/**
* Copyright (C) 2012 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.forex.provider;
import static org.testng.AssertJUnit.assertEquals;
import static org.testng.AssertJUnit.assertTrue;
import org.testng.annotations.Test;
import org.threeten.bp.Period;
import org.threeten.bp.ZonedDateTime;
import com.opengamma.analytics.financial.forex.definition.ForexDefinition;
import com.opengamma.analytics.financial.forex.definition.ForexOptionVanillaDefinition;
import com.opengamma.analytics.financial.forex.derivative.Forex;
import com.opengamma.analytics.financial.forex.derivative.ForexOptionVanilla;
import com.opengamma.analytics.financial.forex.method.FXMatrix;
import com.opengamma.analytics.financial.forex.method.PresentValueForexBlackVolatilityNodeSensitivityDataBundle;
import com.opengamma.analytics.financial.forex.method.PresentValueForexBlackVolatilitySensitivity;
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.volatility.VolatilityAndBucketedSensitivities;
import com.opengamma.analytics.financial.model.volatility.surface.SmileDeltaTermStructureParametersStrikeInterpolation;
import com.opengamma.analytics.financial.provider.calculator.blackforex.CurrencyExposureForexBlackSmileCalculator;
import com.opengamma.analytics.financial.provider.calculator.blackforex.PercentageGammaForexBlackSmileCalculator;
import com.opengamma.analytics.financial.provider.calculator.blackforex.PresentValueCurveSensitivityForexBlackSmileCalculator;
import com.opengamma.analytics.financial.provider.calculator.blackforex.PresentValueForexBlackSmileCalculator;
import com.opengamma.analytics.financial.provider.calculator.blackforex.PresentValueForexVolatilitySensitivityForexBlackSmileCalculator;
import com.opengamma.analytics.financial.provider.description.forex.BlackForexSmileProvider;
import com.opengamma.analytics.financial.provider.description.forex.BlackForexSmileProviderDiscount;
import com.opengamma.analytics.financial.provider.description.forex.BlackForexSmileProviderInterface;
import com.opengamma.analytics.financial.provider.description.interestrate.MulticurveProviderDiscount;
import com.opengamma.analytics.financial.provider.sensitivity.blackforex.ParameterSensitivityForexBlackSmileDiscountInterpolatedFDCalculator;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MultipleCurrencyMulticurveSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MultipleCurrencyParameterSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.parameter.ParameterSensitivityParameterCalculator;
import com.opengamma.analytics.financial.schedule.ScheduleCalculator;
import com.opengamma.analytics.financial.util.AssertSensivityObjects;
import com.opengamma.analytics.math.function.Function1D;
import com.opengamma.analytics.util.time.TimeCalculator;
import com.opengamma.financial.convention.businessday.BusinessDayConvention;
import com.opengamma.financial.convention.businessday.BusinessDayConventionFactory;
import com.opengamma.financial.convention.calendar.Calendar;
import com.opengamma.financial.convention.calendar.MondayToFridayCalendar;
import com.opengamma.util.money.Currency;
import com.opengamma.util.money.CurrencyAmount;
import com.opengamma.util.money.MultipleCurrencyAmount;
import com.opengamma.util.time.DateUtils;
import com.opengamma.util.tuple.DoublesPair;
import com.opengamma.util.tuple.ObjectsPair;
import com.opengamma.util.tuple.Pair;
import com.opengamma.util.tuple.Triple;
/**
* Tests related to the pricing method for vanilla Forex option transactions with Black function and a volatility provider.
*/
public class ForexOptionVanillaBlackSmileMethodTest {
private static final MulticurveProviderDiscount MULTICURVES = MulticurveProviderDiscountForexDataSets.createMulticurvesForex();
private static final FXMatrix FX_MATRIX = MULTICURVES.getFxRates();
private static final Currency EUR = Currency.EUR;
private static final Currency USD = Currency.USD;
private static final double SPOT = FX_MATRIX.getFxRate(EUR, USD);
// General
private static final Calendar CALENDAR = new MondayToFridayCalendar("A");
private static final BusinessDayConvention BUSINESS_DAY = BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Modified Following");
private static final int SETTLEMENT_DAYS = 2;
// Smile data
private static final Period[] EXPIRY_PERIOD = new Period[] {Period.ofMonths(3), Period.ofMonths(6), Period.ofYears(1),
Period.ofYears(2), Period.ofYears(5) };
private static final int NB_EXP = EXPIRY_PERIOD.length;
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 6, 13);
private static final ZonedDateTime REFERENCE_SPOT = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, SETTLEMENT_DAYS, CALENDAR);
private static final ZonedDateTime[] PAY_DATE = new ZonedDateTime[NB_EXP];
private static final ZonedDateTime[] EXPIRY_DATE = new ZonedDateTime[NB_EXP];
private static final double[] TIME_TO_EXPIRY = new double[NB_EXP + 1];
static {
TIME_TO_EXPIRY[0] = 0.0;
for (int loopexp = 0; loopexp < NB_EXP; loopexp++) {
PAY_DATE[loopexp] = ScheduleCalculator.getAdjustedDate(REFERENCE_SPOT, EXPIRY_PERIOD[loopexp], BUSINESS_DAY, CALENDAR);
EXPIRY_DATE[loopexp] = ScheduleCalculator.getAdjustedDate(PAY_DATE[loopexp], -SETTLEMENT_DAYS, CALENDAR);
TIME_TO_EXPIRY[loopexp + 1] = TimeCalculator.getTimeBetween(REFERENCE_DATE, EXPIRY_DATE[loopexp]);
}
}
private static final double[] ATM = {0.175, 0.185, 0.18, 0.17, 0.16, 0.16 };
private static final double[] DELTA = new double[] {0.10, 0.25 };
