/**
* Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.swaption.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.instrument.index.IborIndex;
import com.opengamma.analytics.financial.instrument.index.IndexSwap;
import com.opengamma.analytics.financial.instrument.swap.SwapFixedIborDefinition;
import com.opengamma.analytics.financial.instrument.swaption.SwaptionBermudaFixedIborDefinition;
import com.opengamma.analytics.financial.instrument.swaption.SwaptionPhysicalFixedIborDefinition;
import com.opengamma.analytics.financial.interestrate.swaption.derivative.SwaptionBermudaFixedIbor;
import com.opengamma.analytics.financial.interestrate.swaption.derivative.SwaptionPhysicalFixedIbor;
import com.opengamma.analytics.financial.model.interestrate.definition.HullWhiteOneFactorPiecewiseConstantParameters;
import com.opengamma.analytics.financial.provider.description.HullWhiteDataSets;
import com.opengamma.analytics.financial.provider.description.MulticurveProviderDiscountDataSets;
import com.opengamma.analytics.financial.provider.description.interestrate.HullWhiteOneFactorProviderDiscount;
import com.opengamma.analytics.financial.provider.description.interestrate.MulticurveProviderDiscount;
import com.opengamma.analytics.financial.schedule.ScheduleCalculator;
import com.opengamma.financial.convention.calendar.Calendar;
import com.opengamma.financial.convention.daycount.DayCount;
import com.opengamma.financial.convention.daycount.DayCountFactory;
import com.opengamma.util.money.Currency;
import com.opengamma.util.money.MultipleCurrencyAmount;
import com.opengamma.util.time.DateUtils;
/**
* Test the Bermuda swaption pricing in the Hull-White one factor model.
*/
public class SwaptionBermudaFixedIborHullWhiteNumericalIntegrationMethodTest {
private static final MulticurveProviderDiscount MULTICURVES = MulticurveProviderDiscountDataSets.createMulticurveEurUsd();
private static final IborIndex EURIBOR3M = MulticurveProviderDiscountDataSets.getIndexesIborMulticurveEurUsd()[0];
private static final Calendar CALENDAR = MulticurveProviderDiscountDataSets.getEURCalendar();
private static final Currency CUR = EURIBOR3M.getCurrency();
// General
private static final ZonedDateTime REFERENCE_DATE = DateUtils.getUTCDate(2011, 7, 22);
// Total swap - 5Y semi bond vs quarterly money
private static final Period FORWARD_TENOR = Period.ofYears(1);
private static final ZonedDateTime SETTLEMENT_DATE = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, FORWARD_TENOR, EURIBOR3M, CALENDAR);
private static final Period SWAP_TENOR = Period.ofYears(5);
private static final double NOTIONAL = 123000000;
private static final boolean FIXED_IS_PAYER = true;
private static final Period FIXED_PAYMENT_PERIOD = Period.ofMonths(6);
private static final DayCount FIXED_DAY_COUNT = DayCountFactory.INSTANCE.getDayCount("30/360");
private static final IndexSwap CMS_INDEX = new IndexSwap(FIXED_PAYMENT_PERIOD, FIXED_DAY_COUNT, EURIBOR3M, SWAP_TENOR, CALENDAR);
private static final double RATE = 0.0200;
private static final SwapFixedIborDefinition TOTAL_SWAP_DEFINITION = SwapFixedIborDefinition.from(SETTLEMENT_DATE, CMS_INDEX, NOTIONAL, RATE, FIXED_IS_PAYER, CALENDAR);
// Semi-annual expiry
private static final boolean IS_LONG = true;
private static final int NB_EXPIRY = TOTAL_SWAP_DEFINITION.getFixedLeg().getNumberOfPayments();
private static final ZonedDateTime[] EXPIRY_DATE = new ZonedDateTime[NB_EXPIRY];
private static final SwapFixedIborDefinition[] EXPIRY_SWAP_DEFINITION = new SwapFixedIborDefinition[NB_EXPIRY];
static {
for (int loopexp = 0; loopexp < NB_EXPIRY; loopexp++) {
EXPIRY_DATE[loopexp] = ScheduleCalculator.getAdjustedDate(TOTAL_SWAP_DEFINITION.getFixedLeg().getNthPayment(loopexp).getAccrualStartDate(), -EURIBOR3M.getSpotLag(), CALENDAR);
EXPIRY_SWAP_DEFINITION[loopexp] = TOTAL_SWAP_DEFINITION.trimStart(EXPIRY_DATE[loopexp]);
}
}
private static final SwaptionBermudaFixedIborDefinition BERMUDA_SWAPTION_DEFINITION = new SwaptionBermudaFixedIborDefinition(EXPIRY_SWAP_DEFINITION, IS_LONG, EXPIRY_DATE);
// to derivatives
private static final HullWhiteOneFactorPiecewiseConstantParameters HW_PARAMETERS = HullWhiteDataSets.createHullWhiteParameters();
private static final HullWhiteOneFactorProviderDiscount HW_MULTICURVES = new HullWhiteOneFactorProviderDiscount(MULTICURVES, HW_PARAMETERS, CUR);
private static final SwaptionBermudaFixedIborHullWhiteNumericalIntegrationMethod METHOD_BERMUDA = SwaptionBermudaFixedIborHullWhiteNumericalIntegrationMethod.getInstance();
private static final SwaptionPhysicalFixedIborHullWhiteMethod METHOD_VANILLA = SwaptionPhysicalFixedIborHullWhiteMethod.getInstance();
private static final SwaptionBermudaFixedIbor BERMUDA_SWAPTION = BERMUDA_SWAPTION_DEFINITION.toDerivative(REFERENCE_DATE);
private static final double TOLERANCE_PV = 1.0E-2;
@Test
/**
* Test the present value against European swaptions.
