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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2007 Ferdinando Ametrano
Copyright (C) 2007 Marco Bianchetti
Copyright (C) 2006, 2007 Giorgio Facchinetti
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/cashflows/cashflows.hpp>
#include <ql/indexes/swapindex.hpp>
#include <ql/instruments/makecms.hpp>
#include <ql/instruments/swap.hpp>
#include <ql/quotes/simplequote.hpp>
#include <ql/termstructures/volatility/swaption/cmsmarket.hpp>
#include <ql/termstructures/yieldtermstructure.hpp>
#include <utility>
using std::vector;
namespace QuantLib {
CmsMarket::CmsMarket(vector<Period> swapLengths,
vector<ext::shared_ptr<SwapIndex> > swapIndexes,
ext::shared_ptr<IborIndex> iborIndex,
const vector<vector<Handle<Quote> > >& bidAskSpreads,
const vector<ext::shared_ptr<CmsCouponPricer> >& pricers,
Handle<YieldTermStructure> discountingTS)
: swapLengths_(std::move(swapLengths)), swapIndexes_(std::move(swapIndexes)),
iborIndex_(std::move(iborIndex)), bidAskSpreads_(bidAskSpreads), pricers_(pricers),
discTS_(std::move(discountingTS)),
nExercise_(swapLengths_.size()), nSwapIndexes_(swapIndexes_.size()),
swapTenors_(nSwapIndexes_),
spotFloatLegNPV_(nExercise_, nSwapIndexes_), spotFloatLegBPS_(nExercise_, nSwapIndexes_),
mktBidSpreads_(nExercise_, nSwapIndexes_), mktAskSpreads_(nExercise_, nSwapIndexes_),
mktSpreads_(nExercise_, nSwapIndexes_), mdlSpreads_(nExercise_, nSwapIndexes_),
errSpreads_(nExercise_, nSwapIndexes_),
mktSpotCmsLegNPV_(nExercise_, nSwapIndexes_), mdlSpotCmsLegNPV_(nExercise_, nSwapIndexes_),
errSpotCmsLegNPV_(nExercise_, nSwapIndexes_),
mktFwdCmsLegNPV_(nExercise_, nSwapIndexes_), mdlFwdCmsLegNPV_(nExercise_, nSwapIndexes_),
errFwdCmsLegNPV_(nExercise_, nSwapIndexes_),
spotSwaps_(nExercise_, vector<ext::shared_ptr<Swap> >(nSwapIndexes_)),
fwdSwaps_(nExercise_, vector<ext::shared_ptr<Swap> >(nSwapIndexes_)) {
QL_REQUIRE(2 * nSwapIndexes_ == bidAskSpreads[0].size(),
"2*nSwapIndexes_ (" << 2 * nSwapIndexes_
<< ") != bidAskSpreads columns() ("
<< bidAskSpreads[0].size() << ")");
QL_REQUIRE(nExercise_ == bidAskSpreads.size(),
"nExercise_ (" << nExercise_ << ") != bidAskSpreads rows() ("
<< bidAskSpreads.size() << ")");
QL_REQUIRE(nSwapIndexes_ == pricers.size(),
"nSwapIndexes_ (" << nSwapIndexes_ << ") != pricers ("
<< pricers_.size() << ")");
for (Size j=0; j<nSwapIndexes_; ++j) {
swapTenors_[j] = swapIndexes_[j]->tenor();
// pricers
registerWith(pricers_[j]);
for (Size i=0; i<nExercise_; ++i) {
// market Spread
registerWith(bidAskSpreads_[i][j*2]);
registerWith(bidAskSpreads_[i][j*2+1]);
}
}
Period start(0, Years);
for (Size i=0; i<nExercise_; ++i) {
if (i>0) start = swapLengths_[i-1];
for (Size j=0; j<nSwapIndexes_; ++j) {
// never evaluate the spot swap, only its ibor floating leg
spotSwaps_[i][j] = MakeCms(swapLengths_[i],
swapIndexes_[j],
iborIndex_, 0.0,
Period())
.operator ext::shared_ptr<Swap>();
fwdSwaps_[i][j] = MakeCms(swapLengths_[i]-start,
swapIndexes_[j],
iborIndex_, 0.0,
start)
.withCmsCouponPricer(pricers_[j])
.withDiscountingTermStructure(discTS_)
.operator ext::shared_ptr<Swap>();
}
}
// probably useless
performCalculations();
}
void CmsMarket::performCalculations() const {
for (Size j=0; j<nSwapIndexes_; ++j) {
Real mktPrevPart = 0.0, mdlPrevPart = 0.0;
for (Size i=0; i<nExercise_; ++i) {
// **** market
mktBidSpreads_[i][j] = bidAskSpreads_[i][j*2]->value();
mktAskSpreads_[i][j] = bidAskSpreads_[i][j*2+1]->value();
mktSpreads_[i][j] = (mktBidSpreads_[i][j]+mktAskSpreads_[i][j])/2;
const Leg& spotFloatLeg = spotSwaps_[i][j]->leg(1);
spotFloatLegNPV_[i][j] = CashFlows::npv(spotFloatLeg,
**discTS_,
false, discTS_->referenceDate());
spotFloatLegBPS_[i][j] = CashFlows::bps(spotFloatLeg,
**discTS_,
false, discTS_->referenceDate());
// imply the spot CMS leg NPV from the spot ibor floating leg NPV
mktSpotCmsLegNPV_[i][j] = -(spotFloatLegNPV_[i][j] +
spotFloatLegBPS_[i][j]*mktSpreads_[i][j]/1e-4);
// fwd CMS legs can be computed as differences between spot legs
mktFwdCmsLegNPV_[i][j] = mktSpotCmsLegNPV_[i][j] - mktPrevPart;
mktPrevPart = mktSpotCmsLegNPV_[i][j];
// **** model
// calculate the forward swap (the time consuming part)
mdlFwdCmsLegNPV_[i][j] = fwdSwaps_[i][j]->legNPV(0);
errFwdCmsLegNPV_[i][j] = mdlFwdCmsLegNPV_[i][j] -
mktFwdCmsLegNPV_[i][j];
// spot CMS legs can be computed as incremental sum of forward legs
mdlSpotCmsLegNPV_[i][j] = mdlPrevPart + mdlFwdCmsLegNPV_[i][j];
mdlPrevPart = mdlSpotCmsLegNPV_[i][j];
errSpotCmsLegNPV_[i][j] = mdlSpotCmsLegNPV_[i][j] -
mktSpotCmsLegNPV_[i][j];
// equilibriums spread over ibor leg
Real npv = spotFloatLegNPV_[i][j] + mdlSpotCmsLegNPV_[i][j];
mdlSpreads_[i][j] = - npv/spotFloatLegBPS_[i][j]*1e-4;
errSpreads_[i][j] = mdlSpreads_[i][j] - mktSpreads_[i][j];
}
}
}
void CmsMarket::reprice(const Handle<SwaptionVolatilityStructure> &v,
Real meanReversion) {
Handle<Quote> meanReversionQuote(
ext::make_shared<SimpleQuote>(meanReversion));
for (Size j = 0; j < nSwapIndexes_; ++j) {
// ??
