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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2011, 2012 Andre Miemiec
Copyright (C) 2012 Samuel Tebege
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 haganirregularswaptionengine.hpp
\brief engine for pricing irregular swaptions via super-replication
*/
#ifndef quantlib_hagan_irregular_swaption_engine_hpp
#define quantlib_hagan_irregular_swaption_engine_hpp
#include <ql/experimental/swaptions/irregularswaption.hpp>
#include <ql/termstructures/yieldtermstructure.hpp>
#include <ql/termstructures/volatility/swaption/swaptionvolstructure.hpp>
#include <ql/math/optimization/costfunction.hpp>
#include <ql/instruments/makevanillaswap.hpp>
namespace QuantLib {
//! Pricing engine for irregular swaptions
/*! References:
1. P.S. Hagan: "Methodology for Callable Swaps and Bermudan
'Exercise into Swaptions'"
2. P.J. Hunt, J.E. Kennedy: "Implied interest rate pricing
models", Finance Stochast. 2, 275-293 (1998)
\warning Currently a spread is not handled correctly; it
should be a minor exercise to account for this
feature as well;
*/
class HaganIrregularSwaptionEngine
: public GenericEngine<IrregularSwaption::arguments,
IrregularSwaption::results> {
public:
//@{
explicit HaganIrregularSwaptionEngine(
Handle<SwaptionVolatilityStructure>,
Handle<YieldTermStructure> termStructure = Handle<YieldTermStructure>());
//@}
void calculate() const override;
// helper class
class Basket {
public:
Basket(ext::shared_ptr<IrregularSwap> swap,
Handle<YieldTermStructure> termStructure,
Handle<SwaptionVolatilityStructure> volatilityStructure);
Array compute(Rate lambda = 0.0) const;
Real operator()(Rate x) const;
ext::shared_ptr<VanillaSwap> component(Size i) const;
Array weights() const { return compute(lambda_); };
Real& lambda() const { return lambda_; };
// NOLINTNEXTLINE(cppcoreguidelines-noexcept-swap,performance-noexcept-swap)
ext::shared_ptr<IrregularSwap> swap() const { return swap_; };
private:
ext::shared_ptr<IrregularSwap> swap_;
Handle<YieldTermStructure> termStructure_;
Handle<SwaptionVolatilityStructure> volatilityStructure_;
Real targetNPV_ = 0.0;
ext::shared_ptr<PricingEngine> engine_;
std::vector<Real> fairRates_;
std::vector<Real> annuities_;
std::vector<Date> expiries_;
mutable Real lambda_ = 0.0;
};
Real HKPrice(Basket& basket,ext::shared_ptr<Exercise>& exercise) const;
Real LGMPrice(Basket& basket,ext::shared_ptr<Exercise>& exercise) const;
private:
Handle<YieldTermStructure> termStructure_;
Handle<SwaptionVolatilityStructure> volatilityStructure_;
class rStarFinder;
};
}
#endif
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