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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2006 Banca Profilo S.p.A.
Copyright (C) 2006 StatPro Italia srl
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/pricingengines/capfloor/mchullwhiteengine.hpp>
namespace QuantLib {
namespace detail {
HullWhiteCapFloorPricer::HullWhiteCapFloorPricer(
const CapFloor::arguments& args,
const boost::shared_ptr<HullWhite>& model,
Time forwardMeasureTime)
: args_(args), model_(model), forwardMeasureTime_(forwardMeasureTime) {
endDiscount_ =
model_->termStructure()->discount(forwardMeasureTime_);
Date referenceDate = model_->termStructure()->referenceDate();
DayCounter dayCounter = model_->termStructure()->dayCounter();
startTimes_.resize(args.startDates.size());
for (Size i=0; i<startTimes_.size(); ++i)
startTimes_[i] = dayCounter.yearFraction(referenceDate,
args.startDates[i]);
endTimes_.resize(args.endDates.size());
for (Size i=0; i<endTimes_.size(); ++i)
endTimes_[i] = dayCounter.yearFraction(referenceDate,
args.endDates[i]);
fixingTimes_.resize(args.fixingDates.size());
for (Size i=0; i<fixingTimes_.size(); ++i)
fixingTimes_[i] = dayCounter.yearFraction(referenceDate,
args.fixingDates[i]);
}
Real HullWhiteCapFloorPricer::operator()(const Path& path) const {
bool isCap = (args_.type == CapFloor::Cap);
Real npv = 0.0;
Time Tb = forwardMeasureTime_;
Size pastFixings = 0;
for (Size i = 0; i<fixingTimes_.size(); i++) {
Time tau = args_.accrualTimes[i];
Time start = startTimes_[i],
end = endTimes_[i],
fixing = fixingTimes_[i];
if (end <= 0.0) {
// the fixing is in the past...
pastFixings++;
// ...and the caplet is expired; nothing more to do.
} else {
Rate ri_1, ri_2, currentLibor;
if (fixing <= 0.0) {
// current caplet. The fixing is in the past...
pastFixings++;
// ...so it is determined.
currentLibor = args_.forwards[i];
// However, the short rate at caplet expiry is not.
ri_2 = path[i-pastFixings+2];
} else {
// future caplet. Everything is to be forecast.
// The number of past fixings is used as an offset
// to index into the path.
ri_1 = path[i-pastFixings+1];
ri_2 = path[i-pastFixings+2];
DiscountFactor d1 =
model_->discountBond(fixing, start, ri_1);
DiscountFactor d2 =
model_->discountBond(fixing, end, ri_1);
currentLibor = (d1/d2-1)/tau;
}
Real accrualFactor =
1.0/model_->discountBond(end, Tb, ri_2);
Rate strike = isCap?
args_.capRates[i] :
args_.floorRates[i];
Real payoff = isCap?
std::max(currentLibor - strike, 0.0) :
std::max(strike - currentLibor, 0.0);
npv += payoff * tau * args_.gearings[i] *
args_.nominals[i] * accrualFactor;
}
}
npv *= endDiscount_;
return npv;
}
}
}
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