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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2008 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.
*/
#ifndef quantlib_square_root_andersen_hpp
#define quantlib_square_root_andersen_hpp
#include <ql/models/marketmodels/evolvers/marketmodelvolprocess.hpp>
namespace QuantLib
{
/*!
Displaced diffusion LMM with uncorrelated vol process. Called "Shifted BGM" with Heston vol by Brace in "Engineering BGM."
Vol process is an external input.
*/
class SquareRootAndersen : public MarketModelVolProcess
{
public:
SquareRootAndersen(Real meanLevel,
Real reversionSpeed,
Real volVar,
Real v0,
const std::vector<Real>& evolutionTimes,
Size numberSubSteps_,
Real w1,
Real w2,
Real cutPoint = 1.5);
virtual Size variatesPerStep();
virtual Size numberSteps();
virtual void nextPath();
virtual Real nextstep(const std::vector<Real>& variates);
virtual Real stepSd() const ;
virtual const std::vector<Real>& stateVariables() const;
virtual Size numberStateVariables() const;
private:
void DoOneSubStep(Real& v, Real variate, Size j);
Real theta_; // mean level
Real k_; // reversion speed
Real epsilon_; // volvar
Real v0_; // initial value of instantaneous variance
Size numberSubSteps_; // sub steps per evolution time
std::vector<Real> dt_; // time step lengths
std::vector<Real> eMinuskDt_; // exp( - k * dt)
Real w1_; // weights to use for computing variance across step
Real w2_;
Real PsiC_; // cut-off between two types of evolution
//! evolving values
Real v_;
Size currentStep_;
Size subStep_;
std::vector<Real> vPath_;
mutable std::vector<Real> state_;
};
}
#endif
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