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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2006, 2007 Ferdinando Ametrano
Copyright (C) 2006, 2007 Mark Joshi
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/models/marketmodels/evolvers/lognormalcmswapratepc.hpp>
#include <ql/models/marketmodels/marketmodel.hpp>
#include <ql/models/marketmodels/evolutiondescription.hpp>
#include <ql/models/marketmodels/browniangenerator.hpp>
#include <ql/models/marketmodels/driftcomputation/cmsmmdriftcalculator.hpp>
namespace QuantLib {
LogNormalCmSwapRatePc::LogNormalCmSwapRatePc(
const Size spanningForwards,
const boost::shared_ptr<MarketModel>& marketModel,
const BrownianGeneratorFactory& factory,
const std::vector<Size>& numeraires,
Size initialStep)
: spanningForwards_(spanningForwards),
marketModel_(marketModel),
numeraires_(numeraires),
initialStep_(initialStep),
numberOfRates_(marketModel->numberOfRates()),
numberOfFactors_(marketModel_->numberOfFactors()),
curveState_(marketModel->evolution().rateTimes(), spanningForwards),
swapRates_(marketModel->initialRates()),
displacements_(marketModel->displacements()),
logSwapRates_(numberOfRates_), initialLogSwapRates_(numberOfRates_),
drifts1_(numberOfRates_), drifts2_(numberOfRates_),
initialDrifts_(numberOfRates_), brownians_(numberOfFactors_),
correlatedBrownians_(numberOfRates_),
alive_(marketModel->evolution().firstAliveRate())
{
checkCompatibility(marketModel->evolution(), numeraires);
Size steps = marketModel->evolution().numberOfSteps();
generator_ = factory.create(numberOfFactors_, steps-initialStep_);
currentStep_ = initialStep_;
calculators_.reserve(steps);
fixedDrifts_.reserve(steps);
for (Size j=0; j<steps; ++j) {
const Matrix& A = marketModel_->pseudoRoot(j);
calculators_.push_back(CMSMMDriftCalculator(A,
displacements_,
marketModel->evolution().rateTaus(),
numeraires[j],
alive_[j],
spanningForwards));
std::vector<Real> fixed(numberOfRates_);
for (Size k=0; k<numberOfRates_; ++k) {
Real variance =
std::inner_product(A.row_begin(k), A.row_end(k),
A.row_begin(k), 0.0);
fixed[k] = -0.5*variance;
}
fixedDrifts_.push_back(fixed);
}
setCMSwapRates(marketModel_->initialRates());
}
const std::vector<Size>& LogNormalCmSwapRatePc::numeraires() const {
return numeraires_;
}
void LogNormalCmSwapRatePc::setCMSwapRates(const std::vector<Real>& swapRates)
{
QL_REQUIRE(swapRates.size()==numberOfRates_,
"mismatch between swapRates and rateTimes");
for (Size i=0; i<numberOfRates_; ++i)
initialLogSwapRates_[i] = std::log(swapRates[i] +
displacements_[i]);
curveState_.setOnCMSwapRates(swapRates);
calculators_[initialStep_].compute(curveState_, initialDrifts_);
}
void LogNormalCmSwapRatePc::setInitialState(const CurveState& cs) {
const CMSwapCurveState* cotcs = dynamic_cast<const CMSwapCurveState*>(&cs);
const std::vector<Real>& swapRates = cotcs->cmSwapRates(spanningForwards_);
setCMSwapRates(swapRates);
}
Real LogNormalCmSwapRatePc::startNewPath() {
currentStep_ = initialStep_;
std::copy(initialLogSwapRates_.begin(), initialLogSwapRates_.end(),
logSwapRates_.begin());
return generator_->nextPath();
}
Real LogNormalCmSwapRatePc::advanceStep()
{
// we're going from T1 to T2
// a) compute drifts D1 at T1;
if (currentStep_ > initialStep_)
calculators_[currentStep_].compute(curveState_, drifts1_);
else
std::copy(initialDrifts_.begin(), initialDrifts_.end(),
drifts1_.begin());
// b) evolve forwards up to T2 using D1;
Real weight = generator_->nextStep(brownians_);
const Matrix& A = marketModel_->pseudoRoot(currentStep_);
const std::vector<Real>& fixedDrift = fixedDrifts_[currentStep_];
Size i, alive = alive_[currentStep_];
for (i=alive; i<numberOfRates_; ++i) {
logSwapRates_[i] += drifts1_[i] + fixedDrift[i];
logSwapRates_[i] +=
std::inner_product(A.row_begin(i), A.row_end(i),
brownians_.begin(), 0.0);
swapRates_[i] = std::exp(logSwapRates_[i]) - displacements_[i];
}
// intermediate curve state update
curveState_.setOnCMSwapRates(swapRates_);
// c) recompute drifts D2 using the predicted forwards;
calculators_[currentStep_].compute(curveState_, drifts2_);
// d) correct forwards using both drifts
for (i=alive; i<numberOfRates_; ++i) {
logSwapRates_[i] += (drifts2_[i]-drifts1_[i])/2.0;
swapRates_[i] = std::exp(logSwapRates_[i]) - displacements_[i];
}
// e) update curve state
//curveState_.setOnCMSwapRates(swapRates_, alive);
curveState_.setOnCMSwapRates(swapRates_);
++currentStep_;
return weight;
}
Size LogNormalCmSwapRatePc::currentStep() const {
return currentStep_;
}
const CurveState& LogNormalCmSwapRatePc::currentState() const {
return curveState_;
}
}
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