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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2008 Andreas Gaida
Copyright (C) 2008, 2009 Ralph Schreyer
Copyright (C) 2008, 2009 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.
*/
#include <ql/instruments/payoffs.hpp>
#include <ql/math/functional.hpp>
#include <ql/methods/finitedifferences/meshers/fdmmesher.hpp>
#include <ql/methods/finitedifferences/operators/fdmblackscholesop.hpp>
#include <ql/methods/finitedifferences/operators/fdmlinearoplayout.hpp>
#include <ql/methods/finitedifferences/operators/secondderivativeop.hpp>
#include <utility>
namespace QuantLib {
FdmBlackScholesOp::FdmBlackScholesOp(
const ext::shared_ptr<FdmMesher>& mesher,
const ext::shared_ptr<GeneralizedBlackScholesProcess>& bsProcess,
Real strike,
bool localVol,
Real illegalLocalVolOverwrite,
Size direction,
ext::shared_ptr<FdmQuantoHelper> quantoHelper)
: mesher_(mesher), rTS_(bsProcess->riskFreeRate().currentLink()),
qTS_(bsProcess->dividendYield().currentLink()),
volTS_(bsProcess->blackVolatility().currentLink()),
localVol_((localVol) ? bsProcess->localVolatility().currentLink() :
ext::shared_ptr<LocalVolTermStructure>()),
x_((localVol) ? Array(Exp(mesher->locations(direction))) : Array()),
dxMap_(FirstDerivativeOp(direction, mesher)), dxxMap_(SecondDerivativeOp(direction, mesher)),
mapT_(direction, mesher), strike_(strike),
illegalLocalVolOverwrite_(illegalLocalVolOverwrite), direction_(direction),
quantoHelper_(std::move(quantoHelper)) {}
void FdmBlackScholesOp::setTime(Time t1, Time t2) {
const Rate r = rTS_->forwardRate(t1, t2, Continuous).rate();
const Rate q = qTS_->forwardRate(t1, t2, Continuous).rate();
if (localVol_ != nullptr) {
Array v(mesher_->layout()->size());
for (const auto& iter : *mesher_->layout()) {
const Size i = iter.index();
if (illegalLocalVolOverwrite_ < 0.0) {
v[i] = squared(localVol_->localVol(0.5*(t1+t2), x_[i], true));
}
else {
try {
v[i] = squared(localVol_->localVol(0.5*(t1+t2), x_[i], true));
} catch (Error&) {
v[i] = squared(illegalLocalVolOverwrite_);
}
}
}
if (quantoHelper_ != nullptr) {
mapT_.axpyb(r - q - 0.5*v
- quantoHelper_->quantoAdjustment(Sqrt(v), t1, t2),
dxMap_, dxxMap_.mult(0.5*v), Array(1, -r));
} else {
mapT_.axpyb(r - q - 0.5*v, dxMap_,
dxxMap_.mult(0.5*v), Array(1, -r));
}
} else {
const Real v
= volTS_->blackForwardVariance(t1, t2, strike_)/(t2-t1);
if (quantoHelper_ != nullptr) {
mapT_.axpyb(
Array(1, r - q - 0.5*v)
- quantoHelper_->quantoAdjustment(
Array(1, std::sqrt(v)), t1, t2),
dxMap_,
dxxMap_.mult(0.5*Array(mesher_->layout()->size(), v)),
Array(1, -r));
} else {
mapT_.axpyb(Array(1, r - q - 0.5*v), dxMap_,
dxxMap_.mult(0.5*Array(mesher_->layout()->size(), v)),
Array(1, -r));
}
}
}
Size FdmBlackScholesOp::size() const { return 1U; }
Array FdmBlackScholesOp::apply(const Array& u) const {
return mapT_.apply(u);
}
Array FdmBlackScholesOp::apply_direction(Size direction,
const Array& r) const {
if (direction == direction_)
return mapT_.apply(r);
else {
return Array(r.size(), 0.0);
}
}
Array FdmBlackScholesOp::apply_mixed(const Array& r) const {
return Array(r.size(), 0.0);
}
Array FdmBlackScholesOp::solve_splitting(Size direction,
const Array& r, Real dt) const {
if (direction == direction_)
return mapT_.solve_splitting(r, dt, 1.0);
else {
return r;
}
}
Array FdmBlackScholesOp::preconditioner(const Array& r,
Real dt) const {
return solve_splitting(direction_, r, dt);
}
std::vector<SparseMatrix> FdmBlackScholesOp::toMatrixDecomp() const {
return std::vector<SparseMatrix>(1, mapT_.toMatrix());
}
}
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