private static final double[][] RISK_REVERSAL = new double[][] { {-0.010, -0.0050 }, {-0.011, -0.0060 }, {-0.012, -0.0070 }, {-0.013, -0.0080 }, {-0.014, -0.0090 },
{-0.014, -0.0090 } };
private static final double[][] STRANGLE = new double[][] { {0.0300, 0.0100 }, {0.0310, 0.0110 }, {0.0320, 0.0120 }, {0.0330, 0.0130 }, {0.0340, 0.0140 }, {0.0340, 0.0140 } };
private static final int NB_STRIKE = 2 * DELTA.length + 1;
private static final SmileDeltaTermStructureParametersStrikeInterpolation SMILE_TERM = new SmileDeltaTermStructureParametersStrikeInterpolation(TIME_TO_EXPIRY, DELTA,
ATM, RISK_REVERSAL, STRANGLE);
private static final SmileDeltaTermStructureParametersStrikeInterpolation SMILE_TERM_FLAT = ForexSmileProviderDataSets.smileFlat(REFERENCE_DATE);
private static final BlackForexSmileProviderDiscount SMILE_MULTICURVES = new BlackForexSmileProviderDiscount(MULTICURVES, SMILE_TERM, Pair.of(EUR, USD));
private static final BlackForexSmileProviderDiscount SMILE_FLAT_MULTICURVES = new BlackForexSmileProviderDiscount(MULTICURVES, SMILE_TERM_FLAT, Pair.of(EUR, USD));
private static final double SHIFT = 1.0E-6;
private static final FXMatrix FX_MATRIX_M = new FXMatrix(EUR, USD, SPOT - SHIFT);
private static final FXMatrix FX_MATRIX_P = new FXMatrix(EUR, USD, SPOT + SHIFT);
private static final MulticurveProviderDiscount MULTICURVES_FX_M = MULTICURVES.copy();
private static final MulticurveProviderDiscount MULTICURVES_FX_P = MULTICURVES.copy();
static {
MULTICURVES_FX_M.setForexMatrix(FX_MATRIX_M);
MULTICURVES_FX_P.setForexMatrix(FX_MATRIX_P);
}
private static final BlackForexSmileProvider SMILE_M_MULTICURVES = new BlackForexSmileProvider(MULTICURVES_FX_M, SMILE_TERM_FLAT, Pair.of(EUR, USD));
private static final BlackForexSmileProvider SMILE_P_MULTICURVES = new BlackForexSmileProvider(MULTICURVES_FX_P, SMILE_TERM_FLAT, Pair.of(EUR, USD));
private static final BlackPriceFunction BLACK_FUNCTION = new BlackPriceFunction();
private static final ForexOptionVanillaBlackSmileMethod METHOD_OPTION = ForexOptionVanillaBlackSmileMethod.getInstance();
private static final ForexDiscountingMethod METHOD_DISC = ForexDiscountingMethod.getInstance();
private static final PresentValueForexBlackSmileCalculator PVFBC = PresentValueForexBlackSmileCalculator.getInstance();
private static final CurrencyExposureForexBlackSmileCalculator CEFBC = CurrencyExposureForexBlackSmileCalculator.getInstance();
private static final PresentValueCurveSensitivityForexBlackSmileCalculator PVCSFBC = PresentValueCurveSensitivityForexBlackSmileCalculator.getInstance();
private static final PresentValueForexVolatilitySensitivityForexBlackSmileCalculator PVVSFBSC = PresentValueForexVolatilitySensitivityForexBlackSmileCalculator
.getInstance();
private static final double SHIFT_FD = 1.0E-6;
private static final ParameterSensitivityParameterCalculator<BlackForexSmileProviderInterface> PS_FBS_C = new ParameterSensitivityParameterCalculator<>(
PVCSFBC);
private static final ParameterSensitivityForexBlackSmileDiscountInterpolatedFDCalculator PS_FBS_FDC = new ParameterSensitivityForexBlackSmileDiscountInterpolatedFDCalculator(
PVFBC, SHIFT_FD);
// option
private static final double STRIKE = 1.45;
private static final boolean IS_CALL = true;
private static final boolean IS_LONG = true;
private static final double NOTIONAL = 100000000;
private static final ZonedDateTime OPTION_PAY_DATE = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
private static final ZonedDateTime OPTION_EXP_DATE = ScheduleCalculator.getAdjustedDate(OPTION_PAY_DATE, -SETTLEMENT_DAYS, CALENDAR);
private static final ForexDefinition FOREX_DEFINITION = new ForexDefinition(EUR, USD, OPTION_PAY_DATE, NOTIONAL, STRIKE);
private static final ForexOptionVanillaDefinition FOREX_OPTION_CALL_DEFINITION = new ForexOptionVanillaDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, IS_LONG);
private static final ForexOptionVanilla FOREX_CALL_OPTION = FOREX_OPTION_CALL_DEFINITION.toDerivative(REFERENCE_DATE);
private static final double TOLERANCE_RELATIVE = 1.0E-9;
private static final double TOLERANCE_PV = 1.0E-2;
private static final double TOLERANCE_PV_DELTA = 1.0E+0;
@Test
/**
* Tests the present value at a time grid point.
*/
public void persentValueAtGridPoint() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final int indexPay = 2; // 1Y
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, PAY_DATE[indexPay], notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, EXPIRY_DATE[indexPay], isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final double df = MULTICURVES.getDiscountFactor(USD, TimeCalculator.getTimeBetween(REFERENCE_DATE, PAY_DATE[indexPay]));
final double forward = SPOT * MULTICURVES.getDiscountFactor(EUR, TimeCalculator.getTimeBetween(REFERENCE_DATE, PAY_DATE[indexPay])) / df;
final double volatility = SMILE_TERM.getVolatility(new Triple<>(TIME_TO_EXPIRY[indexPay + 1], strike, forward));
final BlackFunctionData dataBlack = new BlackFunctionData(forward, df, volatility);
final Function1D<BlackFunctionData, Double> func = BLACK_FUNCTION.getPriceFunction(forexOption);
final double priceExpected = func.evaluate(dataBlack) * notional;
final MultipleCurrencyAmount priceComputed = METHOD_OPTION.presentValue(forexOption, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: present value", priceExpected, priceComputed.getAmount(USD), TOLERANCE_PV);
}
@Test
/**
* Tests the present value against an explicit computation.
