/**
* 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 static org.testng.AssertJUnit.assertEquals;
import org.testng.annotations.Test;
import org.threeten.bp.Period;
import org.threeten.bp.ZonedDateTime;
import com.opengamma.analytics.financial.instrument.index.IndexPrice;
import com.opengamma.analytics.financial.instrument.inflation.CapFloorInflationYearOnYearMonthlyDefinition;
import com.opengamma.analytics.financial.instrument.inflation.CouponInflationYearOnYearMonthlyDefinition;
import com.opengamma.analytics.financial.interestrate.inflation.derivative.CapFloorInflationYearOnYearMonthly;
import com.opengamma.analytics.financial.model.option.parameters.BlackSmileCapInflationYearOnYearParameters;
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.calculator.inflation.PresentValueBlackSmileInflationYearOnYearCalculator;
import com.opengamma.analytics.financial.provider.calculator.inflation.PresentValueCurveSensitivityBlackSmileInflationYearOnYearCalculator;
import com.opengamma.analytics.financial.provider.description.BlackDataSets;
import com.opengamma.analytics.financial.provider.description.MulticurveProviderDiscountDataSets;
import com.opengamma.analytics.financial.provider.description.inflation.BlackSmileCapInflationYearOnYearProviderDiscount;
import com.opengamma.analytics.financial.provider.description.inflation.BlackSmileCapInflationYearOnYearProviderInterface;
import com.opengamma.analytics.financial.provider.description.inflation.InflationIssuerProviderDiscount;
import com.opengamma.analytics.financial.provider.sensitivity.inflation.MultipleCurrencyInflationSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.inflation.ParameterSensitivityBlackSmileYearOnYearCapDiscountInterpolatedFDCalculator;
import com.opengamma.analytics.financial.provider.sensitivity.multicurve.MultipleCurrencyParameterSensitivity;
import com.opengamma.analytics.financial.provider.sensitivity.parameter.ParameterInflationSensitivityParameterCalculator;
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.math.surface.InterpolatedDoublesSurface;
import com.opengamma.financial.convention.businessday.BusinessDayConvention;
import com.opengamma.financial.convention.businessday.BusinessDayConventionFactory;
import com.opengamma.financial.convention.calendar.Calendar;
import com.opengamma.util.money.MultipleCurrencyAmount;
import com.opengamma.util.time.DateUtils;
/**
* Tests the present value and its sensitivities for year on year cap/floor with reference index on the first of the month.
*/
public class CapFloorInflationYearOnYearMonthlyBlackNormalSmileMethodTest {
private static final InflationIssuerProviderDiscount MARKET = MulticurveProviderDiscountDataSets.createMarket1();
private static final IndexPrice[] PRICE_INDEXES = MARKET.getPriceIndexes().toArray(new IndexPrice[MARKET.getPriceIndexes().size()]);
private static final IndexPrice PRICE_INDEX_EUR = PRICE_INDEXES[0];
private static final Calendar CALENDAR_EUR = MulticurveProviderDiscountDataSets.getEURCalendar();
private static final BusinessDayConvention BUSINESS_DAY = BusinessDayConventionFactory.INSTANCE.getBusinessDayConvention("Modified Following");
private static final ZonedDateTime START_DATE = DateUtils.getUTCDate(2008, 8, 18);
private static final Period COUPON_TENOR = Period.ofYears(10);
private static final ZonedDateTime PAYMENT_DATE = ScheduleCalculator.getAdjustedDate(START_DATE, COUPON_TENOR, BUSINESS_DAY, CALENDAR_EUR);
private static final ZonedDateTime PAYMENT_DATE_MINUS1 = ScheduleCalculator.getAdjustedDate(START_DATE, Period.ofYears(9), BUSINESS_DAY, CALENDAR_EUR);
private static final double NOTIONAL = 98765432;
private static final int MONTH_LAG = 3;
private static final ZonedDateTime PRICING_DATE = DateUtils.getUTCDate(2011, 8, 3);
private static final double STRIKE = .02;
private static final boolean IS_CAP = true;
private static final ZonedDateTime LAST_KNOWN_FIXING_DATE = DateUtils.getUTCDate(2008, 7, 01);
private static final InterpolatedDoublesSurface BLACK_SURF = BlackDataSets.createBlackSurfaceExpiryStrike();
private static final BlackSmileCapInflationYearOnYearParameters BLACK_PARAM = new BlackSmileCapInflationYearOnYearParameters(BLACK_SURF, PRICE_INDEX_EUR);
private static final BlackSmileCapInflationYearOnYearProviderDiscount BLACK_INFLATION = new BlackSmileCapInflationYearOnYearProviderDiscount(MARKET.getInflationProvider(), BLACK_PARAM);
private static final double SHIFT_FD = 1.0E-7;
private static final double TOLERANCE_PV = 1.0E-2;
private static final double TOLERANCE_PV_DELTA = 1.0E+2;
private static final CouponInflationYearOnYearMonthlyDefinition YEAR_ON_YEAR_DEFINITION = CouponInflationYearOnYearMonthlyDefinition.from(PAYMENT_DATE_MINUS1, PAYMENT_DATE, NOTIONAL,
PRICE_INDEX_EUR,
MONTH_LAG, false);
private static final CapFloorInflationYearOnYearMonthlyDefinition YEAR_ON_YEAR_DEFINITION_CAP = CapFloorInflationYearOnYearMonthlyDefinition.from(YEAR_ON_YEAR_DEFINITION,
LAST_KNOWN_FIXING_DATE, STRIKE, IS_CAP);
private static final CapFloorInflationYearOnYearMonthly YEAR_ON_YEAR_CAP = YEAR_ON_YEAR_DEFINITION_CAP.toDerivative(PRICING_DATE);
private static final CapFloorInflationYearOnYearMonthlyBlackNormalSmileMethod METHOD = CapFloorInflationYearOnYearMonthlyBlackNormalSmileMethod.getInstance();
private static final PresentValueBlackSmileInflationYearOnYearCalculator PVIC = PresentValueBlackSmileInflationYearOnYearCalculator.getInstance();
private static final PresentValueCurveSensitivityBlackSmileInflationYearOnYearCalculator PVCSDC = PresentValueCurveSensitivityBlackSmileInflationYearOnYearCalculator.getInstance();
private static final ParameterInflationSensitivityParameterCalculator<BlackSmileCapInflationYearOnYearProviderInterface> PSC = new ParameterInflationSensitivityParameterCalculator<>(PVCSDC);
private static final ParameterSensitivityBlackSmileYearOnYearCapDiscountInterpolatedFDCalculator PS_PV_FDC = new ParameterSensitivityBlackSmileYearOnYearCapDiscountInterpolatedFDCalculator(PVIC,
SHIFT_FD);
/**
* The Black function used in the pricing.
