >= t2)
{
double df = Math.Exp(-curve.getRT_(t));
temp += paymentAmounts[i] * df;
temp2 += paymentAmounts[i] * curve.getSingleNodeDiscountFactorSensitivity(t, curveIndex);
i2--;
}
}
double cachedValues = temp;
double cachedSense = temp2;
int index1 = i1;
int index2 = i2;
BracketRoot BRACKETER = new BracketRoot();
NewtonRaphsonSingleRootFinder ROOTFINDER = new NewtonRaphsonSingleRootFinder();
Func <double, double> func = x => apply_(x, curve, curveIndex, cachedValues, index1, index2,
swap, paymentAmounts);
Func <double, double> grad = x => apply_sen(x, curve, curveIndex, cachedSense, index1, index2,
swap, swapRate);
double guess = curve.getZeroRateAtIndex(curveIndex);
if (guess == 0.0 && func(guess) == 0.0)
{
return(curve);
}
double[] bracket = BRACKETER.getBracketedPoints(func, 0.8 * guess, 1.25 * guess, 0, double.PositiveInfinity);
double r = ROOTFINDER.getRoot(func, grad, bracket[0], bracket[1]);
return(curve.withRate(r, curveIndex));
}
//-------------------------------------------------------------------------
private double[] bracketRoot(double optionPrice, double sigma)
{
BracketRoot bracketer = new BracketRoot();
System.Func <double, double> func = (double?volatility) =>
{
return(priceFunc.apply(volatility) / optionPrice - 1.0);
};
return(bracketer.getBracketedPoints(func, Math.Max(0.0, sigma - BRACKET_STEP), sigma + BRACKET_STEP, 0d, double.PositiveInfinity));
}
//-------------------------------------------------------------------------
/// <summary>
/// Computes the implied volatility.
/// <para>
/// If the volatility data is not zero, it is used as a starting point for the volatility search.
/// </para>
/// <para>
/// Note that the 'numeraire' is a simple multiplier and is the responsibility of the caller.
///
/// </para>
/// </summary>
/// <param name="optionPrice"> the price of the option </param>
/// <param name="forward"> the forward value of the underlying </param>
/// <param name="strike"> the strike </param>
/// <param name="timeToExpiry"> the time to expiry </param>
/// <param name="initialNormalVol"> the normal volatility used to start the search </param>
/// <param name="numeraire"> the numeraire </param>
/// <param name="putCall"> whether it is put or call </param>
/// <returns> the implied volatility </returns>
public static double impliedVolatility(double optionPrice, double forward, double strike, double timeToExpiry, double initialNormalVol, double numeraire, PutCall putCall)
{
double intrinsicPrice = numeraire * Math.Max(0, (putCall.Call ? 1 : -1) * (forward - strike));
ArgChecker.isTrue(optionPrice > intrinsicPrice || DoubleMath.fuzzyEquals(optionPrice, intrinsicPrice, 1e-6), "Option price (" + optionPrice + ") less than intrinsic value (" + intrinsicPrice + ")");
if (System.BitConverter.DoubleToInt64Bits(optionPrice) == Double.doubleToLongBits(intrinsicPrice))
{
return(0d);
}
double sigma = (Math.Abs(initialNormalVol) < 1e-10 ? 0.3 * forward : initialNormalVol);
double maxChange = 0.5 * forward;
ValueDerivatives price = priceAdjoint(forward, strike, timeToExpiry, sigma, numeraire, putCall);
double vega = price.getDerivative(1);
double change = (price.Value - optionPrice) / vega;
double sign = Math.Sign(change);
change = sign * Math.Min(maxChange, Math.Abs(change));
if (change > 0 && change > sigma)
{
change = sigma;
}
int count = 0;
while (Math.Abs(change) > EPS)
{
sigma -= change;
price = priceAdjoint(forward, strike, timeToExpiry, sigma, numeraire, putCall);
vega = price.getDerivative(1);
change = (price.Value - optionPrice) / vega;
sign = Math.Sign(change);
change = sign * Math.Min(maxChange, Math.Abs(change));
if (change > 0 && change > sigma)
{
change = sigma;
}
if (count++ > MAX_ITERATIONS)
{
BracketRoot bracketer = new BracketRoot();
BisectionSingleRootFinder rootFinder = new BisectionSingleRootFinder(EPS);
System.Func <double, double> func = (double?volatility) =>
{
return(numeraire * NormalFormulaRepository.price(forward, strike, timeToExpiry, volatility.Value, putCall) - optionPrice);
};
double[] range = bracketer.getBracketedPoints(func, 0d, 10d);
return(rootFinder.getRoot(func, range[0], range[1]).Value);
}
}
return(sigma);
}
/// <summary>
/// Calculates the common part of the exercise boundary of European swaptions forward.
/// <para>
/// This is intended to be used in particular for Bermudan swaption first step of the pricing.