*/
public void presentValue() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final double timeToExpiry = TimeCalculator.getTimeBetween(REFERENCE_DATE, expDate);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final double df = MULTICURVES.getDiscountFactor(USD, TimeCalculator.getTimeBetween(REFERENCE_DATE, payDate));
final double forward = SPOT * MULTICURVES.getDiscountFactor(EUR, TimeCalculator.getTimeBetween(REFERENCE_DATE, payDate)) / df;
final double volatility = SMILE_TERM.getVolatility(new Triple<>(timeToExpiry, strike, forward));
final BlackFunctionData dataBlack = new BlackFunctionData(forward, df, volatility);
final Function1D<BlackFunctionData, Double> func = BLACK_FUNCTION.getPriceFunction(forexOption);
final double priceExpected = func.evaluate(dataBlack) * notional;
final MultipleCurrencyAmount priceComputed = METHOD_OPTION.presentValue(forexOption, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: present value", priceExpected, priceComputed.getAmount(USD), TOLERANCE_PV);
}
@Test
/**
* Tests a EUR/USD call vs a USD/EUR put.
*/
public void presentValueCallPut() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexEURUSDDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexDefinition forexUSDEURDefinition = new ForexDefinition(USD, EUR, payDate, -notional * strike, 1.0 / strike);
final ForexOptionVanillaDefinition callEURUSDDefinition = new ForexOptionVanillaDefinition(forexEURUSDDefinition, expDate, isCall, isLong);
final ForexOptionVanillaDefinition putUSDEURDefinition = new ForexOptionVanillaDefinition(forexUSDEURDefinition, expDate, isCall, isLong);
final ForexOptionVanilla callEURUSD = callEURUSDDefinition.toDerivative(REFERENCE_DATE);
final ForexOptionVanilla putUSDEUR = putUSDEURDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pvCallEURUSD = METHOD_OPTION.presentValue(callEURUSD, SMILE_MULTICURVES);
final MultipleCurrencyAmount pvPutUSDEUR = METHOD_OPTION.presentValue(putUSDEUR, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: present value Method vs Calculator", pvCallEURUSD.getAmount(USD) / SPOT, pvPutUSDEUR.getAmount(EUR), TOLERANCE_PV);
}
@Test
/**
* Tests the present value Method versus the Calculator.
*/
public void presentValueMethodVsCalculator() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pvMethod = METHOD_OPTION.presentValue(forexOption, SMILE_MULTICURVES);
final MultipleCurrencyAmount pvCalculator = forexOption.accept(PVFBC, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: present value Method vs Calculator", pvMethod.getAmount(USD), pvCalculator.getAmount(USD), TOLERANCE_PV);
}
@Test
/**
* Tests the present value long/short parity.
*/
public void presentValueLongShort() {
final ForexOptionVanillaDefinition forexOptionShortDefinition = new ForexOptionVanillaDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, !IS_LONG);
final ForexOptionVanilla forexOptionShort = forexOptionShortDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pvShort = METHOD_OPTION.presentValue(forexOptionShort, SMILE_MULTICURVES);
final MultipleCurrencyAmount pvLong = METHOD_OPTION.presentValue(FOREX_CALL_OPTION, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: present value long/short parity", pvLong.getAmount(USD), -pvShort.getAmount(USD), TOLERANCE_PV);
final MultipleCurrencyAmount ceShort = METHOD_OPTION.currencyExposure(forexOptionShort, SMILE_MULTICURVES);
final MultipleCurrencyAmount ceLong = METHOD_OPTION.currencyExposure(FOREX_CALL_OPTION, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: currency exposure long/short parity", ceLong.getAmount(USD), -ceShort.getAmount(USD), TOLERANCE_PV);
assertEquals("Forex vanilla option: currency exposure long/short parity", ceLong.getAmount(EUR), -ceShort.getAmount(EUR), TOLERANCE_PV);
}
@Test
/**
* Tests the currency exposure against an explicit computation.
*/
public void currencyExposure() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final double timeToExpiry = TimeCalculator.getTimeBetween(REFERENCE_DATE, expDate);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinitionCall = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanillaDefinition forexOptionDefinitionPut = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong);
final ForexOptionVanilla forexOptionCall = forexOptionDefinitionCall.toDerivative(REFERENCE_DATE);
final ForexOptionVanilla forexOptionPut = forexOptionDefinitionPut.toDerivative(REFERENCE_DATE);
final double dfDomestic = MULTICURVES.getDiscountFactor(USD, TimeCalculator.getTimeBetween(REFERENCE_DATE, payDate)); // USD
final double dfForeign = MULTICURVES.getDiscountFactor(EUR, TimeCalculator.getTimeBetween(REFERENCE_DATE, payDate)); // EUR
final double forward = SPOT * dfForeign / dfDomestic;
final double volatility = SMILE_TERM.getVolatility(new Triple<>(timeToExpiry, strike, forward));
final BlackFunctionData dataBlack = new BlackFunctionData(forward, dfDomestic, volatility);
final double[] priceAdjointCall = BLACK_FUNCTION.getPriceAdjoint(forexOptionCall, dataBlack);
final double[] priceAdjointPut = BLACK_FUNCTION.getPriceAdjoint(forexOptionPut, dataBlack);
final double deltaForwardCall = priceAdjointCall[1];
final double deltaForwardPut = priceAdjointPut[1];
final double deltaSpotCall = deltaForwardCall * dfForeign / dfDomestic;
final double deltaSpotPut = deltaForwardPut * dfForeign / dfDomestic;
final MultipleCurrencyAmount priceComputedCall = METHOD_OPTION.presentValue(forexOptionCall, SMILE_MULTICURVES);
final MultipleCurrencyAmount priceComputedPut = METHOD_OPTION.presentValue(forexOptionPut, SMILE_MULTICURVES);
final MultipleCurrencyAmount currencyExposureCallComputed = METHOD_OPTION.currencyExposure(forexOptionCall, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: currency exposure foreign - call", deltaSpotCall * notional, currencyExposureCallComputed.getAmount(EUR), TOLERANCE_PV);
assertEquals("Forex vanilla option: currency exposure domestic - call", -deltaSpotCall * notional * SPOT + priceComputedCall.getAmount(USD),
currencyExposureCallComputed.getAmount(USD), 1E-2);
final MultipleCurrencyAmount currencyExposurePutComputed = METHOD_OPTION.currencyExposure(forexOptionPut, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: currency exposure foreign- put", deltaSpotPut * notional, currencyExposurePutComputed.getAmount(EUR), TOLERANCE_PV);
assertEquals("Forex vanilla option: currency exposure domestic - put", -deltaSpotPut * notional * SPOT + priceComputedPut.getAmount(USD),
currencyExposurePutComputed.getAmount(USD), 1E-2);
}
@Test
/**
* Tests the currency exposure against the present value.
