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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2007, 2008 Ferdinando Ametrano
Copyright (C) 2006 Cristina Duminuco
Copyright (C) 2001, 2002, 2003 Sadruddin Rejeb
Copyright (C) 2006, 2007 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/swaption/blackswaptionengine.hpp>
#include <ql/pricingengines/blackformula.hpp>
#include <ql/termstructures/volatility/swaption/swaptionconstantvol.hpp>
#include <ql/time/calendars/nullcalendar.hpp>
#include <ql/pricingengines/swap/discountingswapengine.hpp>
#include <ql/indexes/iborindex.hpp>
#include <ql/cashflows/fixedratecoupon.hpp>
#include <ql/cashflows/cashflows.hpp>
#include <ql/exercise.hpp>
namespace QuantLib {
BlackSwaptionEngine::BlackSwaptionEngine(
const Handle<YieldTermStructure>& discountCurve,
Volatility vol,
const DayCounter& dc,
Real displacement)
: discountCurve_(discountCurve),
vol_(boost::shared_ptr<SwaptionVolatilityStructure>(new
ConstantSwaptionVolatility(0, NullCalendar(), Following, vol, dc))),
displacement_(displacement) {
registerWith(discountCurve_);
}
BlackSwaptionEngine::BlackSwaptionEngine(
const Handle<YieldTermStructure>& discountCurve,
const Handle<Quote>& vol,
const DayCounter& dc,
Real displacement)
: discountCurve_(discountCurve),
vol_(boost::shared_ptr<SwaptionVolatilityStructure>(new
ConstantSwaptionVolatility(0, NullCalendar(), Following, vol, dc))),
displacement_(displacement) {
registerWith(discountCurve_);
registerWith(vol_);
}
BlackSwaptionEngine::BlackSwaptionEngine(
const Handle<YieldTermStructure>& discountCurve,
const Handle<SwaptionVolatilityStructure>& volatility,
Real displacement)
: discountCurve_(discountCurve), vol_(volatility),
displacement_(displacement) {
registerWith(discountCurve_);
registerWith(vol_);
}
void BlackSwaptionEngine::calculate() const {
static const Spread basisPoint = 1.0e-4;
Date exerciseDate = arguments_.exercise->date(0);
// the part of the swap preceding exerciseDate should be truncated
// to avoid taking into account unwanted cashflows
VanillaSwap swap = *arguments_.swap;
Rate strike = swap.fixedRate();
// using the discounting curve
// swap.iborIndex() might be using a different forwarding curve
swap.setPricingEngine(boost::shared_ptr<PricingEngine>(new
DiscountingSwapEngine(discountCurve_, false)));
Rate atmForward = swap.fairRate();
// Volatilities are quoted for zero-spreaded swaps.
// Therefore, any spread on the floating leg must be removed
// with a corresponding correction on the fixed leg.
if (swap.spread()!=0.0) {
Spread correction = swap.spread() *
std::fabs(swap.floatingLegBPS()/swap.fixedLegBPS());
strike -= correction;
atmForward -= correction;
results_.additionalResults["spreadCorrection"] = correction;
} else {
results_.additionalResults["spreadCorrection"] = 0.0;
}
results_.additionalResults["strike"] = strike;
results_.additionalResults["atmForward"] = atmForward;
// using the discounting curve
swap.setPricingEngine(boost::shared_ptr<PricingEngine>(
new DiscountingSwapEngine(discountCurve_, false)));
Real annuity;
switch(arguments_.settlementType) {
case Settlement::Physical: {
annuity = std::fabs(swap.fixedLegBPS())/basisPoint;
break;
}
case Settlement::Cash: {
const Leg& fixedLeg = swap.fixedLeg();
boost::shared_ptr<FixedRateCoupon> firstCoupon =
boost::dynamic_pointer_cast<FixedRateCoupon>(fixedLeg[0]);
DayCounter dayCount = firstCoupon->dayCounter();
Real fixedLegCashBPS =
CashFlows::bps(fixedLeg,
InterestRate(atmForward, dayCount, Compounded, Annual),
false, discountCurve_->referenceDate()) ;
annuity = std::fabs(fixedLegCashBPS/basisPoint);
break;
}
default:
QL_FAIL("unknown settlement type");
}
results_.additionalResults["annuity"] = annuity;
// the swap length calculation might be improved using the value date
// of the exercise date
Time swapLength = vol_->swapLength(exerciseDate,
arguments_.floatingPayDates.back());
results_.additionalResults["swapLength"] = swapLength;
Real variance = vol_->blackVariance(exerciseDate,
swapLength,
strike);
Real stdDev = std::sqrt(variance);
results_.additionalResults["stdDev"] = stdDev;
Option::Type w = (arguments_.type==VanillaSwap::Payer) ?
Option::Call : Option::Put;
results_.value = blackFormula(w, strike, atmForward, stdDev, annuity,
displacement_);
Time exerciseTime = vol_->timeFromReference(exerciseDate);
results_.additionalResults["vega"] = std::sqrt(exerciseTime) *
blackFormulaStdDevDerivative(strike, atmForward, stdDev, annuity,
displacement_);
}
}
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