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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2006 Mario Pucci
This file is part of QuantLib, a free-software/open-source library
for financial quantitative analysts and developers - http://quantlib.org/
QuantLib is free software: you can redistribute it and/or modify it
under the terms of the QuantLib license. You should have received a
copy of the license along with this program; if not, please email
<quantlib-dev@lists.sf.net>. The license is also available online at
<http://quantlib.org/license.shtml>.
This program is distributed in the hope that it will be useful, but WITHOUT
ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS
FOR A PARTICULAR PURPOSE. See the license for more details.
*/
/*! \file smilesection.hpp
\brief Smile section base class
*/
#ifndef quantlib_smile_section_hpp
#define quantlib_smile_section_hpp
#include <ql/patterns/observable.hpp>
#include <ql/time/date.hpp>
#include <ql/time/daycounters/actual365fixed.hpp>
#include <ql/utilities/null.hpp>
#include <ql/quote.hpp>
#include <vector>
namespace QuantLib {
class SpreadedSmileSection;
//! interest rate volatility smile section
/*! This abstract class provides volatility smile section interface */
class SmileSection : public virtual Observable, public Observer {
public:
SmileSection(const Date& d,
const DayCounter& dc = DayCounter(),
const Date& referenceDate = Date());
SmileSection(Time exerciseTime,
const DayCounter& dc = DayCounter());
SmileSection() {}
virtual void update();
virtual ~SmileSection() {}
virtual Real minStrike() const = 0;
virtual Real maxStrike() const = 0;
Real variance(Rate strike = Null<Rate>()) const;
Volatility volatility(Rate strike = Null<Rate>()) const;
virtual Real atmLevel() const = 0;
const Date& exerciseDate() const { return exerciseDate_; }
Time exerciseTime() const { return exerciseTime_; }
const DayCounter& dayCounter() const { return dc_; }
void initializeExerciseTime() const;
friend class SpreadedSmileSection;
protected:
virtual Real varianceImpl(Rate strike) const = 0;
virtual Volatility volatilityImpl(Rate strike) const = 0;
private:
bool isFloating_;
mutable Date referenceDate_;
Date exerciseDate_;
DayCounter dc_;
mutable Time exerciseTime_;
};
inline Real SmileSection::variance(Rate strike) const {
if (strike==Null<Rate>())
strike = atmLevel();
return varianceImpl(strike);
}
inline Volatility SmileSection::volatility(Rate strike) const {
if (strike==Null<Rate>())
strike = atmLevel();
return volatilityImpl(strike);
}
class FlatSmileSection : public SmileSection {
public:
FlatSmileSection(const Date& d,
Volatility vol,
const DayCounter& dc,
const Date& referenceDate = Date(),
Real atmLevel = Null<Rate>())
: SmileSection(d, dc, referenceDate),
vol_(vol),
atmLevel_(atmLevel){}
FlatSmileSection(Time exerciseTime,
Volatility vol,
const DayCounter& dc = Actual365Fixed())
: SmileSection(exerciseTime, dc), vol_(vol) {}
Real minStrike () const { return 0.0; }
Real maxStrike () const { return QL_MAX_REAL; }
Real atmLevel() const { return atmLevel_; }
protected:
Real varianceImpl(Rate) const { return vol_*vol_* exerciseTime(); }
Volatility volatilityImpl(Rate) const { return vol_; }
private:
Volatility vol_;
Real atmLevel_;
};
class SabrSmileSection : public SmileSection {
public:
SabrSmileSection(Time timeToExpiry,
Rate forward,
const std::vector<Real>& sabrParameters);
SabrSmileSection(const Date& d,
Rate forward,
const std::vector<Real>& sabrParameters,
const DayCounter& dc = Actual365Fixed());
Real minStrike () const { return 0.0; }
Real maxStrike () const { return QL_MAX_REAL; }
Real atmLevel() const { return forward_; }
protected:
Real varianceImpl(Rate strike) const;
Volatility volatilityImpl(Rate strike) const;
private:
Real alpha_, beta_, nu_, rho_, forward_;
};
class SpreadedSmileSection : public SmileSection {
public:
SpreadedSmileSection(const boost::shared_ptr<SmileSection>& underlyingSection,
const Handle<Quote>& spread)
: underlyingSection_(underlyingSection), spread_(spread) {
registerWith(underlyingSection_);
registerWith(spread_);
}
void update(){ notifyObservers(); }
Real minStrike() const { return underlyingSection_->minStrike(); }
Real maxStrike() const { return underlyingSection_->maxStrike(); }
const Date& exerciseDate() const { return underlyingSection_->exerciseDate(); }
Time exerciseTime() const { return underlyingSection_->exerciseTime(); }
const DayCounter& dayCounter() const { return underlyingSection_->dayCounter(); }
Real atmLevel() const { return underlyingSection_->atmLevel(); }
protected:
Real varianceImpl(Rate strike) const {
Volatility vol = volatilityImpl(strike);
return vol*vol*exerciseTime();
}
Volatility volatilityImpl(Rate strike) const {
return underlyingSection_->volatilityImpl(strike)+spread_->value();
}
private:
const boost::shared_ptr<SmileSection> underlyingSection_;
const Handle<Quote> spread_;
};
}
#endif
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