*/
public void currencyExposureVsPresentValue() {
final MultipleCurrencyAmount pv = METHOD_OPTION.presentValue(FOREX_CALL_OPTION, SMILE_MULTICURVES);
final MultipleCurrencyAmount ce = METHOD_OPTION.currencyExposure(FOREX_CALL_OPTION, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: currency exposure vs present value", ce.getAmount(USD) + ce.getAmount(EUR) * SPOT, pv.getAmount(USD), TOLERANCE_PV);
}
@Test
/**
* Tests a EUR/USD call vs a USD/EUR put.
*/
public void currencyExposureCallPut() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexEURUSDDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexDefinition forexUSDEURDefinition = new ForexDefinition(USD, EUR, payDate, -notional * strike, 1.0 / strike);
final ForexOptionVanillaDefinition callEURUSDDefinition = new ForexOptionVanillaDefinition(forexEURUSDDefinition, expDate, isCall, isLong);
final ForexOptionVanillaDefinition putUSDEURDefinition = new ForexOptionVanillaDefinition(forexUSDEURDefinition, expDate, isCall, isLong);
final ForexOptionVanilla callEURUSD = callEURUSDDefinition.toDerivative(REFERENCE_DATE);
final ForexOptionVanilla putUSDEUR = putUSDEURDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pvCallEURUSD = METHOD_OPTION.currencyExposure(callEURUSD, SMILE_MULTICURVES);
final MultipleCurrencyAmount pvPutUSDEUR = METHOD_OPTION.currencyExposure(putUSDEUR, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: currency exposure", pvCallEURUSD.getAmount(EUR), pvPutUSDEUR.getAmount(EUR), TOLERANCE_PV);
assertEquals("Forex vanilla option: currency exposure", pvCallEURUSD.getAmount(USD), pvPutUSDEUR.getAmount(USD), TOLERANCE_PV);
}
@Test
/**
* Tests the put/call parity currency exposure.
*/
public void currencyExposurePutCallParity() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinitionCall = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanillaDefinition forexOptionDefinitionPut = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong);
final ForexOptionVanilla forexOptionCall = forexOptionDefinitionCall.toDerivative(REFERENCE_DATE);
final ForexOptionVanilla forexOptionPut = forexOptionDefinitionPut.toDerivative(REFERENCE_DATE);
final Forex forexForward = forexUnderlyingDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount currencyExposureCall = METHOD_OPTION.currencyExposure(forexOptionCall, SMILE_MULTICURVES);
final MultipleCurrencyAmount currencyExposurePut = METHOD_OPTION.currencyExposure(forexOptionPut, SMILE_MULTICURVES);
final MultipleCurrencyAmount currencyExposureForward = METHOD_DISC.currencyExposure(forexForward, MULTICURVES);
assertEquals("Forex vanilla option: currency exposure put/call parity foreign", currencyExposureForward.getAmount(EUR), currencyExposureCall.getAmount(EUR)
- currencyExposurePut.getAmount(EUR), TOLERANCE_PV);
assertEquals("Forex vanilla option: currency exposure put/call parity domestic", currencyExposureForward.getAmount(USD), currencyExposureCall.getAmount(USD)
- currencyExposurePut.getAmount(USD), TOLERANCE_PV);
}
@Test
/**
* Tests currency exposure Method vs Calculator.
*/
public void currencyExposureMethodVsCalculator() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount ceMethod = METHOD_OPTION.currencyExposure(forexOption, SMILE_MULTICURVES);
final MultipleCurrencyAmount ceCalculator = forexOption.accept(CEFBC, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: currency exposure Method vs Calculator", ceMethod.getAmount(EUR), ceCalculator.getAmount(EUR), TOLERANCE_PV);
assertEquals("Forex vanilla option: currency exposure Method vs Calculator", ceMethod.getAmount(USD), ceCalculator.getAmount(USD), TOLERANCE_PV);
}
@Test
/**
* Tests forward Forex rate.
*/
public void forwardForexRate() {
final double fwd = METHOD_OPTION.forwardForexRate(FOREX_CALL_OPTION, MULTICURVES);
final double fwdExpected = METHOD_DISC.forwardForexRate(FOREX_CALL_OPTION.getUnderlyingForex(), MULTICURVES);
assertEquals("Forex vanilla option: forward forex rate", fwd, fwdExpected, TOLERANCE_RELATIVE);
}
// @Test
// /**
// * Tests the forward Forex rate through the method and through the calculator.
// */
// public void forwardRateMethodVsCalculator() {
// final double fwdMethod = METHOD_OPTION.forwardForexRate(FOREX_CALL_OPTION, SMILE_BUNDLE);
// final ForwardRateForexCalculator FWDC = ForwardRateForexCalculator.getInstance();
// final double fwdCalculator = FOREX_CALL_OPTION.accept(FWDC, SMILE_BUNDLE);
// assertEquals("Forex: forward rate", fwdMethod, fwdCalculator, TOLERANCE_RELATIVE);
// }
@Test
/**
* Tests the relative delta for Forex option.
