/// <summary>
/// Prepares the portfolios by splitting products with early exercise into
/// the products they become after exercise and the product that produces their
/// cashflows until exercise.
/// </summary>
/// <param name="portfolioIn">The user supplied portfolio.</param>
/// <param name="fwdValueDates">The extra forward value dates.</param>
private void PreparePortfolios(Product[] portfolioIn, Date[] fwdValueDates)
{
allDates = fwdValueDates.Select(date => new Date(date)).ToList();
allDates.Add(valueDate);
allTrades = new List <Product>();
originalTrades = new List <int>();
postExerciseTrades = new Dictionary <int, List <int> >();
// Add the orginal trades
int counter = 0;
foreach (Product product in portfolioIn)
{
allTrades.Add(product.Clone());
originalTrades.Add(counter);
ProductWithEarlyExercise option = product as ProductWithEarlyExercise;
if (option != null)
{
List <int> subList = new List <int>();
postExerciseTrades.Add(counter, subList);
counter++;
allDates.AddRange(option.GetExerciseDates());
List <Product> postExProducts = option.GetPostExProducts();
foreach (Product postExProduct in postExProducts)
{
allTrades.Add(postExProduct);
subList.Add(counter);
counter++;
}
}
else
{
counter++;
}
}
allDates = allDates.Distinct().ToList();
allDates.Sort();
}
/// <summary>
/// Replaces the no exercise cashflows for the product at position <paramref name="key"/> with the cashflows based on
/// an estimated optimal exercise policy.
/// </summary>
/// <param name="key">The postion in <see cref="allTrades"/> of the product to be updated.</param>
private void ApplyEarlyExercise(int key)
{
// Get pathwise regressed values of post exercise products.
ProductWithEarlyExercise option = allTrades[key] as ProductWithEarlyExercise;
List <Date> exDates = option.GetExerciseDates();
double[,] postExRegressedValues = new double[N, exDates.Count];
for (int i = 0; i < exDates.Count; i++)
{
// perform regression on each exercise date
int postExerciseProductInd = postExerciseTrades[key][option.GetPostExProductAtDate(exDates[i])];
double[] fitted = PerformRegression(exDates[i], simulatedCFs, simulatedRegs, new List <int> {
postExerciseProductInd
});
postExRegressedValues.SetColumn(i, fitted);
}
// Iterate backwards
// initially the stoppping time on all paths is infinity (actually the year 3000)
Date[] optimalStop = new Date[N];
Date finalDate = new Date(3000, 1, 1);
for (int i = 0; i < N; i++)
{
optimalStop[i] = finalDate;
}
for (int exDateCount = exDates.Count - 1; exDateCount >= 0; exDateCount--)
{
Date exDate = exDates[exDateCount];
// Optimal flows are underlying product up to the stopping time, then the post exercise product flows afterwards
double[] pvOptimalCFs = Vector.Zeros(N);
for (int pathCount = 0; pathCount < N; pathCount++)
{
if (optimalStop[pathCount] < finalDate)
{
int exProductInd = postExerciseTrades[key][option.GetPostExProductAtDate(optimalStop[pathCount])];
foreach (Cashflow cf in simulatedCFs.GetCFs(exProductInd, pathCount))
{
if (cf.date > optimalStop[pathCount])
{
pvOptimalCFs[pathCount] += cf.amount;
}
}
}
foreach (Cashflow cf in simulatedCFs.GetCFs(key, pathCount))
{
if (cf.date > valueDate && cf.date <= optimalStop[pathCount])
{
pvOptimalCFs[pathCount] += cf.amount;
}
}
}
// update optimal stopping times
double[] optimalCV = simulatedRegs.FitCFs(exDate, pvOptimalCFs);
for (int pathCount = 0; pathCount < N; pathCount++)
{
if (option.IsLongOptionality(exDate) && optimalCV[pathCount] < postExRegressedValues[pathCount, exDateCount])
{
optimalStop[pathCount] = exDate;
}
else if (!option.IsLongOptionality(exDate) && optimalCV[pathCount] > postExRegressedValues[pathCount, exDateCount])
{
optimalStop[pathCount] = exDate;
}
}
}
// All stopping times have been found so now we can update the cashflows.
// The cashflows are continuation flows up to the exercise date then cashflows from the
// exercise product after that.
List <Cashflow>[] newCFs = new List <Cashflow> [N];
for (int pathCount = 0; pathCount < N; pathCount++)
{
newCFs[pathCount] = new List <Cashflow>();
int exProductInd = postExerciseTrades[key][option.GetPostExProductAtDate(optimalStop[pathCount])];
foreach (Cashflow cf in simulatedCFs.GetCFs(exProductInd, pathCount))
{
if (cf.date > optimalStop[pathCount])
{
newCFs[pathCount].Add(cf);
}
}
foreach (Cashflow cf in simulatedCFs.GetCFs(key, pathCount))
{
if (cf.date > valueDate && cf.date <= optimalStop[pathCount])
{
newCFs[pathCount].Add(cf);
}
}
}
simulatedCFs.Update(key, newCFs);
}
