final SABRInterestRateDataBundle sabrBundle = new SABRInterestRateDataBundle(sabrParameter, curves);
final double highStrike = 0.10;
final SwapFixedIborDefinition swapDefinitionPayerHighStrike = SwapFixedIborDefinition.from(SETTLEMENT_DATE, CMS_INDEX, NOTIONAL, highStrike, FIXED_IS_PAYER, CALENDAR);
final SwaptionCashFixedIborDefinition swaptionDefinitionLongPayerHighStrike = SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, swapDefinitionPayerHighStrike, IS_LONG);
final SwaptionCashFixedIborDefinition swaptionDefinitionShortPayerHighStrike = SwaptionCashFixedIborDefinition.from(EXPIRY_DATE, swapDefinitionPayerHighStrike, !IS_LONG);
final SwaptionCashFixedIbor swaptionLongPayerHighStrike = swaptionDefinitionLongPayerHighStrike.toDerivative(REFERENCE_DATE, CURVES_NAME);
final SwaptionCashFixedIbor swaptionShortPayerHighStrike = swaptionDefinitionShortPayerHighStrike.toDerivative(REFERENCE_DATE, CURVES_NAME);
final SwaptionCashFixedIborSABRExtrapolationRightMethod methodExtra = new SwaptionCashFixedIborSABRExtrapolationRightMethod(CUT_OFF_STRIKE, MU);
// Swaption sensitivity
InterestRateCurveSensitivity pvsLongPayerExtra = methodExtra.presentValueSensitivity(swaptionLongPayerHighStrike, sabrBundle);
final InterestRateCurveSensitivity pvsShortPayerExtra = methodExtra.presentValueSensitivity(swaptionShortPayerHighStrike, sabrBundle);
// Long/short parity
final InterestRateCurveSensitivity pvsShortPayer_1 = pvsShortPayerExtra.multipliedBy(-1);
assertEquals(pvsLongPayerExtra.getSensitivities(), pvsShortPayer_1.getSensitivities());
// Present value sensitivity comparison with finite difference.
final double deltaTolerance = 5.0E+4;
//Testing note: Sensitivity is for a movement of 1. 1E+2 = 1 cent for a 1 bp move. Tolerance increased to cope with numerical imprecision of finite difference.
final double deltaShift = 1.0E-5;
pvsLongPayerExtra = pvsLongPayerExtra.cleaned();
final double pv = methodExtra.presentValue(swaptionLongPayerHighStrike, sabrBundle);
// 1. Forward curve sensitivity
final String bumpedCurveName = "Bumped Curve";
final String[] bumpedCurvesForwardName = {FUNDING_CURVE_NAME, bumpedCurveName};
final SwaptionCashFixedIbor swaptionBumpedForward = swaptionDefinitionLongPayerHighStrike.toDerivative(REFERENCE_DATE, bumpedCurvesForwardName);
final YieldAndDiscountCurve curveForward = curves.getCurve(FORWARD_CURVE_NAME);
final Set<Double> timeForwardSet = new TreeSet<>();
for (final Payment pay : swaptionLongPayerHighStrike.getUnderlyingSwap().getSecondLeg().getPayments()) {
final CouponIbor coupon = (CouponIbor) pay;
timeForwardSet.add(coupon.getFixingPeriodStartTime());
timeForwardSet.add(coupon.getFixingPeriodEndTime());
}
final int nbForwardDate = timeForwardSet.size();
final List<Double> timeForwardList = new ArrayList<>(timeForwardSet);
Double[] timeForwardArray = new Double[nbForwardDate];
timeForwardArray = timeForwardList.toArray(timeForwardArray);
final double[] yieldsForward = new double[nbForwardDate + 1];
final double[] nodeTimesForward = new double[nbForwardDate + 1];
yieldsForward[0] = curveForward.getInterestRate(0.0);
for (int i = 0; i < nbForwardDate; i++) {
nodeTimesForward[i + 1] = timeForwardArray[i];
yieldsForward[i + 1] = curveForward.getInterestRate(nodeTimesForward[i + 1]);
}
final YieldAndDiscountCurve tempCurveForward = YieldCurve.from(InterpolatedDoublesCurve.fromSorted(nodeTimesForward, yieldsForward, new LinearInterpolator1D()));
final List<DoublesPair> tempForward = pvsLongPayerExtra.getSensitivities().get(FORWARD_CURVE_NAME);
final double[] resFwd = new double[nbForwardDate];
for (int i = 0; i < nbForwardDate; i++) {
final YieldAndDiscountCurve bumpedCurveForward = tempCurveForward.withSingleShift(nodeTimesForward[i + 1], deltaShift);
final YieldCurveBundle curvesBumpedForward = new YieldCurveBundle();
curvesBumpedForward.addAll(curves);
curvesBumpedForward.setCurve("Bumped Curve", bumpedCurveForward);
final SABRInterestRateDataBundle sabrBundleBumped = new SABRInterestRateDataBundle(sabrParameter, curvesBumpedForward);
final double bumpedpv = methodExtra.presentValue(swaptionBumpedForward, sabrBundleBumped);
resFwd[i] = (bumpedpv - pv) / deltaShift;
final DoublesPair pair = tempForward.get(i);
assertEquals("Sensitivity to forward curve: Node " + i, nodeTimesForward[i + 1], pair.getFirst(), 1E-8);
assertEquals("Sensitivity to forward curve: Node " + i, resFwd[i], pair.getSecond(), deltaTolerance);
}
// 2. Funding curve sensitivity
final String[] bumpedCurvesFundingName = {bumpedCurveName, FORWARD_CURVE_NAME};
final SwaptionCashFixedIbor swaptionBumpedFunding = swaptionDefinitionLongPayerHighStrike.toDerivative(REFERENCE_DATE, bumpedCurvesFundingName);
final SwapDefinition underlyingSwap = swaptionDefinitionLongPayerHighStrike.getUnderlyingSwap();
AnnuityDefinition<? extends PaymentDefinition> floatLeg;
if (underlyingSwap.getFirstLeg() instanceof AnnuityCouponFixedDefinition) {
floatLeg = underlyingSwap.getSecondLeg();
} else {