*/
public void deltaRelativeDirect() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 1;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount ce = METHOD_OPTION.currencyExposure(forexOption, SMILE_MULTICURVES);
final double delta = METHOD_OPTION.deltaRelative(forexOption, SMILE_MULTICURVES, true);
assertEquals("Forex: relative delta", ce.getAmount(EUR), delta, TOLERANCE_RELATIVE);
final MultipleCurrencyAmount pvM = METHOD_OPTION.presentValue(forexOption, SMILE_M_MULTICURVES);
final MultipleCurrencyAmount pvP = METHOD_OPTION.presentValue(forexOption, SMILE_P_MULTICURVES);
final double deltaFlat = METHOD_OPTION.deltaRelative(forexOption, SMILE_FLAT_MULTICURVES, true);
assertEquals("Forex: relative delta", (pvP.getAmount(USD) - pvM.getAmount(USD)) / (2 * SHIFT), deltaFlat, TOLERANCE_RELATIVE);
}
@Test
/**
* Tests the relative delta for Forex option.
*/
public void deltaRelativeReverse() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 1;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(USD, EUR, payDate, notional, 1.0 / strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pvM = METHOD_OPTION.presentValue(forexOption, SMILE_M_MULTICURVES);
final MultipleCurrencyAmount pvP = METHOD_OPTION.presentValue(forexOption, SMILE_P_MULTICURVES);
final double delta = METHOD_OPTION.deltaRelative(forexOption, SMILE_FLAT_MULTICURVES, false);
assertEquals("Forex: relative gamma", (pvP.getAmount(EUR) - pvM.getAmount(EUR)) / (2 * SHIFT), delta, TOLERANCE_RELATIVE);
}
@Test
/**
* Tests the relative delta for Forex option.
*/
public void deltaRelativeSpotDirect() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 1;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount ce = METHOD_OPTION.currencyExposure(forexOption, SMILE_MULTICURVES);
final double delta = METHOD_OPTION.deltaRelative(forexOption, SMILE_MULTICURVES, true);
assertEquals("Forex: relative delta", ce.getAmount(EUR), delta, TOLERANCE_RELATIVE);
final MultipleCurrencyAmount pvM = METHOD_OPTION.presentValue(forexOption, SMILE_M_MULTICURVES);
final MultipleCurrencyAmount pvP = METHOD_OPTION.presentValue(forexOption, SMILE_P_MULTICURVES);
final double deltaFlat = METHOD_OPTION.deltaRelativeSpot(forexOption, SMILE_FLAT_MULTICURVES, true);
assertEquals("Forex: relative delta", (pvP.getAmount(USD) - pvM.getAmount(USD)) / (2 * SHIFT) * FX_MATRIX.getFxRate(EUR, USD), deltaFlat, TOLERANCE_RELATIVE);
}
@Test
/**
* Tests the relative delta for Forex option.
*/
public void deltaRelativeSpotReverse() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 1;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(USD, EUR, payDate, notional, 1.0 / strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pvM = METHOD_OPTION.presentValue(forexOption, SMILE_M_MULTICURVES);
final MultipleCurrencyAmount pvP = METHOD_OPTION.presentValue(forexOption, SMILE_P_MULTICURVES);
final double delta = METHOD_OPTION.deltaRelativeSpot(forexOption, SMILE_FLAT_MULTICURVES, false);
assertEquals("Forex: relative gamma", (pvP.getAmount(EUR) - pvM.getAmount(EUR)) / (2 * SHIFT / SPOT), delta, TOLERANCE_RELATIVE);
}
@Test
/**
* Tests the relative gamma for Forex option. Direct quote
*/
public void gammaRelativeDirect() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 1;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pv = METHOD_OPTION.presentValue(forexOption, SMILE_FLAT_MULTICURVES);
final MultipleCurrencyAmount pvM = METHOD_OPTION.presentValue(forexOption, SMILE_M_MULTICURVES);
final MultipleCurrencyAmount pvP = METHOD_OPTION.presentValue(forexOption, SMILE_P_MULTICURVES);
final double gamma = METHOD_OPTION.gammaRelative(forexOption, SMILE_FLAT_MULTICURVES, true);
assertEquals("Forex: relative gamma", 1.0, (pvP.getAmount(USD) + pvM.getAmount(USD) - 2 * pv.getAmount(USD)) / (SHIFT * SHIFT) / gamma, 2.0E-4);
}
@Test
/**
* Tests the relative gamma for Forex option. Reverse quote
*/
public void gammaRelativeReverse() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 1;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(USD, EUR, payDate, notional, 1.0 / strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pv = METHOD_OPTION.presentValue(forexOption, SMILE_FLAT_MULTICURVES);
final MultipleCurrencyAmount pvM = METHOD_OPTION.presentValue(forexOption, SMILE_M_MULTICURVES);
final MultipleCurrencyAmount pvP = METHOD_OPTION.presentValue(forexOption, SMILE_P_MULTICURVES);
final double gamma = METHOD_OPTION.gammaRelative(forexOption, SMILE_FLAT_MULTICURVES, false);
assertEquals("Forex: relative gamma", 1.0, (pvP.getAmount(EUR) + pvM.getAmount(EUR) - 2 * pv.getAmount(EUR)) / (SHIFT * SHIFT) / gamma, 1.0E-4);
}
@Test
/**
* Tests the relative gamma for Forex option. Direct quote
*/
public void gammaRelativeSpotDirect() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 1;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final double deltaM = METHOD_OPTION.deltaRelative(forexOption, SMILE_M_MULTICURVES, true);
final double deltaP = METHOD_OPTION.deltaRelative(forexOption, SMILE_P_MULTICURVES, true);
final double gamma = METHOD_OPTION.gammaRelativeSpot(forexOption, SMILE_FLAT_MULTICURVES, true);
assertEquals("Forex: relative gamma", gamma, (deltaP - deltaM) / (2 * SHIFT / SPOT), TOLERANCE_RELATIVE);
}
@Test
/**
* Tests the relative gamma for Forex option. Reverse quote
*/
public void gammaRelativeSpotReverse() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 1;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(USD, EUR, payDate, notional, 1.0 / strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final double deltaM = METHOD_OPTION.deltaRelative(forexOption, SMILE_M_MULTICURVES, false);
final double deltaP = METHOD_OPTION.deltaRelative(forexOption, SMILE_P_MULTICURVES, false);
final double gamma = METHOD_OPTION.gammaRelativeSpot(forexOption, SMILE_FLAT_MULTICURVES, false);
assertEquals("Forex: relative gamma", gamma, (deltaP - deltaM) / (2 * SHIFT / SPOT), TOLERANCE_RELATIVE);
}
@Test
/**
* Tests the gamma for Forex option.
