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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2005, 2006 Klaus Spanderen
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 liborforwardmodel.hpp
\brief libor forward model incl. exact cap pricing
Rebonato formula to approximate swaption prices.
*/
#ifndef quantlib_libor_forward_model_hpp
#define quantlib_libor_forward_model_hpp
#include <ql/legacy/libormarketmodels/lfmprocess.hpp>
#include <ql/termstructures/volatility/swaption/swaptionvolmatrix.hpp>
#include <ql/termstructures/volatility/optionlet/capletvariancecurve.hpp>
#include <ql/models/model.hpp>
#include <ql/legacy/libormarketmodels/lfmcovarproxy.hpp>
namespace QuantLib {
//! %Libor forward model
/*! References:
Stefan Weber, 2005, Efficient Calibration for Libor Market Models,
(<http://workshop.mathfinance.de/2005/papers/weber/slides.pdf>)
Damiano Brigo, Fabio Mercurio, Massimo Morini, 2003,
Different Covariance Parameterizations of Libor Market Model and Joint
Caps/Swaptions Calibration,
(<http://www.business.uts.edu.au/qfrc/conferences/qmf2001/Brigo_D.pdf>
\test the correctness is tested using Monte-Carlo Simulation to
reproduce swaption npvs, model calibration and exact cap pricing
*/
class LiborForwardModel : public CalibratedModel, public AffineModel {
public:
LiborForwardModel(
const boost::shared_ptr<LiborForwardModelProcess> & process,
const boost::shared_ptr<LmVolatilityModel> & volaModel,
const boost::shared_ptr<LmCorrelationModel> & corrModel);
Rate S_0(Size alpha, Size beta) const;
// approx. swaption matrix using Rebonato's approx.
// fix and floating leg have the same frequency
virtual boost::shared_ptr<SwaptionVolatilityMatrix>
getSwaptionVolatilityMatrix() const;
DiscountFactor discount(Time t) const;
Real discountBond(Time now, Time maturity, Array factors) const;
Real discountBondOption(Option::Type type, Real strike,
Time maturity, Time bondMaturity) const;
void setParams(const Array& params);
protected:
Disposable<Array> w_0(Size alpha, Size beta) const;
std::vector<Real> f_;
std::vector<Time> accrualPeriod_;
const boost::shared_ptr<LfmCovarianceProxy> covarProxy_;
const boost::shared_ptr<LiborForwardModelProcess> process_;
mutable boost::shared_ptr<SwaptionVolatilityMatrix> swaptionVola;
};
}
#endif
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