/**
* Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.future.provider;
import com.opengamma.analytics.financial.interestrate.future.derivative.InterestRateFutureOptionMarginSecurity;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.BlackFunctionData;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.BlackPriceFunction;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.EuropeanVanillaOption;
import com.opengamma.analytics.financial.provider.description.interestrate.BlackSTIRFuturesSmileProviderInterface;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MulticurveSensitivity;
import com.opengamma.analytics.util.amount.SurfaceValue;
import com.opengamma.util.ArgumentChecker;
import com.opengamma.util.tuple.DoublesPair;
/**
* Method for the pricing of interest rate future options with margin process. The pricing is done with a Black approach on the future rate (1.0-price).
* The Black parameters are represented by (expiration-strike-delay) surfaces. The "delay" is the time between option expiration and future last trading date,
* i.e. 0 for quarterly options and x for x-year mid-curve options. The future prices are computed without convexity adjustments.
*/
public final class InterestRateFutureOptionMarginSecurityBlackSmileMethod extends InterestRateFutureOptionMarginSecurityGenericMethod<BlackSTIRFuturesSmileProviderInterface> {
/**
* Creates the method unique instance.
*/
private static final InterestRateFutureOptionMarginSecurityBlackSmileMethod INSTANCE = new InterestRateFutureOptionMarginSecurityBlackSmileMethod();
/**
* Constructor.
*/
private InterestRateFutureOptionMarginSecurityBlackSmileMethod() {
}
/**
* Return the method unique instance.
* @return The instance.
*/
public static InterestRateFutureOptionMarginSecurityBlackSmileMethod getInstance() {
return INSTANCE;
}
/**
* The Black function used in the pricing.
*/
private static final BlackPriceFunction BLACK_FUNCTION = new BlackPriceFunction();
/**
* The method used to compute the future price. It is a method without convexity adjustment.
*/
private static final InterestRateFutureSecurityDiscountingMethod METHOD_FUTURE = InterestRateFutureSecurityDiscountingMethod.getInstance();
/**
* Computes the option security price from future price.
* @param security The future option security.
* @param blackData The Black volatility and multi-curves provider.
* @param priceFuture The price of the underlying future.
* @return The security price.
*/
public double priceFromFuturePrice(final InterestRateFutureOptionMarginSecurity security, final BlackSTIRFuturesSmileProviderInterface blackData, final double priceFuture) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(blackData, "Black data");
final double rateStrike = 1.0 - security.getStrike();
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double delay = security.getUnderlyingFuture().getLastTradingTime() - security.getExpirationTime();
final double volatility = blackData.getVolatility(security.getExpirationTime(), security.getStrike(), delay); //
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final double priceSecurity = BLACK_FUNCTION.getPriceFunction(option).evaluate(dataBlack);
return priceSecurity;
}
/**
* Computes the option security price. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The security price.
*/
@Override
public double price(final InterestRateFutureOptionMarginSecurity security, final BlackSTIRFuturesSmileProviderInterface blackData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(blackData, "Black data");
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData.getMulticurveProvider());
return priceFromFuturePrice(security, blackData, priceFuture);
}
/**
* Computes the option security price curve sensitivity. The future price is computed without convexity adjustment.
* It is supposed that for a given strike the volatility does not change with the curves (sticky strike).
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The security price curve sensitivity.
*/
@Override
public MulticurveSensitivity priceCurveSensitivity(final InterestRateFutureOptionMarginSecurity security, final BlackSTIRFuturesSmileProviderInterface blackData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(blackData, "Black data");
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData.getMulticurveProvider());
final double rateStrike = 1.0 - security.getStrike();
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double delay = security.getUnderlyingFuture().getLastTradingTime() - security.getExpirationTime();
final double volatility = blackData.getVolatility(security.getExpirationTime(), security.getStrike(), delay);
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final double[] priceAdjoint = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
// Backward sweep
final double priceBar = 1.0;
final double forwardBar = priceAdjoint[1] * priceBar;
final double priceFutureBar = -forwardBar;
final MulticurveSensitivity priceFutureDerivative = METHOD_FUTURE.priceCurveSensitivity(security.getUnderlyingFuture(), blackData.getMulticurveProvider());
return priceFutureDerivative.multipliedBy(priceFutureBar);
}
/**
* Computes the option security price volatility sensitivity. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The security price Black volatility sensitivity.
