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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2011 Klaus Spanderen
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
<https://www.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.
*/
/*! \file klugeextouprocess.hpp
\brief joint Kluge process an d Ornstein Uhlenbeck process
*/
#ifndef quantlib_kluge_ext_ou_process_hpp
#define quantlib_kluge_ext_ou_process_hpp
#include <ql/stochasticprocess.hpp>
namespace QuantLib {
class ExtOUWithJumpsProcess;
class ExtendedOrnsteinUhlenbeckProcess;
/*! This class describes a correlated Kluge - extended Ornstein-Uhlenbeck
process governed by
\f[
\begin{array}{rcl}
P_t &=& \exp(p_t + X_t + Y_t) \\
dX_t &=& -\alpha X_tdt + \sigma_x dW_t^x \\
dY_t &=& -\beta Y_{t-}dt + J_tdN_t \\
\omega(J) &=& \eta e^{-\eta J} \\
G_t &=& \exp(g_t + U_t) \\
dU_t &=& -\kappa U_tdt + \sigma_udW_t^u \\
\rho &=& \mathrm{corr} (dW_t^x, dW_t^u)
\end{array}
\f]
*/
/*! References:
B. Hambly, S. Howison, T. Kluge, Modelling spikes and pricing
swing options in electricity markets,
http://people.maths.ox.ac.uk/hambly/PDF/Papers/elec.pdf
*/
class KlugeExtOUProcess : public StochasticProcess {
public:
KlugeExtOUProcess(Real rho,
ext::shared_ptr<ExtOUWithJumpsProcess> kluge,
ext::shared_ptr<ExtendedOrnsteinUhlenbeckProcess> extOU);
Size size() const override;
Size factors() const override;
Array initialValues() const override;
Array drift(Time t, const Array& x) const override;
Matrix diffusion(Time t, const Array& x) const override;
Array evolve(Time t0, const Array& x0, Time dt, const Array& dw) const override;
ext::shared_ptr<ExtOUWithJumpsProcess> getKlugeProcess() const;
ext::shared_ptr<ExtendedOrnsteinUhlenbeckProcess> getExtOUProcess() const;
Real rho() const;
private:
const Real rho_, sqrtMRho_;
const ext::shared_ptr<ExtOUWithJumpsProcess> klugeProcess_;
const ext::shared_ptr<ExtendedOrnsteinUhlenbeckProcess> ouProcess_;
};
}
#endif
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