/// </para>
/// <para>
/// Reference: Henrard, "M. Bermudan Swaptions in Gaussian HJM One-Factor Model: Analytical and Numerical Approaches".
/// SSRN, October 2008. Available at SSRN: http://ssrn.com/abstract=1287982
///
/// </para>
/// </summary>
/// <param name="discountedCashFlow"> the swap discounted cash flows </param>
/// <param name="alpha2"> square of the alpha parameter </param>
/// <param name="hwH"> the H factors </param>
/// <returns> the exercise boundary </returns>
public double lambda(DoubleArray discountedCashFlow, DoubleArray alpha2, DoubleArray hwH)
{
//JAVA TO C# CONVERTER WARNING: The original Java variable was marked 'final':
//ORIGINAL LINE: final java.util.function.Function<double, double> swapValue = new java.util.function.Function<double, double>()
System.Func <double, double> swapValue = (double?x) =>
{
double value = 0.0;
for (int loopcf = 0; loopcf < alpha2.size(); loopcf++)
{
value += discountedCashFlow.get(loopcf) * Math.Exp(-0.5 * alpha2.get(loopcf) - hwH.get(loopcf) * x);
}
return(value);
};
BracketRoot bracketer = new BracketRoot();
double accuracy = 1.0E-8;
RidderSingleRootFinder rootFinder = new RidderSingleRootFinder(accuracy);
double[] range = bracketer.getBracketedPoints(swapValue, -2.0, 2.0);
return(rootFinder.getRoot(swapValue, range[0], range[1]).Value);
}
//-------------------------------------------------------------------------
private InterpolatedNodalCurve fitSwap(int curveIndex, BasicFixedLeg swap, InterpolatedNodalCurve curve, double swapRate)
{
int nPayments = swap.NumPayments;
int nNodes = curve.ParameterCount;
double t1 = curveIndex == 0 ? 0.0 : curve.XValues.get(curveIndex - 1);
double t2 = curveIndex == nNodes - 1 ? double.PositiveInfinity : curve.XValues.get(curveIndex + 1);
double temp = 0;
double temp2 = 0;
int i1 = 0;
int i2 = nPayments;
double[] paymentAmounts = new double[nPayments];
for (int i = 0; i < nPayments; i++)
{
double t = swap.getPaymentTime(i);
paymentAmounts[i] = swap.getPaymentAmounts(i, swapRate);
if (t <= t1)
{
double df = Math.Exp(-curve.yValue(t) * t);
temp += paymentAmounts[i] * df;
temp2 += paymentAmounts[i] * t *df *curve.yValueParameterSensitivity(t).Sensitivity.get(curveIndex);
i1++;
}
else if (t >= t2)
{
double df = Math.Exp(-curve.yValue(t) * t);
temp += paymentAmounts[i] * df;
temp2 -= paymentAmounts[i] * t *df *curve.yValueParameterSensitivity(t).Sensitivity.get(curveIndex);
i2--;
}
}
double cachedValues = temp;
double cachedSense = temp2;
int index1 = i1;
int index2 = i2;
//JAVA TO C# CONVERTER WARNING: The original Java variable was marked 'final':
//ORIGINAL LINE: java.util.function.Function<double, double> func = new java.util.function.Function<double, double>()
System.Func <double, double> func = (double?x) =>
{
InterpolatedNodalCurve tempCurve = curve.withParameter(curveIndex, x);
double sum = 1.0 - cachedValues; // Floating leg at par
for (int i = index1; i < index2; i++)
{
double t = swap.getPaymentTime(i);
sum -= paymentAmounts[i] * Math.Exp(-tempCurve.yValue(t) * t);
}
return(sum);
};
//JAVA TO C# CONVERTER WARNING: The original Java variable was marked 'final':
//ORIGINAL LINE: java.util.function.Function<double, double> grad = new java.util.function.Function<double, double>()
System.Func <double, double> grad = (double?x) =>
{
InterpolatedNodalCurve tempCurve = curve.withParameter(curveIndex, x);
double sum = cachedSense;
for (int i = index1; i < index2; i++)
{
double t = swap.getPaymentTime(i);
sum += swap.getPaymentAmounts(i, swapRate) * t * Math.Exp(-tempCurve.yValue(t) * t) * tempCurve.yValueParameterSensitivity(t).Sensitivity.get(curveIndex);
}
return(sum);
};
double guess = curve.getParameter(curveIndex);
if (guess == 0.0 && func(guess) == 0.0)
{
return(curve);
}
double[] bracket = guess > 0d ? BRACKETER.getBracketedPoints(func, 0.8 * guess, 1.25 * guess, double.NegativeInfinity, double.PositiveInfinity) : BRACKETER.getBracketedPoints(func, 1.25 * guess, 0.8 * guess, double.NegativeInfinity, double.PositiveInfinity);
double r = rootFinder.getRoot(func, grad, bracket[0], bracket[1]).Value;
return(curve.withParameter(curveIndex, r));
}