*/
public void gammaDirect() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final double gammaRelative = METHOD_OPTION.gammaRelative(forexOption, SMILE_MULTICURVES, true);
final double gammaExpected = gammaRelative * notional;
final CurrencyAmount gammaComputed = METHOD_OPTION.gamma(forexOption, SMILE_MULTICURVES, true);
assertEquals("Forex: relative gamma", 1.0, gammaExpected / gammaComputed.getAmount(), TOLERANCE_PV);
}
@Test
/**
* Tests the gamma for Forex option.
*/
public void gammaReverse() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(USD, EUR, payDate, notional, 1.0 / strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final double gammaRelative = METHOD_OPTION.gammaRelative(forexOption, SMILE_MULTICURVES, false);
final double gammaExpected = gammaRelative * notional;
final CurrencyAmount gammaComputed = METHOD_OPTION.gamma(forexOption, SMILE_MULTICURVES, false);
assertEquals("Forex: relative gamma", 1.0, gammaExpected / gammaComputed.getAmount(), TOLERANCE_PV);
}
private static final PercentageGammaForexBlackSmileCalculator GSFBSC = PercentageGammaForexBlackSmileCalculator.getInstance();
@Test
/**
* Tests the gamma for Forex option.
*/
public void gammaSpotDirect() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final double gammaRelativeSpot = METHOD_OPTION.gammaRelativeSpot(forexOption, SMILE_MULTICURVES, true);
final double gammaSpotExpected = gammaRelativeSpot * notional;
final CurrencyAmount gammaSpotComputed = METHOD_OPTION.gammaSpot(forexOption, SMILE_MULTICURVES, true);
assertEquals("Forex: relative gamma", 1.0, gammaSpotExpected / gammaSpotComputed.getAmount(), TOLERANCE_PV);
assertEquals("Forex: relative gamma", 1.0, gammaSpotExpected / forexOption.accept(GSFBSC, SMILE_MULTICURVES).getAmount(), TOLERANCE_PV);
final double gammaSpotExpected2 = METHOD_OPTION.gamma(forexOption, SMILE_MULTICURVES, true).getAmount() * SPOT;
assertEquals("Forex: relative gamma", 1.0, gammaSpotExpected2 / gammaSpotComputed.getAmount(), TOLERANCE_PV);
}
@Test
/**
* Tests the gamma for Forex option.
*/
public void gammaSpotReverse() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(USD, EUR, payDate, notional, 1.0 / strike);
final ForexOptionVanillaDefinition forexOptionDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
final double gammaRelativeSpot = METHOD_OPTION.gammaRelativeSpot(forexOption, SMILE_MULTICURVES, false);
final double gammaSpotExpected = gammaRelativeSpot * notional;
final CurrencyAmount gammaSpotComputed = METHOD_OPTION.gammaSpot(forexOption, SMILE_MULTICURVES, false);
assertEquals("Forex: relative gamma", 1.0, gammaSpotExpected / gammaSpotComputed.getAmount(), TOLERANCE_PV);
final double gammaSpotExpected2 = METHOD_OPTION.gamma(forexOption, SMILE_MULTICURVES, false).getAmount() * SPOT;
assertEquals("Forex: relative gamma", 1.0, gammaSpotExpected2 / gammaSpotComputed.getAmount(), TOLERANCE_PV);
}
@Test
/**
* Tests the present value curve sensitivity.
*/
public void presentValueCurveSensitivity() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexOptionVanillaDefinition forexOptionDefinitionCall = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
final ForexOptionVanilla forexOptionCall = forexOptionDefinitionCall.toDerivative(REFERENCE_DATE);
final MultipleCurrencyParameterSensitivity pvpsExact = PS_FBS_C.calculateSensitivity(forexOptionCall, SMILE_FLAT_MULTICURVES, SMILE_FLAT_MULTICURVES
.getMulticurveProvider().getAllNames());
final MultipleCurrencyParameterSensitivity pvpsFD = PS_FBS_FDC.calculateSensitivity(forexOptionCall, SMILE_FLAT_MULTICURVES);
AssertSensivityObjects.assertEquals("SwaptionPhysicalFixedIborSABRMethod: presentValueCurveSensitivity ", pvpsExact, pvpsFD, TOLERANCE_PV_DELTA);
}
@Test
/**
* Test the present value curve sensitivity through the method and through the calculator.
*/
public void presentValueCurveSensitivityMethodVsCalculator() {
final MultipleCurrencyMulticurveSensitivity pvcsMethod = METHOD_OPTION.presentValueCurveSensitivity(FOREX_CALL_OPTION, SMILE_MULTICURVES);
final MultipleCurrencyMulticurveSensitivity pvcsCalculator = FOREX_CALL_OPTION.accept(PVCSFBC, SMILE_MULTICURVES);
assertEquals("Forex present value curve sensitivity: Method vs Calculator", pvcsMethod, pvcsCalculator);
}
@Test
/**
* Tests present value volatility sensitivity.