*/
public void presentValue() {
final MultipleCurrencyAmount pv = METHOD_BERMUDA.presentValue(BERMUDA_SWAPTION, HW_MULTICURVES);
final double pvPrevious = 4477405.551; // Hard-coded - previous run
assertEquals("Bermuda swaption vs European", pvPrevious, pv.getAmount(CUR), TOLERANCE_PV);
// European swaptions
final SwaptionPhysicalFixedIborDefinition[] swaptionEuropeanDefinition = new SwaptionPhysicalFixedIborDefinition[NB_EXPIRY];
final SwaptionPhysicalFixedIbor[] swaptionEuropean = new SwaptionPhysicalFixedIbor[NB_EXPIRY];
final MultipleCurrencyAmount[] pvEuropean = new MultipleCurrencyAmount[NB_EXPIRY];
for (int loopexp = 0; loopexp < NB_EXPIRY; loopexp++) {
swaptionEuropeanDefinition[loopexp] = SwaptionPhysicalFixedIborDefinition.from(EXPIRY_DATE[loopexp], EXPIRY_SWAP_DEFINITION[loopexp], IS_LONG);
swaptionEuropean[loopexp] = swaptionEuropeanDefinition[loopexp].toDerivative(REFERENCE_DATE);
pvEuropean[loopexp] = METHOD_VANILLA.presentValue(swaptionEuropean[loopexp], HW_MULTICURVES);
assertTrue("Bermuda swaption vs European", pv.getAmount(CUR) >= pvEuropean[loopexp].getAmount(CUR));
}
}
//TODO: test present value with external values
@Test
/**
* Test the present value long/short parity.
*/
public void longShortParity() {
final MultipleCurrencyAmount pvLong = METHOD_BERMUDA.presentValue(BERMUDA_SWAPTION, HW_MULTICURVES);
final SwaptionBermudaFixedIborDefinition bermudaShortDefinition = new SwaptionBermudaFixedIborDefinition(EXPIRY_SWAP_DEFINITION, !IS_LONG, EXPIRY_DATE);
final SwaptionBermudaFixedIbor bermudShort = bermudaShortDefinition.toDerivative(REFERENCE_DATE);
final MultipleCurrencyAmount pvShort = METHOD_BERMUDA.presentValue(bermudShort, HW_MULTICURVES);
assertEquals("Bermuda swaption pv: short/long parity", pvLong.getAmount(CUR), -pvShort.getAmount(CUR), TOLERANCE_PV);
}
@Test(enabled = false)
/**
* Tests of performance. "enabled = false" for the standard testing.
*/
public void performance() {
long startTime, endTime;
final int nbTest = 20;
// Creates different swaptions
final SwapFixedIborDefinition[] swapDefinition = new SwapFixedIborDefinition[nbTest];
final SwapFixedIborDefinition[][] swapExpiryDefinition = new SwapFixedIborDefinition[nbTest][NB_EXPIRY];
final SwaptionBermudaFixedIborDefinition[] swaptionBermudaDefinition = new SwaptionBermudaFixedIborDefinition[nbTest];
final SwaptionBermudaFixedIbor[] swaptionBermuda = new SwaptionBermudaFixedIbor[nbTest];
for (int looptest = 0; looptest < nbTest; looptest++) {
swapDefinition[looptest] = SwapFixedIborDefinition.from(SETTLEMENT_DATE, CMS_INDEX, NOTIONAL, RATE + looptest * 0.0010 / nbTest, FIXED_IS_PAYER, CALENDAR);
for (int loopexp = 0; loopexp < NB_EXPIRY; loopexp++) {
swapExpiryDefinition[looptest][loopexp] = swapDefinition[looptest].trimStart(EXPIRY_DATE[loopexp]);
}
swaptionBermudaDefinition[looptest] = new SwaptionBermudaFixedIborDefinition(swapExpiryDefinition[looptest], IS_LONG, EXPIRY_DATE);
swaptionBermuda[looptest] = swaptionBermudaDefinition[looptest].toDerivative(REFERENCE_DATE);
}
// Loop for pricing
final MultipleCurrencyAmount[] pv = new MultipleCurrencyAmount[nbTest];
startTime = System.currentTimeMillis();
for (int looptest = 0; looptest < nbTest; looptest++) {
pv[looptest] = METHOD_BERMUDA.presentValue(swaptionBermuda[looptest], HW_MULTICURVES);
}
endTime = System.currentTimeMillis();
System.out.println(nbTest + " pv Bermuda swaption Hull-White numerical integration method: " + (endTime - startTime) + " ms");
// Performance note: HW price: 19-Jan-12: On Mac Pro 3.2 GHz Quad-Core Intel Xeon: 480 ms for 20 swaptions.
double total = 0.0;
for (int looptest = 0; looptest < nbTest; looptest++) {
total += pv[looptest].getAmount(CUR);
}
assertEquals("Bermuda swaption pv performance", pv[nbTest / 2].getAmount(CUR), total / nbTest, 1.0E+5);
}
}