/**
* Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.fra.provider;
import java.util.ArrayList;
import java.util.HashMap;
import java.util.List;
import java.util.Map;
import com.opengamma.analytics.financial.interestrate.fra.derivative.ForwardRateAgreement;
import com.opengamma.analytics.financial.provider.description.interestrate.MulticurveProviderInterface;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.ForwardSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MulticurveSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MultipleCurrencyMulticurveSensitivity;
import com.opengamma.util.ArgumentChecker;
import com.opengamma.util.money.MultipleCurrencyAmount;
import com.opengamma.util.tuple.DoublesPair;
/**
* Method to compute the present value and its sensitivities for a FRA with
* discounting. The present value is computed as the (forward rate - FRA rate)
* multiplied by the notional and the payment accrual factor and discounted to
* settlement. The discounting to settlement is done using the forward rate
* over the fixing period. The value is further discounted from settlement to
* today using the discounting curve.
* $$
* \begin{equation*}
* P^D(0,t_1)\frac{\delta_P(F-K)}{1+\delta_P F} \quad \mbox{and}\quad F = \frac{1}{\delta_F}\left( \frac{P^j(0,t_1)}{P^j(0,t_2)}-1\right)
* \end{equation*}
* $$
* This approach is valid subject to a independence hypothesis between the
* discounting curve and some spread.
* <p>
* Reference: Henrard, M. (2010). The irony in the derivatives discounting part
* II: the crisis. Wilmott Journal, 2(6):301-316.
*/
public final class ForwardRateAgreementDiscountingProviderMethod {
/**
* The method unique instance.
*/
private static final ForwardRateAgreementDiscountingProviderMethod INSTANCE = new ForwardRateAgreementDiscountingProviderMethod();
/**
* Return the unique instance of the class.
* @return The instance.
*/
public static ForwardRateAgreementDiscountingProviderMethod getInstance() {
return INSTANCE;
}
/**
* Private constructor.
*/
private ForwardRateAgreementDiscountingProviderMethod() {
}
/**
* Compute the present value of a FRA by discounting.
* @param fra The FRA.
* @param multicurve The multi-curve provider.
* @return The present value.
*/
public MultipleCurrencyAmount presentValue(final ForwardRateAgreement fra, final MulticurveProviderInterface multicurve) {
ArgumentChecker.notNull(fra, "FRA");
ArgumentChecker.notNull(multicurve, "Multiurves");
final double discountFactorSettlement = multicurve.getDiscountFactor(fra.getCurrency(), fra.getPaymentTime());
final double forward = multicurve.getForwardRate(fra.getIndex(), fra.getFixingPeriodStartTime(), fra.getFixingPeriodEndTime(), fra.getFixingYearFraction());
final double presentValue = discountFactorSettlement * fra.getPaymentYearFraction() * fra.getNotional() * (forward - fra.getRate()) / (1 + fra.getPaymentYearFraction() * forward);
return MultipleCurrencyAmount.of(fra.getCurrency(), presentValue);
}
/**
* Compute the present value sensitivity to rates of a FRA by discounting.
* @param fra The FRA.
* @param multicurve The multi-curve provider.
* @return The present value sensitivity.
*/
public MultipleCurrencyMulticurveSensitivity presentValueCurveSensitivity(final ForwardRateAgreement fra, final MulticurveProviderInterface multicurve) {
ArgumentChecker.notNull(fra, "FRA");
ArgumentChecker.notNull(multicurve, "Multiurves");
final double df = multicurve.getDiscountFactor(fra.getCurrency(), fra.getPaymentTime());
final double forward = multicurve.getForwardRate(fra.getIndex(), fra.getFixingPeriodStartTime(), fra.getFixingPeriodEndTime(), fra.getFixingYearFraction());
// Backward sweep
final double pvBar = 1.0;
final double forwardBar = df * fra.getPaymentYearFraction() * fra.getNotional() * (1 - (forward - fra.getRate()) / (1 + fra.getPaymentYearFraction() * forward) * fra.getPaymentYearFraction())
/ (1 + fra.getPaymentYearFraction() * forward);
final double dfBar = fra.getPaymentYearFraction() * fra.getNotional() * (forward - fra.getRate()) / (1 + fra.getFixingYearFraction() * forward) * pvBar;
final Map<String, List<DoublesPair>> mapDsc = new HashMap<>();
final List<DoublesPair> listDiscounting = new ArrayList<>();
listDiscounting.add(new DoublesPair(fra.getPaymentTime(), -fra.getPaymentTime() * df * dfBar));
mapDsc.put(multicurve.getName(fra.getCurrency()), listDiscounting);
final Map<String, List<ForwardSensitivity>> mapFwd = new HashMap<>();
final List<ForwardSensitivity> listForward = new ArrayList<>();
listForward.add(new ForwardSensitivity(fra.getFixingPeriodStartTime(), fra.getFixingPeriodEndTime(), fra.getFixingYearFraction(), forwardBar));
mapFwd.put(multicurve.getName(fra.getIndex()), listForward);
final MultipleCurrencyMulticurveSensitivity result = MultipleCurrencyMulticurveSensitivity.of(fra.getCurrency(), MulticurveSensitivity.of(mapDsc, mapFwd));
return result;
}
/**
* Compute the par rate or forward rate of the FRA.
* @param fra The FRA.
* @param multicurve The multi-curve provider.
* @return The par rate.
*/
public double parRate(final ForwardRateAgreement fra, final MulticurveProviderInterface multicurve) {
ArgumentChecker.notNull(fra, "FRA");
ArgumentChecker.notNull(multicurve, "Multiurves");
return multicurve.getForwardRate(fra.getIndex(), fra.getFixingPeriodStartTime(), fra.getFixingPeriodEndTime(), fra.getFixingYearFraction());
}
/**
* Computes the par spread (spread to be added to the fixed rate to have a present value of 0).
* @param fra The FRA.
* @param multicurve The multi-curve provider.
* @return The par spread.
*/
public double parSpread(final ForwardRateAgreement fra, final MulticurveProviderInterface multicurve) {
ArgumentChecker.notNull(fra, "FRA");
ArgumentChecker.notNull(multicurve, "Multiurves");
final double forward = multicurve.getForwardRate(fra.getIndex(), fra.getFixingPeriodStartTime(), fra.getFixingPeriodEndTime(), fra.getFixingYearFraction());
return forward - fra.getRate();
}
/**
* Computes the par spread curve sensitivity.
* @param fra The FRA.
* @param multicurve The multi-curve provider.
* @return The par spread sensitivity.
*/
public MulticurveSensitivity parSpreadCurveSensitivity(final ForwardRateAgreement fra, final MulticurveProviderInterface multicurve) {
ArgumentChecker.notNull(fra, "FRA");
ArgumentChecker.notNull(multicurve, "Multiurves");
final Map<String, List<ForwardSensitivity>> mapFwd = new HashMap<>();
final List<ForwardSensitivity> listForward = new ArrayList<>();
listForward.add(new ForwardSensitivity(fra.getFixingPeriodStartTime(), fra.getFixingPeriodEndTime(), fra.getFixingYearFraction(), 1.0));
mapFwd.put(multicurve.getName(fra.getIndex()), listForward);
return MulticurveSensitivity.ofForward(mapFwd);
}
}