*/
public void volatilitySensitivity() {
final PresentValueForexBlackVolatilitySensitivity sensi = METHOD_OPTION.presentValueBlackVolatilitySensitivity(FOREX_CALL_OPTION, SMILE_MULTICURVES);
final Pair<Currency, Currency> currencyPair = ObjectsPair.of(EUR, USD);
final DoublesPair point = new DoublesPair(FOREX_CALL_OPTION.getTimeToExpiry(), STRIKE);
assertEquals("Forex vanilla option: vega", currencyPair, sensi.getCurrencyPair());
assertEquals("Forex vanilla option: vega size", 1, sensi.getVega().getMap().entrySet().size());
assertTrue("Forex vanilla option: vega", sensi.getVega().getMap().containsKey(point));
final double timeToExpiry = TimeCalculator.getTimeBetween(REFERENCE_DATE, OPTION_EXP_DATE);
final double df = MULTICURVES.getDiscountFactor(USD, TimeCalculator.getTimeBetween(REFERENCE_DATE, OPTION_PAY_DATE));
final double forward = SPOT * MULTICURVES.getDiscountFactor(EUR, TimeCalculator.getTimeBetween(REFERENCE_DATE, OPTION_PAY_DATE)) / df;
final double volatility = SMILE_TERM.getVolatility(new Triple<>(timeToExpiry, STRIKE, forward));
final BlackFunctionData dataBlack = new BlackFunctionData(forward, df, volatility);
final double[] priceAdjoint = BLACK_FUNCTION.getPriceAdjoint(FOREX_CALL_OPTION, dataBlack);
assertEquals("Forex vanilla option: vega", priceAdjoint[2] * NOTIONAL, sensi.getVega().getMap().get(point));
final ForexOptionVanillaDefinition optionShortDefinition = new ForexOptionVanillaDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, !IS_LONG);
final ForexOptionVanilla optionShort = optionShortDefinition.toDerivative(REFERENCE_DATE);
final PresentValueForexBlackVolatilitySensitivity sensiShort = METHOD_OPTION.presentValueBlackVolatilitySensitivity(optionShort, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: vega short", -sensi.getVega().getMap().get(point), sensiShort.getVega().getMap().get(point));
// Put/call parity
final ForexOptionVanillaDefinition optionShortPutDefinition = new ForexOptionVanillaDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, !IS_CALL, !IS_LONG);
final ForexOptionVanilla optionShortPut = optionShortPutDefinition.toDerivative(REFERENCE_DATE);
final PresentValueForexBlackVolatilitySensitivity sensiShortPut = METHOD_OPTION.presentValueBlackVolatilitySensitivity(optionShortPut, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: vega short", sensiShortPut.getVega().getMap().get(point) + sensi.getVega().getMap().get(point), 0.0, 1.0E-2);
}
@Test
/**
* Test the present value curve sensitivity through the method and through the calculator.
*/
public void volatilitySensitivityMethodVsCalculator() {
final PresentValueForexBlackVolatilitySensitivity pvvsMethod = METHOD_OPTION.presentValueBlackVolatilitySensitivity(FOREX_CALL_OPTION, SMILE_MULTICURVES);
final PresentValueForexBlackVolatilitySensitivity pvvsCalculator = FOREX_CALL_OPTION.accept(PVVSFBSC, SMILE_MULTICURVES);
assertEquals("Forex present value curve sensitivity: Method vs Calculator", pvvsMethod, pvvsCalculator);
}
@Test
/**
* Tests a EUR/USD call vs a USD/EUR put.
*/
public void volatilitySensitivityCallPut() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexEURUSDDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexDefinition forexUSDEURDefinition = new ForexDefinition(USD, EUR, payDate, -notional * strike, 1.0 / strike);
final ForexOptionVanillaDefinition callEURUSDDefinition = new ForexOptionVanillaDefinition(forexEURUSDDefinition, expDate, isCall, isLong);
final ForexOptionVanillaDefinition putUSDEURDefinition = new ForexOptionVanillaDefinition(forexUSDEURDefinition, expDate, isCall, isLong);
final ForexOptionVanilla callEURUSD = callEURUSDDefinition.toDerivative(REFERENCE_DATE);
final ForexOptionVanilla putUSDEUR = putUSDEURDefinition.toDerivative(REFERENCE_DATE);
final PresentValueForexBlackVolatilitySensitivity vsCallEURUSD = METHOD_OPTION.presentValueBlackVolatilitySensitivity(callEURUSD, SMILE_MULTICURVES);
final PresentValueForexBlackVolatilitySensitivity vsPutUSDEUR = METHOD_OPTION.presentValueBlackVolatilitySensitivity(putUSDEUR, SMILE_MULTICURVES);
final DoublesPair point = DoublesPair.of(callEURUSD.getTimeToExpiry(), strike);
assertEquals("Forex vanilla option: volatilityNode", vsCallEURUSD.getVega().getMap().get(point) / SPOT, vsPutUSDEUR.getVega().getMap().get(point), 1.0E-2);
}
@Test
/**
* Tests present value volatility node sensitivity.
*/
public void volatilityNodeSensitivity() {
final PresentValueForexBlackVolatilityNodeSensitivityDataBundle sensi = METHOD_OPTION
.presentValueBlackVolatilityNodeSensitivity(FOREX_CALL_OPTION, SMILE_MULTICURVES);
assertEquals("Forex vanilla option: vega node size", NB_EXP + 1, sensi.getVega().getData().length);
assertEquals("Forex vanilla option: vega node size", NB_STRIKE, sensi.getVega().getData()[0].length);
final Pair<Currency, Currency> currencyPair = ObjectsPair.of(EUR, USD);
assertEquals("Forex vanilla option: vega", currencyPair, sensi.getCurrencyPair());
final PresentValueForexBlackVolatilitySensitivity pointSensitivity = METHOD_OPTION.presentValueBlackVolatilitySensitivity(FOREX_CALL_OPTION, SMILE_MULTICURVES);
final double df = MULTICURVES.getDiscountFactor(USD, TimeCalculator.getTimeBetween(REFERENCE_DATE, OPTION_PAY_DATE));
final double forward = SPOT * MULTICURVES.getDiscountFactor(EUR, TimeCalculator.getTimeBetween(REFERENCE_DATE, OPTION_PAY_DATE)) / df;
final VolatilityAndBucketedSensitivities volAndSensitivities = SMILE_TERM.getVolatilityAndSensitivities(FOREX_CALL_OPTION.getTimeToExpiry(), STRIKE, forward);
final double[][] nodeWeight = volAndSensitivities.getBucketedSensitivities();
final DoublesPair point = DoublesPair.of(FOREX_CALL_OPTION.getTimeToExpiry(), STRIKE);
for (int loopexp = 0; loopexp < NB_EXP; loopexp++) {
for (int loopstrike = 0; loopstrike < NB_STRIKE; loopstrike++) {
assertEquals("Forex vanilla option: vega node", nodeWeight[loopexp][loopstrike] * pointSensitivity.getVega().getMap().get(point),
sensi.getVega().getData()[loopexp][loopstrike]);
}
}
}
@Test
/**
* Tests a EUR/USD call vs a USD/EUR put.
