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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2007 Cristina Duminuco
Copyright (C) 2006 Ferdinando Ametrano
Copyright (C) 2006 Franois du Vignaud
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.
*/
#include "swaptionvolatilitymatrix.hpp"
#include "swaptionvolstructuresutilities.hpp"
#include "utilities.hpp"
#include <ql/utilities/dataformatters.hpp>
#include <string>
using namespace QuantLib;
using namespace boost::unit_test_framework;
QL_BEGIN_TEST_LOCALS(SwaptionVolatilityMatrixTest)
// global data
Date referenceDate_;
SwaptionMarketConventions conventions_;
AtmVolatility atm_;
RelinkableHandle<YieldTermStructure> termStructure_;
RelinkableHandle<SwaptionVolatilityStructure> atmVolMatrix_;
Real tolerance_;
// utilities
void setup() {
conventions_.setConventions();
atm_.setMarketData();
atmVolMatrix_ = RelinkableHandle<SwaptionVolatilityStructure>(
boost::shared_ptr<SwaptionVolatilityStructure>(new
SwaptionVolatilityMatrix(conventions_.calendar,
atm_.tenors.options,
atm_.tenors.swaps,
atm_.volsHandle,
conventions_.dayCounter,
conventions_.optionBdc)));
}
void makeObservabilityTest(
const std::string& description,
const boost::shared_ptr<SwaptionVolatilityStructure>& vol,
bool mktDataFloating,
bool referenceDateFloating) {
Rate dummyStrike = .02;
Date referenceDate = Settings::instance().evaluationDate();
Volatility initialVol = vol->volatility(
referenceDate + atm_.tenors.options[0],
atm_.tenors.swaps[0], dummyStrike, false);
// testing evaluation date change ...
Settings::instance().evaluationDate() = referenceDate - Period(1, Years);
Volatility newVol = vol->volatility(
referenceDate + atm_.tenors.options[0],
atm_.tenors.swaps[0], dummyStrike, false);
Settings::instance().evaluationDate() = referenceDate;
if (referenceDateFloating && (initialVol == newVol))
BOOST_ERROR(description <<
" the volatility should change when the reference date is changed !");
if (!referenceDateFloating && (initialVol != newVol))
BOOST_ERROR(description <<
" the volatility should not change when the reference date is changed !");
// test market data change...
if (mktDataFloating){
Volatility initialVolatility = atm_.volsHandle[0][0]->value();
boost::dynamic_pointer_cast<SimpleQuote>(
atm_.volsHandle[0][0].currentLink())->setValue(10);
newVol = vol->volatility(
referenceDate + atm_.tenors.options[0],
atm_.tenors.swaps[0], dummyStrike, false);
boost::dynamic_pointer_cast<SimpleQuote>(
atm_.volsHandle[0][0].currentLink())->setValue(initialVolatility);
if (initialVol == newVol)
BOOST_ERROR(description << " the volatility should change when"
" the market data is changed !");
}
}
void makeCoherenceTest(
const std::string& description,
const boost::shared_ptr<SwaptionVolatilityDiscrete>& vol) {
Date refDate = vol->referenceDate();
for (Size i=0; i<atm_.tenors.options.size(); ++i) {
Date expOptDate = conventions_.calendar.advance(refDate, atm_.tenors.options[i], conventions_.optionBdc);
Date actOptDate = vol->optionDates()[i];
if (actOptDate!=expOptDate)
BOOST_FAIL("\nrecovery of option dates failed for " <<
description << ":"
"\n calendar = " << conventions_.calendar <<
"\n referenceDate = " << refDate <<
"\n expiry tenor = " << atm_.tenors.options[i] <<
"\nexpected option date = " << expOptDate <<
"\n actual option date = " << actOptDate);
