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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2008 Frank Hövermann
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 <ql/experimental/volatility/extendedblackvariancesurface.hpp>
#include <ql/math/interpolations/bilinearinterpolation.hpp>
namespace QuantLib {
ExtendedBlackVarianceSurface::ExtendedBlackVarianceSurface(
const Date& referenceDate,
const Calendar& calendar,
const std::vector<Date>& dates,
const std::vector<Real>& strikes,
const std::vector<Handle<Quote> >& volatilities,
const DayCounter& dayCounter,
ExtendedBlackVarianceSurface::Extrapolation lowerEx,
ExtendedBlackVarianceSurface::Extrapolation upperEx)
: BlackVarianceTermStructure(referenceDate, calendar),
dayCounter_(dayCounter), maxDate_(dates.back()),
volatilities_(volatilities), strikes_(strikes),
lowerExtrapolation_(lowerEx), upperExtrapolation_(upperEx) {
QL_REQUIRE(dates.size()*strikes_.size()==volatilities_.size(),
"size mismatch between date vector and vol matrix columns "
"and/or between money-strike vector and vol matrix rows");
QL_REQUIRE(dates[0] > referenceDate,
"cannot have dates_[0] <= referenceDate_");
times_ = std::vector<Time>(dates.size()+1);
times_[0] = 0.0;
for (Size j=1; j<=dates.size(); j++) {
times_[j] = timeFromReference(dates[j-1]);
QL_REQUIRE(times_[j]>times_[j-1],
"dates must be sorted unique");
}
variances_ = Matrix(strikes_.size(), dates.size()+1);
setVariances();
setInterpolation<Bilinear>();
for (Size j = 0; j < volatilities_.size(); j++)
registerWith(volatilities_[j]);
}
void ExtendedBlackVarianceSurface::setVariances() {
for (Size i=0; i<times_.size()+1; i++) {
variances_[0][i] = 0.0;
}
for (Size j=1; j<=times_.size(); j++) {
for (Size i=0; i<strikes_.size(); i++) {
Volatility sigma = volatilities_[i*times_.size()+j-1]->value();
variances_[i][j] = times_[j] * sigma * sigma;
QL_REQUIRE(variances_[i][j]>=variances_[i][j-1],
"variance must be non-decreasing");
}
}
}
void ExtendedBlackVarianceSurface::update() {
setVariances();
varianceSurface_.update();
notifyObservers();
}
Real ExtendedBlackVarianceSurface::blackVarianceImpl(Time t,
Real strike) const {
if (t==0.0) return 0.0;
// enforce constant extrapolation when required
if (strike < strikes_.front()
&& lowerExtrapolation_ == ConstantExtrapolation)
strike = strikes_.front();
if (strike > strikes_.back()
&& upperExtrapolation_ == ConstantExtrapolation)
strike = strikes_.back();
if (t<=times_.back())
return varianceSurface_(t, strike, true);
else // t>times_.back() || extrapolate
return varianceSurface_(times_.back(), strike, true) *
t/times_.back();
}
}
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