*/
public SurfaceValue priceBlackSensitivity(final InterestRateFutureOptionMarginSecurity security, final BlackSTIRFuturesSmileProviderInterface blackData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(blackData, "Black data");
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData.getMulticurveProvider());
final double strike = security.getStrike();
final double rateStrike = 1.0 - strike;
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double delay = security.getUnderlyingFuture().getLastTradingTime() - security.getExpirationTime();
final double volatility = blackData.getVolatility(security.getExpirationTime(), security.getStrike(), delay);
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final double[] priceAdjoint = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
// Backward sweep
final double priceBar = 1.0;
final double volatilityBar = priceAdjoint[2] * priceBar;
final DoublesPair expiryStrikeDelay = new DoublesPair(security.getExpirationTime(), strike);
final SurfaceValue sensi = SurfaceValue.from(expiryStrikeDelay, volatilityBar);
return sensi;
}
/**
* Computes the option security price delta, wrt the futures price dV/df. The futures price is computed without convexity adjustment.
* It is supposed that for a given strike the volatility does not change with the curves.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The delta.
*/
public double priceDelta(final InterestRateFutureOptionMarginSecurity security, final BlackSTIRFuturesSmileProviderInterface blackData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(blackData, "Black data");
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData);
final double rateStrike = 1.0 - security.getStrike();
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double delay = security.getUnderlyingFuture().getLastTradingTime() - security.getExpirationTime();
final double volatility = blackData.getVolatility(security.getExpirationTime(), security.getStrike(), delay);
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final double[] priceAdjoint = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
return -priceAdjoint[1];
}
/**
* Computes the option's value gamma, the second derivative of the security price wrt underlying futures rate.
* The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The security price.
*/
public double priceGamma(final InterestRateFutureOptionMarginSecurity security, final BlackSTIRFuturesSmileProviderInterface blackData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(blackData, "Black data");
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData.getMulticurveProvider());
final double strike = security.getStrike();
final double rateStrike = 1.0 - strike;
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double delay = security.getUnderlyingFuture().getLastTradingTime() - security.getExpirationTime();
final double volatility = blackData.getVolatility(security.getExpirationTime(), security.getStrike(), delay);
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final double[] firstDerivs = new double[3];
final double[][] secondDerivs = new double[3][3];
BLACK_FUNCTION.getPriceAdjoint2(option, dataBlack, firstDerivs, secondDerivs);
return secondDerivs[0][0];
}
/**
* Computes the option security vega. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return Black lognormal vega.
*/
public double priceVega(final InterestRateFutureOptionMarginSecurity security, final BlackSTIRFuturesSmileProviderInterface blackData) {
// Forward sweep
final double priceFuture = METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData);
final double strike = security.getStrike();
final double rateStrike = 1.0 - strike;
final EuropeanVanillaOption option = new EuropeanVanillaOption(rateStrike, security.getExpirationTime(), !security.isCall());
final double forward = 1 - priceFuture;
final double delay = security.getUnderlyingFuture().getLastTradingTime() - security.getExpirationTime();
final double volatility = blackData.getVolatility(security.getExpirationTime(), security.getStrike(), delay);
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final double[] priceAdjoint = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
return priceAdjoint[2];
}
/**
* Interpolates and returns the option's implied volatility
* The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return Lognormal Implied Volatility.
*/
public double impliedVolatility(final InterestRateFutureOptionMarginSecurity security, final BlackSTIRFuturesSmileProviderInterface blackData) {
ArgumentChecker.notNull(security, "Option security");
ArgumentChecker.notNull(blackData, "Black data");
final double delay = security.getUnderlyingFuture().getLastTradingTime() - security.getExpirationTime();
return blackData.getVolatility(security.getExpirationTime(), security.getStrike(), delay);
}
/**
* Computes the underlying future security price. The future price is computed without convexity adjustment.
* @param security The future option security.
* @param blackData The curve and Black volatility data.
* @return The security price.
*/
public double underlyingFuturesPrice(final InterestRateFutureOptionMarginSecurity security, final BlackSTIRFuturesSmileProviderInterface blackData) {
return METHOD_FUTURE.price(security.getUnderlyingFuture(), blackData.getMulticurveProvider());
}
}