/**
* Copyright (C) 2009 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.model.volatility.surface;
import static org.testng.AssertJUnit.assertEquals;
import java.util.Collections;
import org.testng.annotations.Test;
import org.threeten.bp.ZonedDateTime;
import com.opengamma.analytics.financial.model.interestrate.curve.YieldAndDiscountCurve;
import com.opengamma.analytics.financial.model.interestrate.curve.YieldCurve;
import com.opengamma.analytics.financial.model.option.definition.ConstantElasticityOfVarianceModelDataBundle;
import com.opengamma.analytics.financial.model.option.definition.EuropeanVanillaOptionDefinition;
import com.opengamma.analytics.financial.model.option.definition.OptionDefinition;
import com.opengamma.analytics.financial.model.option.pricing.analytic.BlackScholesMertonModel;
import com.opengamma.analytics.math.curve.ConstantDoublesCurve;
import com.opengamma.analytics.math.surface.ConstantDoublesSurface;
import com.opengamma.util.time.DateUtils;
import com.opengamma.util.time.Expiry;
/**
*
*/
public class ConstantElasticityOfVarianceBlackEquivalentVolatilitySurfaceModelTest {
private static final double SPOT = 100;
private static final double T = 0.25;
private static final double B = 0;
private static final YieldAndDiscountCurve CURVE = YieldCurve.from(ConstantDoublesCurve.from(0.1));
private static final ZonedDateTime DATE = DateUtils.getUTCDate(2010, 7, 1);
private static final Expiry EXPIRY = new Expiry(DateUtils.getDateOffsetWithYearFraction(DATE, T));
private static final double BETA = 0.5;
private static final ConstantElasticityOfVarianceModelDataBundle DATA = new ConstantElasticityOfVarianceModelDataBundle(CURVE, B, new VolatilitySurface(ConstantDoublesSurface.from(0.005)), SPOT,
DATE, BETA);
private static final ConstantElasticityOfVarianceBlackEquivalentVolatilitySurfaceModel MODEL = new ConstantElasticityOfVarianceBlackEquivalentVolatilitySurfaceModel();
private static final BlackScholesMertonModel BSM = new BlackScholesMertonModel();
@Test(expectedExceptions = IllegalArgumentException.class)
public void testNullOptionData() {
MODEL.getSurface(null, DATA);
}
@Test(expectedExceptions = IllegalArgumentException.class)
public void testEmptyOptionData() {
MODEL.getSurface(Collections.<OptionDefinition, Double> emptyMap(), DATA);
}
@Test(expectedExceptions = IllegalArgumentException.class)
public void testNullData() {
MODEL.getSurface(Collections.<OptionDefinition, Double> singletonMap(new EuropeanVanillaOptionDefinition(100, EXPIRY, true), 0.2), null);
}
@Test
public void test() {
final double eps = 1e-4;
OptionDefinition option = new EuropeanVanillaOptionDefinition(90, EXPIRY, true);
ConstantElasticityOfVarianceModelDataBundle data = DATA.withVolatilitySurface(new VolatilitySurface(ConstantDoublesSurface.from(0)));
VolatilitySurface blackEquivalent = MODEL.getSurface(Collections.<OptionDefinition, Double> singletonMap(option, 0.), data);
assertEquals(BSM.getPricingFunction(option).evaluate(data.withVolatilitySurface(blackEquivalent)), BSM.getPricingFunction(option).evaluate(data), 0);
data = DATA.withVolatilitySurface(new VolatilitySurface(ConstantDoublesSurface.from(0.5)));
blackEquivalent = MODEL.getSurface(Collections.<OptionDefinition, Double> singletonMap(option, 0.), data);
assertEquals(BSM.getPricingFunction(option).evaluate(data.withVolatilitySurface(blackEquivalent)), 9.7531, eps);
data = DATA.withVolatilitySurface(new VolatilitySurface(ConstantDoublesSurface.from(1)));
option = new EuropeanVanillaOptionDefinition(95, EXPIRY, true);
blackEquivalent = MODEL.getSurface(Collections.<OptionDefinition, Double> singletonMap(option, 0.), data);
assertEquals(BSM.getPricingFunction(option).evaluate(data.withVolatilitySurface(blackEquivalent)), 5.2678, eps);
data = DATA.withVolatilitySurface(new VolatilitySurface(ConstantDoublesSurface.from(2)));
option = new EuropeanVanillaOptionDefinition(100, EXPIRY, true);
blackEquivalent = MODEL.getSurface(Collections.<OptionDefinition, Double> singletonMap(option, 0.), data);
assertEquals(BSM.getPricingFunction(option).evaluate(data.withVolatilitySurface(blackEquivalent)), 3.8897, eps);
data = DATA.withVolatilitySurface(new VolatilitySurface(ConstantDoublesSurface.from(3)));
option = new EuropeanVanillaOptionDefinition(105, EXPIRY, true);
blackEquivalent = MODEL.getSurface(Collections.<OptionDefinition, Double> singletonMap(option, 0.), data);
assertEquals(BSM.getPricingFunction(option).evaluate(data.withVolatilitySurface(blackEquivalent)), 3.7832, eps);
data = DATA.withVolatilitySurface(new VolatilitySurface(ConstantDoublesSurface.from(4)));
option = new EuropeanVanillaOptionDefinition(115, EXPIRY, true);
blackEquivalent = MODEL.getSurface(Collections.<OptionDefinition, Double> singletonMap(option, 0.), data);
assertEquals(BSM.getPricingFunction(option).evaluate(data.withVolatilitySurface(blackEquivalent)), 2.7613, eps);
}
}