// set new volatility structure and new mean reversion
pricers_[j]->setSwaptionVolatility(v);
if (meanReversion != Null<Real>()) {
ext::shared_ptr<MeanRevertingPricer> p =
ext::dynamic_pointer_cast<MeanRevertingPricer>(
pricers_[j]);
QL_REQUIRE(p != nullptr, "mean reverting pricer required at index " << j);
p->setMeanReversion(meanReversionQuote);
}
}
performCalculations();
}
Real CmsMarket::weightedFwdNpvError(const Matrix& w) {
performCalculations();
return weightedMean(errFwdCmsLegNPV_, w);
}
Real CmsMarket::weightedSpotNpvError(const Matrix& w) {
performCalculations();
return weightedMean(errSpotCmsLegNPV_, w);
}
Real CmsMarket::weightedSpreadError(const Matrix& w) {
performCalculations();
return weightedMean(errSpreads_, w);
}
// array of errors to be used by Levenberg-Marquardt optimization
Array CmsMarket::weightedFwdNpvErrors(const Matrix& w) {
performCalculations();
return weightedMeans(errFwdCmsLegNPV_, w);
}
Array CmsMarket::weightedSpotNpvErrors(const Matrix& w) {
performCalculations();
return weightedMeans(errSpotCmsLegNPV_, w);
}
Array CmsMarket::weightedSpreadErrors(const Matrix& w) {
performCalculations();
return weightedMeans(errSpreads_, w);
}
Real CmsMarket::weightedMean(const Matrix& var, const Matrix& w) const {
Real mean = 0.0;
for (Size i=0; i<nExercise_; ++i) {
for (Size j=0; j<nSwapIndexes_; ++j) {
mean += w[i][j]*var[i][j]*var[i][j];
}
}
mean = std::sqrt(mean/(nExercise_*nSwapIndexes_));
return mean;
}
Array CmsMarket::weightedMeans(const Matrix& var, const Matrix& w) const {
Array weightedVars(nExercise_*nSwapIndexes_);
for (Size i=0; i<nExercise_; ++i) {
for (Size j=0; j<nSwapIndexes_; ++j) {
weightedVars[i*nSwapIndexes_+j] = std::sqrt(w[i][j])*var[i][j];
}
}
return weightedVars;
}
Matrix CmsMarket::browse() const {
calculate();
//Matrix result(nExercise_*nSwapIndexes_, 15);
Matrix result(nExercise_*nSwapIndexes_, 14);
for (Size j=0; j<nSwapIndexes_; ++j) {
for (Size i=0; i<nExercise_; ++i) {
result[j*nExercise_+i][0] = swapTenors_[j].length();
result[j*nExercise_+i][1] = swapLengths_[i].length();
// Spreads
result[j*nExercise_+i][2] = mktBidSpreads_[i][j]*10000;
result[j*nExercise_+i][3] = mktAskSpreads_[i][j]*10000;
result[j*nExercise_+i][4] = mktSpreads_[i][j]*10000;
result[j*nExercise_+i][5] = mdlSpreads_[i][j]*10000;
result[j*nExercise_+i][6] = errSpreads_[i][j]*10000;
if (mdlSpreads_[i][j]>mktAskSpreads_[i][j])
result[j*nExercise_+i][7] = (mdlSpreads_[i][j] -
mktAskSpreads_[i][j])*10000;
else if (mdlSpreads_[i][j]<mktBidSpreads_[i][j])
result[j*nExercise_+i][7] = (mktBidSpreads_[i][j] -
mdlSpreads_[i][j])*10000;
else
result[j*nExercise_+i][7] = 0.0;
// spot CMS Leg NPVs
result[j*nExercise_+i][ 8] = mktSpotCmsLegNPV_[i][j];
result[j*nExercise_+i][ 9] = mdlSpotCmsLegNPV_[i][j];
result[j*nExercise_+i][10] = errSpotCmsLegNPV_[i][j];
// forward CMS Leg NPVs
result[j*nExercise_+i][11] = mktFwdCmsLegNPV_[i][j];
result[j*nExercise_+i][12] = mdlFwdCmsLegNPV_[i][j];
result[j*nExercise_+i][13] = errFwdCmsLegNPV_[i][j];
}
}
return result;
}
}
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