*/
public void volatilityNodeCallPut() {
final double strike = 1.45;
final boolean isCall = true;
final boolean isLong = true;
final double notional = 100000000;
final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
final ForexDefinition forexEURUSDDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
final ForexDefinition forexUSDEURDefinition = new ForexDefinition(USD, EUR, payDate, -notional * strike, 1.0 / strike);
final ForexOptionVanillaDefinition callEURUSDDefinition = new ForexOptionVanillaDefinition(forexEURUSDDefinition, expDate, isCall, isLong);
final ForexOptionVanillaDefinition putUSDEURDefinition = new ForexOptionVanillaDefinition(forexUSDEURDefinition, expDate, isCall, isLong);
final ForexOptionVanilla callEURUSD = callEURUSDDefinition.toDerivative(REFERENCE_DATE);
final ForexOptionVanilla putUSDEUR = putUSDEURDefinition.toDerivative(REFERENCE_DATE);
final PresentValueForexBlackVolatilityNodeSensitivityDataBundle nsCallEURUSD = METHOD_OPTION
.presentValueBlackVolatilityNodeSensitivity(callEURUSD, SMILE_MULTICURVES);
final PresentValueForexBlackVolatilityNodeSensitivityDataBundle nsPutUSDEUR = METHOD_OPTION.presentValueBlackVolatilityNodeSensitivity(putUSDEUR, SMILE_MULTICURVES);
for (int loopexp = 0; loopexp < nsCallEURUSD.getExpiries().getNumberOfElements(); loopexp++) {
for (int loopdelta = 0; loopdelta < nsCallEURUSD.getDelta().getNumberOfElements(); loopdelta++) {
assertEquals("Forex vanilla option: volatilityNode", nsCallEURUSD.getVega().getEntry(loopexp, loopdelta) / SPOT,
nsPutUSDEUR.getVega().getEntry(loopexp, loopdelta), 1.0E-2);
}
}
}
@Test
/**
* Tests present value volatility quote sensitivity.
*/
public void volatilityQuoteSensitivity() {
final PresentValueForexBlackVolatilityNodeSensitivityDataBundle sensiStrike = METHOD_OPTION.presentValueBlackVolatilityNodeSensitivity(FOREX_CALL_OPTION,
SMILE_MULTICURVES);
final double[][] sensiQuote = METHOD_OPTION.presentValueBlackVolatilityNodeSensitivity(FOREX_CALL_OPTION, SMILE_MULTICURVES).quoteSensitivity().getVega();
final double[][] sensiStrikeData = sensiStrike.getVega().getData();
final double[] atm = new double[sensiQuote.length];
for (int loopexp = 0; loopexp < sensiQuote.length; loopexp++) {
for (int loopdelta = 0; loopdelta < DELTA.length; loopdelta++) {
assertEquals("Forex vanilla option: vega quote - RR", sensiQuote[loopexp][1 + loopdelta], -0.5 * sensiStrikeData[loopexp][loopdelta] + 0.5
* sensiStrikeData[loopexp][2 * DELTA.length - loopdelta], 1.0E-10);
assertEquals("Forex vanilla option: vega quote - Strangle", sensiQuote[loopexp][DELTA.length + 1 + loopdelta], sensiStrikeData[loopexp][loopdelta]
+ sensiStrikeData[loopexp][2 * DELTA.length - loopdelta], 1.0E-10);
atm[loopexp] += sensiStrikeData[loopexp][loopdelta] + sensiStrikeData[loopexp][2 * DELTA.length - loopdelta];
}
atm[loopexp] += sensiStrikeData[loopexp][DELTA.length];
assertEquals("Forex vanilla option: vega quote", sensiQuote[loopexp][0], atm[loopexp], 1.0E-10); // ATM
}
}
// @Test
// /**
// * Tests the theoretical Theta (derivative with respect to time in Black formula).
// */
// public void thetaTheoretical() {
// final double strike = 1.45;
// final boolean isCall = true;
// final boolean isLong = true;
// final double notional = 100000000;
// final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
// final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
// final double timeToExpiry = TimeCalculator.getTimeBetween(REFERENCE_DATE, expDate);
// final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
// final ForexOptionVanillaDefinition callDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
// final ForexOptionVanilla call = callDefinition.toDerivative(REFERENCE_DATE, NOT_USED_2);
// final double df = CURVES.getCurve(CURVES_NAME[1]).getDiscountFactor(TimeCalculator.getTimeBetween(REFERENCE_DATE, payDate));
// final double forward = SPOT * CURVES.getCurve(CURVES_NAME[0]).getDiscountFactor(TimeCalculator.getTimeBetween(REFERENCE_DATE, payDate)) / df;
// final double volatility = SMILE_TERM.getVolatility(timeToExpiry, strike, forward);
// final double thetaUnit = BlackFormulaRepository.theta(forward, strike, timeToExpiry, volatility);
// final double thetaExpected = thetaUnit * notional;
// final CurrencyAmount thetaCallComputed = METHOD_OPTION.thetaTheoretical(call, SMILE_MULTICURVES);
// assertEquals("Theta theoretical: forex option", thetaExpected, thetaCallComputed.getAmount(), TOLERANCE_PV);
// assertEquals("Theta theoretical: forex option", USD, thetaCallComputed.getCurrency());
// final ForexOptionVanillaDefinition putDefinition = new ForexOptionVanillaDefinition(forexUnderlyingDefinition, expDate, !isCall, isLong);
// final ForexOptionVanilla put = putDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
// final CurrencyAmount thetaPutComputed = METHOD_OPTION.thetaTheoretical(put, SMILE_MULTICURVES);
// assertEquals("Theta theoretical: forex option", thetaCallComputed.getAmount(), thetaPutComputed.getAmount(), TOLERANCE_PV);
// }
}