}
Date lengthRef = vol->optionDates()[0];
DayCounter volDC = vol->dayCounter();
for (Size j=0; j<atm_.tenors.swaps.size(); ++j) {
Period actSwapTenor = vol->swapTenors()[j];
Date endDate = lengthRef + atm_.tenors.swaps[j];
Time expSwapLength = volDC.yearFraction(lengthRef, endDate);
Time actSwapLength = vol->swapLengths()[j];
if ((atm_.tenors.swaps[j]!=actSwapTenor) ||
(expSwapLength!=actSwapLength))
BOOST_FAIL("\nrecovery of " << io::ordinal(j) <<
" swap tenor failed for " <<
description << ":"
"\nexpected swap tenor = " << atm_.tenors.swaps[j] <<
"\n actual swap tenor = " << actSwapTenor <<
"\nexpected swap length = " << expSwapLength <<
"\n actual swap length = " << actSwapLength);
}
Real tolerance = 1.0e-16;
for (Size i=0; i<atm_.tenors.options.size(); ++i) {
for (Size j=0; j<atm_.tenors.swaps.size(); j++) {
Period thisOptionTenor= atm_.tenors.options[i];
Date thisOptionDate = vol->optionDates()[i];
Period thisSwapTenor = atm_.tenors.swaps[j];
std::pair<Time, Time> p = vol->convertDates(
thisOptionDate, thisSwapTenor);
if ((p.first !=vol->optionTimes()[i]) ||
(p.second!=vol->swapLengths()[j]))
BOOST_FAIL("\nconvertDates failure for " <<
description << ":"
"\n option date = " << thisOptionDate <<
"\n option tenor = " << thisOptionTenor <<
"\nactual option time = " << p.first <<
"\n exp. option time = " << vol->optionTimes()[i] <<
"\n swap tenor = " << thisSwapTenor <<
"\n actual swap length = " << p.second <<
"\n exp. swap length = " << vol->swapLengths()[j]);
Volatility error, actVol, expVol = atm_.vols[i][j];
actVol = vol->volatility(
thisOptionDate, thisSwapTenor, 0.05, true);
error = std::abs(expVol-actVol);
if (error>tolerance)
BOOST_FAIL("\nrecovery of atm vols failed for " <<
description << ":"
"\noption date = " << thisOptionDate <<
"\nswap length = " << thisSwapTenor <<
"\n exp. vol = " << io::volatility(expVol) <<
"\n actual vol = " << io::volatility(actVol) <<
"\n error = " << io::volatility(error) <<
"\n tolerance = " << tolerance);
actVol = vol->volatility(
thisOptionTenor, thisSwapTenor, 0.05, true);
error = std::abs(expVol-actVol);
if (error>tolerance)
BOOST_FAIL("\nrecovery of atm vols failed for " <<
description << ":"
"\noption tenor = " << thisOptionTenor <<
"\n swap length = " << thisSwapTenor <<
"\nexpected vol = " << io::volatility(expVol) <<
"\n actual vol = " << io::volatility(actVol) <<
"\n error = " << io::volatility(error) <<
"\n tolerance = " << tolerance);
}
}
}
QL_END_TEST_LOCALS(SwaptionVolatilityMatrixTest)
void SwaptionVolatilityMatrixTest::testSwaptionVolMatrixObservability() {
BOOST_MESSAGE("Testing swaption volatility matrix observability...");
SavedSettings backup;
setup();
boost::shared_ptr<SwaptionVolatilityMatrix> vol;
std::string description;
//floating reference date, floating market data
description = "floating reference date, floating market data";
vol = boost::shared_ptr<SwaptionVolatilityMatrix>(new
SwaptionVolatilityMatrix(conventions_.calendar,
atm_.tenors.options,
atm_.tenors.swaps,
atm_.volsHandle,
conventions_.dayCounter,
conventions_.optionBdc));
makeObservabilityTest(description, vol, true, true);
//fixed reference date, floating market data
description = "fixed reference date, floating market data";
vol = boost::shared_ptr<SwaptionVolatilityMatrix>(new
SwaptionVolatilityMatrix(Settings::instance().evaluationDate(),
