public void TestBGMConvexityAdjustment()
{
//double[] futuresPrice = {0.0d, .05d};
double[,] volatility = { { 0, 0.2 } };
double[, ,] correlation = new double[2, 2, 1];
double[] shift = { 0.0, 0.0 };
double[] coverage = { 0.25, 0.25 };
double[] timeNodes = { 0, 0.25, 0.5 };
double[] knownvalue = { 0.049993797154200, 0.050993548171811, 0.051993294354016, 0.052993035704439, 0.053992772226696, 0.054992503924403, 0.055992230801171, 0.056991952860608, 0.057991670106317, 0.058991382541898 };
double tolerance = 1e-9;
for (var j = 0; j < 2; j++)
{
for (var k = 0; k < 2; k++)
{
correlation[j, k, 0] = 1;
}
}
for (var i = 0; i < 10; i++)
{
var rate = new[] { 0, (50.0 + i) * 0.001 };
var result = CashForward.CalculateCashForward(rate, volatility, correlation, shift, coverage, timeNodes);
Assert.AreEqual(knownvalue[i], result[i].x, tolerance);
Debug.WriteLine(String.Format("rate : {0} implied: {1}", rate, result[1].x));//TODO the 1 needs to ba an i.
}
}
///<summary>
/// The main function to calculate the adjusted forward.
///</summary>
///<param name="futuresPriceArray"> Vector of futures prices.</param>
///<param name="volatilityRange"> Vector of futures</param>
///<param name="correlationRange"> Correlation between forwards. Can be a
/// scalar input or a correlation matrix.</param>
///<param name="shiftArray"> The shift parameters from the BGM
/// calibration.</param>
///<param name="coverageArray"> The vector of time intervals between model
/// time nodes.</param>
///<param name="timeNodesArray"> The model time nodes</param>
///<returns> Output, a 2-D array of ouput data. The first column is the
/// vector of adjusted cash forwards. The second column is the error
/// from the optimisation (the implied futures rate minus the market
/// rate). The third column is the number of iterations taken by the
/// optimisation routine to converge on each adjusted rate. In the first
/// entry in the fourth and fifth column is the time taken to work
/// through the whole set of time nodes, and the program version.</returns>
public object[,] CalculateCashForward(Excel.Range futuresPriceArray,
Excel.Range volatilityRange,
Excel.Range correlationRange,
Excel.Range shiftArray,
Excel.Range coverageArray,
Excel.Range timeNodesArray)
{
var futuresPrice = DataRangeHelper.StripDoubleRange(futuresPriceArray);
var shift = DataRangeHelper.StripDoubleRange(shiftArray);
var coverage = DataRangeHelper.StripDoubleRange(coverageArray);
var timeNodes = DataRangeHelper.StripDoubleRange(timeNodesArray);
var volatility = DataRangeHelper.ToMatrix <double>(volatilityRange);
var correlation = DataRangeHelper.ToMatrix <double>(correlationRange);
var result = CashForward.CalculateCashForward(futuresPrice.ToArray(), volatility,
correlation, shift.ToArray(), coverage.ToArray(), timeNodes.ToArray());
return(DataRangeHelper.ToRange(result));
}
