/**
* 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.CapFloorInflationZeroCouponInterpolation;
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.inflation.BlackSmileCapInflationZeroCouponProviderInterface;
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;
/**
* Class used to compute the price and sensitivity of a Inflation Zero-Coupon cap/floor with Black model.
* Black model for inflation assume a lognormal diffusion of the forward price index.
* No convexity adjustment is done for payment at non-standard dates.
*/
public final class CapFloorInflationZeroCouponInterpolationBlackSmileMethod {
/**
* The method unique instance.
*/
private static final CapFloorInflationZeroCouponInterpolationBlackSmileMethod INSTANCE = new CapFloorInflationZeroCouponInterpolationBlackSmileMethod();
/**
* Private constructor.
*/
private CapFloorInflationZeroCouponInterpolationBlackSmileMethod() {
}
/**
* Return the unique instance of the class.
* @return The instance.
*/
public static CapFloorInflationZeroCouponInterpolationBlackSmileMethod getInstance() {
return INSTANCE;
}
/**
* The Black function used in the pricing.
*/
private static final BlackPriceFunction BLACK_FUNCTION = new BlackPriceFunction();
/**
* 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 CapFloorInflationZeroCouponInterpolation cap, final BlackSmileCapInflationZeroCouponProviderInterface 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(Math.pow(1 + cap.getStrike(), cap.getMaturity()), timeToMaturity, cap.isCap());
final double indexEndValue0 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceEndTime()[0]);
final double indexEndValue1 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceEndTime()[1]);
final double indexEndValue = cap.getWeight() * indexEndValue0 + (1 - cap.getWeight()) * indexEndValue1;
final double forward = indexEndValue / cap.getIndexStartValue();
final double volatility = black.getBlackParameters().getVolatility(cap.getReferenceEndTime()[1], cap.getStrike());
final BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final Function1D<BlackFunctionData, Double> func = BLACK_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 CapFloorInflationZeroCouponInterpolation cap, final BlackSmileCapInflationZeroCouponProviderInterface 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 BlackSmileCapInflationZeroCouponProviderInterface black) {
ArgumentChecker.isTrue(instrument instanceof CapFloorInflationZeroCouponInterpolation, "Inflation Zero Coupon Cap/floor");
return presentValue((CapFloorInflationZeroCouponInterpolation) 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 CapFloorInflationZeroCouponInterpolation cap, final BlackSmileCapInflationZeroCouponProviderInterface 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(Math.pow(1 + cap.getStrike(), cap.getMaturity()), timeToMaturity, cap.isCap());
final double indexEndValue0 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceEndTime()[0]);
final double indexEndValue1 = black.getInflationProvider().getPriceIndex(cap.getPriceIndex(), cap.getReferenceEndTime()[1]);
final double indexEndValue = cap.getWeight() * indexEndValue0 + (1 - cap.getWeight()) * indexEndValue1;
final double forward = indexEndValue / cap.getIndexStartValue();
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.getWeight() / cap.getIndexStartValue()));
listPrice.add(new DoublesPair(cap.getReferenceEndTime()[1], (1 - cap.getWeight()) / cap.getIndexStartValue()));
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 BlackFunctionData dataBlack = new BlackFunctionData(forward, 1.0, volatility);
final double[] bsAdjoint = BLACK_FUNCTION.getPriceAdjoint(option, dataBlack);
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[0]);
result = result.plus(forwardDi.multipliedBy(df * bsAdjoint[1]));
result = result.multipliedBy(cap.getNotional() * cap.getPaymentYearFraction());
return MultipleCurrencyInflationSensitivity.of(cap.getCurrency(), result);
}
}