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finmath lib is a Mathematical Finance Library in Java. It provides algorithms and methodologies related to mathematical finance.
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/*
 * (c) Copyright Christian P. Fries, Germany. Contact: [email protected].
 *
 * Created on 05.04.2015
 */

package net.finmath.montecarlo.hybridassetinterestrate;

import net.finmath.exception.CalculationException;
import net.finmath.functions.AnalyticFormulas;
import net.finmath.marketdata.model.curves.DiscountCurveInterface;
import net.finmath.montecarlo.BrownianMotionInterface;
import net.finmath.montecarlo.assetderivativevaluation.AssetModelMonteCarloSimulationInterface;
import net.finmath.montecarlo.assetderivativevaluation.MonteCarloMultiAssetBlackScholesModel;
import net.finmath.montecarlo.assetderivativevaluation.products.EuropeanOption;
import net.finmath.montecarlo.interestrate.LIBORModelMonteCarloSimulationInterface;
import net.finmath.optimizer.LevenbergMarquardt;
import net.finmath.optimizer.OptimizerInterface;
import net.finmath.optimizer.SolverException;

/**
 * Helper factory to create a simple equity hybrid LIBOR market model.
 * 
 * @author Christian Fries
 */
public class ModelFactory {

	private static ModelFactory modelFactory;

	/**
	 * Private constructor.
	 */
	private ModelFactory() {
		// TODO Auto-generated constructor stub
	}

	public synchronized static ModelFactory getInstance() {
		if(modelFactory == null) modelFactory = new ModelFactory();

		return modelFactory;
	}

	/**
	 * Create a simple equity hybrid LIBOR market model with a calibration of the equity processes
	 * to a given Black-Scholes implied volatility.
	 * 
	 * @param baseModel LIBOR model providing the stochastic numeraire.
	 * @param brownianMotion {@link BrownianMotionInterface} for the asset process.
	 * @param initialValues Initial value of the asset process.
	 * @param riskFreeRate Not used (internally used to generate paths, will be later adjusted)
	 * @param correlations Correlation of the asset processes.
	 * @param maturities Maturities of the options (one for each asset process).
	 * @param strikes Strikes of the options (one for each asset process).
	 * @param volatilities Implied volatilities of the options (one for each asset process).
	 * @param discountCurve Discount curve used for the final hybrid model (not used in calibration).
	 * @return An object implementing {@link HybridAssetLIBORModelMonteCarloSimulationInterface}, where each asset process is calibrated to a given option.
	 * @throws CalculationException Thrown if calibration fails.
	 */
	public HybridAssetLIBORModelMonteCarloSimulationInterface getHybridAssetLIBORModel(final LIBORModelMonteCarloSimulationInterface baseModel, final BrownianMotionInterface brownianMotion, final double[] initialValues, final double riskFreeRate, final double[][] correlations, final double[] maturities, final double[] strikes, final double[] volatilities, final DiscountCurveInterface discountCurve) throws CalculationException {

		OptimizerInterface optimizer = new LevenbergMarquardt(volatilities /*initialParameters*/, volatilities /*targetValues*/, 100 /*maxIteration*/, 1 /*numberOfThreads*/) {
			private static final long serialVersionUID = -9199565564991442848L;

			@Override
			public void setValues(double[] parameters, double[] values) throws SolverException {
				AssetModelMonteCarloSimulationInterface model = new MonteCarloMultiAssetBlackScholesModel(brownianMotion, initialValues, riskFreeRate, parameters, correlations);
				HybridAssetLIBORModelMonteCarloSimulation hybridModel = new HybridAssetLIBORModelMonteCarloSimulation(baseModel, model);

				try {
					for(int assetIndex=0; assetIndex 0.01) throw new CalculationException("Calibration failed");
		}

		/*
		 * Construct model with discounting (options will then use the discounting spread adjustment).
		 */
		HybridAssetLIBORModelMonteCarloSimulation hybridModel = new HybridAssetLIBORModelMonteCarloSimulation(baseModel, model, discountCurve);
		return hybridModel;
	}
}