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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2001, 2002, 2003 Sadruddin Rejeb
Copyright (C) 2013 Peter Caspers
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/jamshidianswaptionengine.hpp>
#include <ql/math/solvers1d/brent.hpp>
namespace QuantLib {
class JamshidianSwaptionEngine::rStarFinder {
public:
rStarFinder(const boost::shared_ptr<OneFactorAffineModel>& model,
Real nominal,
Time maturity,
Time valueTime,
const std::vector<Time>& fixedPayTimes,
const std::vector<Real>& amounts)
: strike_(nominal), maturity_(maturity), valueTime_(valueTime), times_(fixedPayTimes), amounts_(amounts), model_(model) {}
Real operator()(Rate x) const {
Real value = strike_;
Size size = times_.size();
for (Size i=0; i<size; i++) {
Real dbValue =
model_->discountBond(maturity_, times_[i], x) / model_->discountBond(maturity_, valueTime_, x);
value -= amounts_[i]*dbValue;
}
return value;
}
private:
Real strike_;
Time maturity_,valueTime_;
std::vector<Time> times_;
const std::vector<Real>& amounts_;
const boost::shared_ptr<OneFactorAffineModel>& model_;
};
void JamshidianSwaptionEngine::calculate() const {
QL_REQUIRE(arguments_.settlementType==Settlement::Physical,
"cash-settled swaptions not priced by Jamshidian engine");
QL_REQUIRE(arguments_.exercise->type() == Exercise::European,
"cannot use the Jamshidian decomposition "
"on exotic swaptions");
QL_REQUIRE(arguments_.swap->spread() == 0.0, "non zero spread (" << arguments_.swap->spread() << ") not allowed"); // PC
Date referenceDate;
DayCounter dayCounter;
boost::shared_ptr<TermStructureConsistentModel> tsmodel =
boost::dynamic_pointer_cast<TermStructureConsistentModel>(*model_);
if (tsmodel) {
referenceDate = tsmodel->termStructure()->referenceDate();
dayCounter = tsmodel->termStructure()->dayCounter();
} else {
referenceDate = termStructure_->referenceDate();
dayCounter = termStructure_->dayCounter();
}
std::vector<Real> amounts(arguments_.fixedCoupons);
amounts.back() += arguments_.nominal;
Real maturity = dayCounter.yearFraction(referenceDate,
arguments_.exercise->date(0));
std::vector<Time> fixedPayTimes(arguments_.fixedPayDates.size());
Time valueTime = dayCounter.yearFraction(referenceDate,arguments_.fixedResetDates[0]);
for (Size i=0; i<fixedPayTimes.size(); i++)
fixedPayTimes[i] = dayCounter.yearFraction(referenceDate,
arguments_.fixedPayDates[i]);
rStarFinder finder(*model_, arguments_.nominal, maturity, valueTime,
fixedPayTimes, amounts);
Brent s1d;
Rate minStrike = -10.0;
Rate maxStrike = 10.0;
s1d.setMaxEvaluations(10000);
s1d.setLowerBound(minStrike);
s1d.setUpperBound(maxStrike);
Rate rStar = s1d.solve(finder, 1e-8, 0.05, minStrike, maxStrike);
Option::Type w = arguments_.type==VanillaSwap::Payer ?
Option::Put : Option::Call;
Size size = arguments_.fixedCoupons.size();
Real value = 0.0;
for (Size i=0; i<size; i++) {
Real fixedPayTime =
dayCounter.yearFraction(referenceDate,
arguments_.fixedPayDates[i]);
Real strike = model_->discountBond(maturity,
fixedPayTime,
rStar) / model_->discountBond(maturity,valueTime,rStar);
Real dboValue = model_->discountBondOption(
w, strike, maturity, valueTime,
fixedPayTime);
value += amounts[i]*dboValue;
}
results_.value = value;
}
}
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