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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2006 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/callability/lsstrategy.hpp>
#include <ql/models/marketmodels/discounter.hpp>
#include <ql/models/marketmodels/utilities.hpp>
#include <ql/models/marketmodels/evolutiondescription.hpp>
#include <ql/models/marketmodels/curvestate.hpp>
namespace QuantLib {
typedef MarketModelMultiProduct::CashFlow CashFlow;
LongstaffSchwartzExerciseStrategy::LongstaffSchwartzExerciseStrategy(
const Clone<MarketModelBasisSystem>& basisSystem,
const std::vector<std::vector<Real> >& basisCoefficients,
const EvolutionDescription& evolution,
const std::vector<Size>& numeraires,
const Clone<MarketModelExerciseValue>& exercise,
const Clone<MarketModelExerciseValue>& control)
: basisSystem_(basisSystem), basisCoefficients_(basisCoefficients),
exercise_(exercise), control_(control),
numeraires_(numeraires) {
checkCompatibility(evolution, numeraires);
relevantTimes_ = evolution.evolutionTimes();
isBasisTime_.resize(relevantTimes_.size());
isBasisTime_ = isInSubset(relevantTimes_,
basisSystem_->evolution().evolutionTimes());
isRebateTime_.resize(relevantTimes_.size());
isRebateTime_ = isInSubset(relevantTimes_,
exercise_->evolution().evolutionTimes());
isControlTime_.resize(relevantTimes_.size());
isControlTime_ = isInSubset(relevantTimes_,
control_->evolution().evolutionTimes());
exerciseIndex_ = std::vector<Size>(relevantTimes_.size());
isExerciseTime_.resize(relevantTimes_.size(), false);
std::valarray<bool> v = exercise_->isExerciseTime();
Size exercises = 0;
Size i;
for (i=0; i<relevantTimes_.size(); ++i) {
exerciseIndex_[i] = exercises;
if (isRebateTime_[i]) {
isExerciseTime_[i] = v[exercises];
if (isExerciseTime_[i]) {
exerciseTimes_.push_back(relevantTimes_[i]);
++exercises;
}
}
}
std::vector<Time> rateTimes = evolution.rateTimes();
std::vector<Time> rebateTimes = exercise_->possibleCashFlowTimes();
rebateDiscounters_.reserve(rebateTimes.size());
for (i=0; i<rebateTimes.size(); ++i)
rebateDiscounters_.push_back(
MarketModelDiscounter(rebateTimes[i], rateTimes));
std::vector<Time> controlTimes = control_->possibleCashFlowTimes();
controlDiscounters_.reserve(controlTimes.size());
for (i=0; i<controlTimes.size(); ++i)
controlDiscounters_.push_back(
MarketModelDiscounter(controlTimes[i], rateTimes));
std::vector<Size> basisSizes = basisSystem_->numberOfFunctions();
basisValues_.resize(basisSystem_->numberOfExercises());
for (i=0; i<basisValues_.size(); ++i)
basisValues_[i].resize(basisSizes[i]);
}
std::vector<Time>
LongstaffSchwartzExerciseStrategy::exerciseTimes() const {
return exerciseTimes_;
}
std::vector<Time>
LongstaffSchwartzExerciseStrategy::relevantTimes() const {
return relevantTimes_;
}
void LongstaffSchwartzExerciseStrategy::reset() {
exercise_->reset();
control_->reset();
basisSystem_->reset();
currentIndex_ = 0;
principalInNumerairePortfolio_ = newPrincipal_ = 1.0;
}
bool LongstaffSchwartzExerciseStrategy::exercise(
const CurveState& currentState) const {
Size exerciseIndex = exerciseIndex_[currentIndex_-1];
CashFlow exerciseCF = exercise_->value(currentState);
Real exerciseValue = exerciseCF.amount *
rebateDiscounters_[exerciseCF.timeIndex]
.numeraireBonds(currentState,
numeraires_[currentIndex_-1]) /
principalInNumerairePortfolio_;
CashFlow controlCF = control_->value(currentState);
Real controlValue = controlCF.amount *
controlDiscounters_[controlCF.timeIndex]
.numeraireBonds(currentState,
numeraires_[currentIndex_-1]) /
principalInNumerairePortfolio_;
basisSystem_->values(currentState,
basisValues_[exerciseIndex]);
const std::vector<Real>& alphas = basisCoefficients_[exerciseIndex];
Real continuationValue =
std::inner_product(alphas.begin(), alphas.end(),
basisValues_[exerciseIndex].begin(),
controlValue);
return exerciseValue >= continuationValue;
}
void LongstaffSchwartzExerciseStrategy::nextStep(
const CurveState& currentState) {
principalInNumerairePortfolio_ = newPrincipal_;
if (isRebateTime_[currentIndex_])
exercise_->nextStep(currentState);
if (isControlTime_[currentIndex_])
control_->nextStep(currentState);
if (isBasisTime_[currentIndex_])
basisSystem_->nextStep(currentState);
if (currentIndex_ < numeraires_.size()-1) {
Size numeraire = numeraires_[currentIndex_];
Size nextNumeraire = numeraires_[currentIndex_+1];
newPrincipal_ *=
currentState.discountRatio(numeraire, nextNumeraire);
}
++currentIndex_;
}
std::auto_ptr<ExerciseStrategy<CurveState> >
LongstaffSchwartzExerciseStrategy::clone() const {
return std::auto_ptr<ExerciseStrategy<CurveState> >(
new LongstaffSchwartzExerciseStrategy(*this));
}
}
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