conventions_.calendar,
atm_.tenors.options,
atm_.tenors.swaps,
atm_.volsHandle,
conventions_.dayCounter,
conventions_.optionBdc));
makeObservabilityTest(description, vol, true, false);
// floating reference date, fixed market data
description = "floating reference date, fixed market data";
vol = boost::shared_ptr<SwaptionVolatilityMatrix>(new
SwaptionVolatilityMatrix(conventions_.calendar,
atm_.tenors.options,
atm_.tenors.swaps,
atm_.volsHandle,
conventions_.dayCounter,
conventions_.optionBdc));
makeObservabilityTest(description, vol, false, true);
// fixed reference date, fixed market data
description = "fixed reference date, fixed market data";
vol = boost::shared_ptr<SwaptionVolatilityMatrix>(new
SwaptionVolatilityMatrix(Settings::instance().evaluationDate(),
conventions_.calendar,
atm_.tenors.options,
atm_.tenors.swaps,
atm_.volsHandle,
conventions_.dayCounter,
conventions_.optionBdc));
makeObservabilityTest(description, vol, false, false);
// fixed reference date and fixed market data, option dates
//SwaptionVolatilityMatrix(const Date& referenceDate,
// const std::vector<Date>& exerciseDates,
// const std::vector<Period>& swapTenors,
// const Matrix& volatilities,
// const DayCounter& dayCounter);
}
void SwaptionVolatilityMatrixTest::testSwaptionVolMatrixCoherence() {
BOOST_MESSAGE("Testing swaption volatility matrix...");
SavedSettings backup;
setup();
boost::shared_ptr<SwaptionVolatilityMatrix> vol;
std::string description;
//floating reference date, floating market data
description = "floating reference date, floating market data";
vol = boost::shared_ptr<SwaptionVolatilityMatrix>(new
SwaptionVolatilityMatrix(conventions_.calendar,
atm_.tenors.options,
atm_.tenors.swaps,
atm_.volsHandle,
conventions_.dayCounter,
conventions_.optionBdc));
makeCoherenceTest(description, vol);
//fixed reference date, floating market data
description = "fixed reference date, floating market data";
vol = boost::shared_ptr<SwaptionVolatilityMatrix>(new
SwaptionVolatilityMatrix(Settings::instance().evaluationDate(),
conventions_.calendar,
atm_.tenors.options,
atm_.tenors.swaps,
atm_.volsHandle,
conventions_.dayCounter,
conventions_.optionBdc));
makeCoherenceTest(description, vol);
// floating reference date, fixed market data
description = "floating reference date, fixed market data";
vol = boost::shared_ptr<SwaptionVolatilityMatrix>(new
SwaptionVolatilityMatrix(conventions_.calendar,
atm_.tenors.options,
atm_.tenors.swaps,
atm_.volsHandle,
conventions_.dayCounter,
conventions_.optionBdc));
makeCoherenceTest(description, vol);
// fixed reference date, fixed market data
description = "fixed reference date, fixed market data";
vol = boost::shared_ptr<SwaptionVolatilityMatrix>(new
SwaptionVolatilityMatrix(Settings::instance().evaluationDate(),
conventions_.calendar,
atm_.tenors.options,
atm_.tenors.swaps,
atm_.volsHandle,
conventions_.dayCounter,
conventions_.optionBdc));
makeCoherenceTest(description, vol);
}
test_suite* SwaptionVolatilityMatrixTest::suite() {
test_suite* suite = BOOST_TEST_SUITE("Swaption Volatility Matrix tests");
suite->add(BOOST_TEST_CASE(&SwaptionVolatilityMatrixTest::testSwaptionVolMatrixCoherence));
suite->add(BOOST_TEST_CASE(&SwaptionVolatilityMatrixTest::testSwaptionVolMatrixObservability));
return suite;
}
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