/// <summary>
/// Constructor
/// </summary>
/// <param name="volatilities">Existing volatilities</param>
/// <param name="timeGrid">Time discretisation</param>
/// <param name="swaptionWeights"></param>
/// <param name="targets"></param>
/// <param name="parameters"></param>
/// <param name="factors"></param>
public CascadeAlgorithm(InterestRateVolatilities volatilities, PedersenTimeGrid timeGrid,
SwaptionWeights swaptionWeights, CalibrationTargets targets, CascadeParameters parameters, int factors)
{
_targets = targets;
_timeGrid = timeGrid;
_volatilities = volatilities;
_parameters = parameters;
_swaptionWeights = swaptionWeights;
_factors = factors;
_scales = new double[_timeGrid.MaxExpiry][];
_isScaled = new bool[_timeGrid.MaxExpiry][];
for (int i = 0; i < _timeGrid.MaxExpiry; i++)
{
_scales[i] = new double[_timeGrid.MaxTenor - i];
_isScaled[i] = new bool[_timeGrid.MaxTenor - i];
}
}
/// <summary>
/// Constructor
/// </summary>
/// <param name="targets">Calibration targets containing swaption and caplet data</param>
/// <param name="timeGrid">Time discretisation</param>
/// <param name="volatilities">Volatility to be calibrated</param>
/// <param name="parameters">Calibration parameter settings</param>
public CalibrationObjective(CalibrationTargets targets, PedersenTimeGrid timeGrid,
InterestRateVolatilities volatilities, CalibrationSettings parameters)
{
Finished = false;
_gradPhase = false;
_iterationCounter = 0;
_taskCounter = new TaskCounter();
//_currentInput = new DenseVector(0);
_targets = targets;
_timeGrid = timeGrid;
_volatilities = volatilities;
_parameters = parameters;
_hFactor = 1.0 / (_timeGrid.ExpiryCount * (_timeGrid.TenorCount - 1));
_vFactor = 1.0 / ((_timeGrid.ExpiryCount - 1) * _timeGrid.TenorCount);
_sFactor = 1.0 / _targets.SwaptionCount;
_cFactor = 1.0 / _targets.CapletCount;
}
/// <summary>
/// Main calibration method.
/// </summary>
/// <param name="timeGrid">Time discretisation</param>
/// <param name="discount">Quarterly discount factors</param>
/// <param name="shift">Quarterly shift values</param>
/// <param name="correlation">Correlation matrix, corresponding the tenor time discretisation</param>
/// <param name="targets">Caplet and swaption implied vols</param>
/// <param name="parameters">Calibration settings</param>
/// <param name="factors">Factors used</param>
/// <param name="useCascade">Whether to apply cascade algorithm post-calibration</param>
/// <param name="output"></param>
/// <returns></returns>
public static InterestRateVolatilities Calibrate(PedersenTimeGrid timeGrid, QuarterlyDiscounts discount,
QuarterlyShifts shift, DenseMatrix correlation, CalibrationTargets targets,
CalibrationSettings parameters, int factors, bool useCascade, ref string output)
{
#region Initialisations
targets.AdjustImpliedVolsForShift(discount, shift);
var swaptionWeights = new SwaptionWeights(timeGrid.MaxExpiry, timeGrid.MaxTenor);
swaptionWeights.Populate(discount, shift);
var volatilities = new InterestRateVolatilities(timeGrid, factors, swaptionWeights, correlation);
var objective = new CalibrationObjective(targets, timeGrid, volatilities, parameters);
Func <Vector <double>, double> f = objective.ObjFun;
Func <Vector <double>, Vector <double> > g = objective.ObjGrad;
var initialGuess = new DenseVector(timeGrid.ExpiryCount * timeGrid.TenorCount);
double guessValue = targets.AverageImpliedVol();
if (guessValue == 0)
{
throw new Exception("The selected time range does not include any calibration targets.");
}
if (parameters.ExponentialForm)
{
for (var i = 0; i < initialGuess.Count; i++)
{
initialGuess[i] = Math.Log(guessValue) / 20;
}
}
else
{
for (var i = 0; i < initialGuess.Count; i++)
{
initialGuess[i] = guessValue;
}
}
Trace.WriteLine(String.Format("Calibration Starting..."));
objective.StartOtherThreads();
var solution = BfgsSolver.Solve(initialGuess, f, g);
objective.Finished = true;
Trace.WriteLine($"Value at extremum: {solution}");
objective.PopulateVol(solution);
objective.AverageAbsVol();
#endregion
#region Cascade
if (useCascade)
{
Trace.WriteLine(String.Format("Applying Cascade Algorithm..."));
var cascade = new CascadeAlgorithm(volatilities, timeGrid, swaptionWeights, targets, parameters.CascadeParam, factors);
cascade.ApplyCascade();
}
#endregion
#region Output
output = objective.AverageAbsVol();
return(objective.ReturnVol(solution));
#endregion
}