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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 Franois du Vignaud
Copyright (C) 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/driftcomputation/cmsmmdriftcalculator.hpp>
#include <ql/models/marketmodels/curvestates/cmswapcurvestate.hpp>
namespace QuantLib {
CMSMMDriftCalculator::CMSMMDriftCalculator(
const Matrix& pseudo,
const std::vector<Spread>& displacements,
const std::vector<Time>& taus,
Size numeraire,
Size alive,
Size spanningFwds)
: numberOfRates_(taus.size()), numberOfFactors_(pseudo.columns()),
isFullFactor_(numberOfFactors_==numberOfRates_ ? true : false),
numeraire_(numeraire), alive_(alive),
displacements_(displacements), oneOverTaus_(taus.size()),
pseudo_(pseudo), tmp_(taus.size(), 0.0),
PjPnWk_(numberOfFactors_,1+taus.size()),
wkaj_(numberOfFactors_, taus.size()),
wkajN_(numberOfFactors_, taus.size()),
downs_(taus.size()), ups_(taus.size()),
spanningFwds_(spanningFwds) {
// Check requirements
QL_REQUIRE(numberOfRates_>0, "Dim out of range");
QL_REQUIRE(displacements.size() == numberOfRates_,
"Displacements out of range");
QL_REQUIRE(pseudo.rows()==numberOfRates_,
"pseudo.rows() not consistent with dim");
QL_REQUIRE(pseudo.columns()>0 && pseudo.columns()<=numberOfRates_,
"pseudo.rows() not consistent with pseudo.columns()");
QL_REQUIRE(alive<numberOfRates_,
"Alive out of bounds");
QL_REQUIRE(numeraire_<=numberOfRates_,
"Numeraire larger than dim");
QL_REQUIRE(numeraire_>=alive,
"Numeraire smaller than alive");
// Precompute 1/taus
for (Size i=0; i<taus.size(); ++i)
oneOverTaus_[i] = 1.0/taus[i];
// Compute covariance matrix from pseudoroot
const Disposable<Matrix> pT = transpose(pseudo_);
C_ = pseudo_*pT;
// Compute lower and upper extrema for (non reduced) drift calculation
for (Size i=alive_; i<numberOfRates_; ++i) {
downs_[i] = std::min(i+1, numeraire_);
ups_[i] = std::max(i+1, numeraire_);
}
}
void CMSMMDriftCalculator::compute(const CMSwapCurveState& cs,
std::vector<Real>& drifts) const {
#if defined(QL_EXTRA_SAFETY_CHECKS)
QL_REQUIRE(drifts.size()==cs.numberOfRates(),
"drifts.size() <> numberOfRates");
#endif
const std::vector<Time>& taus = cs.rateTaus();
// final bond is numeraire
// Compute cross variations
for (Size k=0; k<PjPnWk_.rows(); ++k) {
PjPnWk_[k][numberOfRates_]=0.0;
wkaj_[k][numberOfRates_-1]=0.0;
for (Integer j=static_cast<Integer>(numberOfRates_)-2;
j>=static_cast<Integer>(alive_)-1; --j)
{
double sr = cs.cmSwapRate(j+1,spanningFwds_);
Integer endIndex =
std::min<Integer>(j + static_cast<Integer>(spanningFwds_) + 1,
static_cast<Integer>(numberOfRates_));
Real first = sr * wkaj_[k][j+1];
Real second = cs.cmSwapAnnuity(numberOfRates_,j+1,spanningFwds_)
* (sr+displacements_[j+1])
*pseudo_[j+1][k];
Real third = PjPnWk_[k][endIndex];
PjPnWk_[k][j+1] = first
+ second
+ third;
if (j>=static_cast<Integer>(alive_))
{
wkaj_[k][j] = wkaj_[k][j+1] + PjPnWk_[k][j+1]*taus[j];
if (j+spanningFwds_+1 <= numberOfRates_)
wkaj_[k][j] -= PjPnWk_[k][endIndex]*taus[endIndex-1];
}
}
}
Real PnOverPN = cs.discountRatio(numberOfRates_, numeraire_);
//Real PnOverPN = 1.0;
for (Size j=alive_; j<numberOfRates_; ++j)
for (Size k=0; k<numberOfFactors_; ++k)
wkajN_[k][j] = wkaj_[k][j]*PnOverPN
-PjPnWk_[k][numeraire_]*PnOverPN*cs.cmSwapAnnuity(numeraire_,j,spanningFwds_);
for (Size j=alive_; j<numberOfRates_; ++j)
{
drifts[j]=0.0;
for (Size k=0; k<numberOfFactors_; ++k)
{
drifts[j] += pseudo_[j][k]*wkajN_[k][j];
}
drifts[j] /= -cs.cmSwapAnnuity(numeraire_,j,spanningFwds_);
}
}
}
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