*/
private static final NormalPriceFunction NORMAL_FUNCTION = new NormalPriceFunction();
@Test
/**
* Tests the present value.
*/
public void presentValue() {
final MultipleCurrencyAmount pv = METHOD.presentValue(YEAR_ON_YEAR_CAP, BLACK_INFLATION);
final double df = MARKET.getCurve(YEAR_ON_YEAR_CAP.getCurrency()).getDiscountFactor(YEAR_ON_YEAR_CAP.getPaymentTime());
final double finalIndex = MARKET.getCurve(PRICE_INDEX_EUR).getPriceIndex(YEAR_ON_YEAR_CAP.getReferenceEndTime());
final double initialIndex = MARKET.getCurve(PRICE_INDEX_EUR).getPriceIndex(YEAR_ON_YEAR_CAP.getReferenceStartTime());
final double forward = finalIndex / initialIndex - 1;
final double timeToMaturity = YEAR_ON_YEAR_CAP.getReferenceEndTime() - YEAR_ON_YEAR_CAP.getLastKnownFixingTime();
final EuropeanVanillaOption option = new EuropeanVanillaOption(YEAR_ON_YEAR_CAP.getStrike(), timeToMaturity, YEAR_ON_YEAR_CAP.isCap());
final double volatility = BLACK_INFLATION.getBlackParameters().getVolatility(YEAR_ON_YEAR_CAP.getReferenceEndTime(), YEAR_ON_YEAR_CAP.getStrike());
final NormalFunctionData dataBlack = new NormalFunctionData(forward, 1.0, volatility);
final Function1D<NormalFunctionData, Double> func = NORMAL_FUNCTION.getPriceFunction(option);
final double pvExpected = df * func.evaluate(dataBlack) * YEAR_ON_YEAR_CAP.getNotional() * YEAR_ON_YEAR_CAP.getPaymentYearFraction();
assertEquals("Year on year coupon inflation DiscountingMethod: Present value", pvExpected, pv.getAmount(YEAR_ON_YEAR_CAP.getCurrency()), TOLERANCE_PV);
}
@Test
/**
* Tests the present value: Method vs Calculator.
*/
public void presentValueMethodVsCalculator() {
final MultipleCurrencyAmount pvMethod = METHOD.presentValue(YEAR_ON_YEAR_CAP, BLACK_INFLATION);
final MultipleCurrencyAmount pvCalculator = YEAR_ON_YEAR_CAP.accept(PVIC, BLACK_INFLATION);
assertEquals("Year on year coupon inflation DiscountingMethod: Present value", pvMethod, pvCalculator);
}
@Test
/**
* Test the present value curves sensitivity.
*/
public void presentValueCurveSensitivity() {
final MultipleCurrencyParameterSensitivity pvicsFD = PS_PV_FDC.calculateSensitivity(YEAR_ON_YEAR_CAP, BLACK_INFLATION);
final MultipleCurrencyParameterSensitivity pvicsExact = PSC.calculateSensitivity(YEAR_ON_YEAR_CAP, BLACK_INFLATION, MARKET.getAllNames());
AssertSensivityObjects.assertEquals("Year on year coupon inflation DiscountingMethod: presentValueCurveSensitivity ", pvicsExact, pvicsFD, TOLERANCE_PV_DELTA);
}
@Test
public void presentValueMarketSensitivityMethodVsCalculator() {
final MultipleCurrencyInflationSensitivity pvcisMethod = METHOD.presentValueCurveSensitivity(YEAR_ON_YEAR_CAP, BLACK_INFLATION);
final MultipleCurrencyInflationSensitivity pvcisCalculator = YEAR_ON_YEAR_CAP.accept(PVCSDC, BLACK_INFLATION);
AssertSensivityObjects.assertEquals("Year on year coupon inflation DiscountingMethod: presentValueMarketSensitivity", pvcisMethod, pvcisCalculator, TOLERANCE_PV_DELTA);
}
}