/// <summary>
/// Calculates the gamma of the bond future option product based on the price of the underlying future.
/// <para>
/// The gamma of the product is the sensitivity of the option delta to the future price.
/// The volatility is unchanged for a fixed strike in the sensitivity computation, hence the "StickyStrike" name.
///
/// </para>
/// </summary>
/// <param name="futureOption"> the option product </param>
/// <param name="discountingProvider"> the discounting provider </param>
/// <param name="volatilities"> the volatilities </param>
/// <param name="futurePrice"> the price of the underlying future </param>
/// <returns> the price curve sensitivity of the product </returns>
public double gammaStickyStrike(ResolvedBondFutureOption futureOption, LegalEntityDiscountingProvider discountingProvider, BlackBondFutureVolatilities volatilities, double futurePrice)
{
ArgChecker.isTrue(futureOption.PremiumStyle.Equals(FutureOptionPremiumStyle.DAILY_MARGIN), "Premium style should be DAILY_MARGIN");
double strike = futureOption.StrikePrice;
ResolvedBondFuture future = futureOption.UnderlyingFuture;
double volatility = volatilities.volatility(futureOption.Expiry, future.LastTradeDate, strike, futurePrice);
double timeToExpiry = volatilities.relativeTime(futureOption.Expiry);
double gamma = BlackFormulaRepository.gamma(futurePrice, strike, timeToExpiry, volatility);
return(gamma);
}
//-------------------------------------------------------------------------
public virtual void test_gamma_presentValueGamma()
{
double gammaCall = PRICER.gamma(CALL_OTM, RATES_PROVIDER, VOLS);
CurrencyAmount pvGammaCall = PRICER.presentValueGamma(CALL_OTM, RATES_PROVIDER, VOLS);
double gammaPut = PRICER.gamma(PUT_ITM, RATES_PROVIDER, VOLS);
CurrencyAmount pvGammaPut = PRICER.presentValueGamma(PUT_ITM, RATES_PROVIDER, VOLS);
double timeToExpiry = VOLS.relativeTime(EXPIRY);
double dfDom = RATES_PROVIDER.discountFactor(USD, PAYMENT_DATE);
double dfFor = RATES_PROVIDER.discountFactor(EUR, PAYMENT_DATE);
double forward = PRICER.DiscountingFxSingleProductPricer.forwardFxRate(FX_PRODUCT_HIGH, RATES_PROVIDER).fxRate(CURRENCY_PAIR);
double vol = SMILE_TERM.volatility(timeToExpiry, STRIKE_RATE_HIGH, forward);
double expectedGamma = dfFor * dfFor / dfDom * BlackFormulaRepository.gamma(forward, STRIKE_RATE_HIGH, timeToExpiry, vol);
double expectedPvGamma = -NOTIONAL * dfFor * dfFor / dfDom * BlackFormulaRepository.gamma(forward, STRIKE_RATE_HIGH, timeToExpiry, vol);
assertEquals(gammaCall, expectedGamma, TOL);
assertEquals(pvGammaCall.Currency, USD);
assertEquals(pvGammaCall.Amount, expectedPvGamma, NOTIONAL * TOL);
assertEquals(gammaPut, expectedGamma, TOL);
assertEquals(pvGammaPut.Currency, USD);
assertEquals(pvGammaPut.Amount, -expectedPvGamma, NOTIONAL * TOL);
}
public virtual void test_presentValueGamma_formula_shift()
{
CurrencyAmount computedCaplet = PRICER.presentValueGamma(CAPLET_LONG, RATES, SHIFTED_VOLS);
CurrencyAmount computedFloorlet = PRICER.presentValueGamma(FLOORLET_SHORT, RATES, SHIFTED_VOLS);
double forward = RATES.iborIndexRates(EUR_EURIBOR_3M).rate(RATE_COMP.Observation);
double expiry = SHIFTED_VOLS.relativeTime(CAPLET_LONG.FixingDateTime);
double volatility = SHIFTED_VOLS.volatility(expiry, STRIKE, forward);
double df = RATES.discountFactor(EUR, CAPLET_LONG.PaymentDate);
double shift = IborCapletFloorletDataSet.SHIFT;
double expectedCaplet = NOTIONAL * df * CAPLET_LONG.YearFraction * BlackFormulaRepository.gamma(forward + shift, STRIKE + shift, expiry, volatility);
double expectedFloorlet = -NOTIONAL *df *FLOORLET_SHORT.YearFraction *BlackFormulaRepository.gamma(forward + shift, STRIKE + shift, expiry, volatility);
assertEquals(computedCaplet.Currency, EUR);
assertEquals(computedCaplet.Amount, expectedCaplet, NOTIONAL * TOL);
assertEquals(computedFloorlet.Currency, EUR);
assertEquals(computedFloorlet.Amount, expectedFloorlet, NOTIONAL * TOL);
}
