/**
* Copyright (C) 2013 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.inflation.provider;
import java.util.ArrayList;
import java.util.HashMap;
import java.util.List;
import java.util.Map;
import com.opengamma.analytics.financial.interestrate.InstrumentDerivative;
import com.opengamma.analytics.financial.interestrate.inflation.derivative.CapFloorInflationYearOnYearInterpolation;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.EuropeanVanillaOption;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.NormalFunctionData;
import com.opengamma.analytics.financial.model.option.pricing.analytic.formula.NormalPriceFunction;
import com.opengamma.analytics.financial.provider.description.inflation.BlackSmileCapInflationYearOnYearProviderInterface;
import com.opengamma.analytics.financial.provider.description.inflation.InflationProviderInterface;
import com.opengamma.analytics.financial.provider.sensitivity.inflation.InflationSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.inflation.MultipleCurrencyInflationSensitivity;
import com.opengamma.analytics.math.function.Function1D;
import com.opengamma.util.ArgumentChecker;
import com.opengamma.util.money.MultipleCurrencyAmount;
import com.opengamma.util.tuple.DoublesPair;
/**
* Pricing method for inflation Year on Year cap\floor. The price is computed by index estimation and discounting.
*/
public final class CapFloorInflationYearOnYearInterpolationBlackNormalSmileMethod {
/**
* The method unique instance.
*/
private static final CapFloorInflationYearOnYearInterpolationBlackNormalSmileMethod INSTANCE = new CapFloorInflationYearOnYearInterpolationBlackNormalSmileMethod();
/**
* Private constructor.
*/
private CapFloorInflationYearOnYearInterpolationBlackNormalSmileMethod() {
}
/**
* Return the unique instance of the class.
* @return The instance.
*/
public static CapFloorInflationYearOnYearInterpolationBlackNormalSmileMethod getInstance() {
return INSTANCE;
}
/**
* The Black function used in the pricing.
*/
private static final NormalPriceFunction NORMAL_FUNCTION = new NormalPriceFunction();
/**
* Computes the net amount.
* @param cap The caplet/floorlet.
* @param black The Black implied volatility and multi-curve provider.
* @return The present value.
*/
public MultipleCurrencyAmount netAmount(final CapFloorInflationYearOnYearInterpolation cap, final BlackSmileCapInflationYearOnYearProviderInterface black) {
ArgumentChecker.notNull(cap, "The cap/floor shoud not be null");
ArgumentChecker.notNull(black, "Black provider");
final double timeToMaturity = cap.getReferenceEndTime()[1] - cap.getLastKnownFixingTime();
final EuropeanVanillaOption option = new EuropeanVanillaOption(cap.getStrike(), timeToMaturity, cap.isCap());
final double priceIndexStart0 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceStartTime()[0]);
final double priceIndexStart1 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceStartTime()[1]);
final double priceIndexStart = cap.getWeightStart() * priceIndexStart0 + (1 - cap.getWeightStart()) * priceIndexStart1;
final double priceIndexEnd0 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceEndTime()[0]);
final double priceIndexEnd1 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceEndTime()[1]);
final double priceIndexEnd = cap.getWeightEnd() * priceIndexEnd0 + (1 - cap.getWeightEnd()) * priceIndexEnd1;
final double forward = priceIndexEnd / priceIndexStart - 1;
final double volatility = black.getBlackParameters().getVolatility(cap.getReferenceEndTime()[1], cap.getStrike());
final NormalFunctionData dataBlack = new NormalFunctionData(forward, 1.0, volatility);
final Function1D<NormalFunctionData, Double> func = NORMAL_FUNCTION.getPriceFunction(option);
final double price = func.evaluate(dataBlack) * cap.getNotional() * cap.getPaymentYearFraction();
return MultipleCurrencyAmount.of(cap.getCurrency(), price);
}
/**
* Computes the present value.
* @param cap The caplet/floorlet.
* @param black The Black implied volatility and multi-curve provider.
* @return The present value.
*/
public MultipleCurrencyAmount presentValue(final CapFloorInflationYearOnYearInterpolation cap, final BlackSmileCapInflationYearOnYearProviderInterface black) {
final MultipleCurrencyAmount nonDiscountedPresentValue = netAmount(cap, black);
final double df = black.getMulticurveProvider().getDiscountFactor(cap.getCurrency(), cap.getPaymentTime());
return nonDiscountedPresentValue.multipliedBy(df);
}
/**
* Computes the present value.
* @param instrument The instrument.
* @param black The Black implied volatility and multi-curve provider.
* @return The present value.
*/
public MultipleCurrencyAmount presentValue(final InstrumentDerivative instrument, final BlackSmileCapInflationYearOnYearProviderInterface black) {
ArgumentChecker.isTrue(instrument instanceof CapFloorInflationYearOnYearInterpolation, "Inflation Year on Year Cap/floor");
return presentValue((CapFloorInflationYearOnYearInterpolation) instrument, black);
}
/**
* Computes the present value rate sensitivity to rates of a cap/floor in the Black model.
* No smile impact is taken into account; equivalent to a sticky strike smile description.
* @param cap The caplet/floorlet.
* @param black The Black implied volatility and multi-curve provider.
* @return The present value curve sensitivity.
*/
public MultipleCurrencyInflationSensitivity presentValueCurveSensitivity(final CapFloorInflationYearOnYearInterpolation cap, final BlackSmileCapInflationYearOnYearProviderInterface black) {
ArgumentChecker.notNull(cap, "The cap/floor shoud not be null");
ArgumentChecker.notNull(black, "Black provider");
final InflationProviderInterface inflation = black.getInflationProvider();
final double timeToMaturity = cap.getReferenceEndTime()[1] - cap.getLastKnownFixingTime();
final EuropeanVanillaOption option = new EuropeanVanillaOption(cap.getStrike(), timeToMaturity, cap.isCap());
final double priceIndexStart0 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceStartTime()[0]);
final double priceIndexStart1 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceStartTime()[1]);
final double priceIndexStart = cap.getWeightStart() * priceIndexStart0 + (1 - cap.getWeightStart()) * priceIndexStart1;
final double priceIndexEnd0 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceEndTime()[0]);
final double priceIndexEnd1 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceEndTime()[1]);
final double priceIndexEnd = cap.getWeightEnd() * priceIndexEnd0 + (1 - cap.getWeightEnd()) * priceIndexEnd1;
final double forward = priceIndexEnd / priceIndexStart - 1;
final double df = black.getMulticurveProvider().getDiscountFactor(cap.getCurrency(), cap.getPaymentTime());
final Map<String, List<DoublesPair>> resultMapPrice = new HashMap<>();
final List<DoublesPair> listPrice = new ArrayList<>();
listPrice.add(new DoublesPair(cap.getReferenceEndTime()[0], cap.getWeightEnd() / priceIndexStart));
listPrice.add(new DoublesPair(cap.getReferenceEndTime()[1], (1 - cap.getWeightEnd()) / priceIndexStart));
listPrice.add(new DoublesPair(cap.getReferenceStartTime()[0], -cap.getWeightStart() * priceIndexEnd / (priceIndexStart * priceIndexStart)));
listPrice.add(new DoublesPair(cap.getReferenceStartTime()[1], -(1 - cap.getWeightStart()) * priceIndexEnd / (priceIndexStart * priceIndexStart)));
resultMapPrice.put(inflation.getName(cap.getPriceIndex()), listPrice);
final InflationSensitivity forwardDi = InflationSensitivity.ofPriceIndex(resultMapPrice);
final double dfDr = -cap.getPaymentTime() * df;
final double volatility = black.getBlackParameters().getVolatility(cap.getReferenceEndTime()[1], cap.getStrike());
final NormalFunctionData dataBlack = new NormalFunctionData(forward, 1.0, volatility);
final double[] priceDerivatives = new double[3];
final double bsAdjoint = NORMAL_FUNCTION.getPriceAdjoint(option, dataBlack, priceDerivatives);
final List<DoublesPair> list = new ArrayList<>();
list.add(new DoublesPair(cap.getPaymentTime(), dfDr));
final Map<String, List<DoublesPair>> resultMap = new HashMap<>();
resultMap.put(inflation.getName(cap.getCurrency()), list);
InflationSensitivity result = InflationSensitivity.ofYieldDiscounting(resultMap);
result = result.multipliedBy(bsAdjoint);
result = result.plus(forwardDi.multipliedBy(df * priceDerivatives[0]));
result = result.multipliedBy(cap.getNotional() * cap.getPaymentYearFraction());
return MultipleCurrencyInflationSensitivity.of(cap.getCurrency(), result);
}
}