net.finmath.montecarlo.interestrate.modelplugins.LIBORCorrelationModelThreeParameterExponentialDecay Maven / Gradle / Ivy

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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 20.05.2006
 */
package net.finmath.montecarlo.interestrate.modelplugins;

import net.finmath.functions.LinearAlgebra;
import net.finmath.time.TimeDiscretizationInterface;

/**
 * Simple correlation model given by R, where R is a factor reduced matrix
 * (see {@link net.finmath.functions.LinearAlgebra#factorReduction(double[][], int)}) created from the
 * \( n \) Eigenvectors of \( \tilde{R} \) belonging to the \( n \) largest non-negative Eigenvalues,
 * where \( \tilde{R} = \tilde{\rho}_{i,j} \) and
 * \[ \tilde{\rho}_{i,j} = b + (1-b) * \exp(-a |T_{i} - T_{j}| - c \max(T_{i},T_{j}))
 * 
 * @see net.finmath.functions.LinearAlgebra#factorReduction(double[][], int)
 * 
 * @author Christian Fries
 */
public class LIBORCorrelationModelThreeParameterExponentialDecay extends LIBORCorrelationModel {
	
	private static final long serialVersionUID = 5063076041285957177L;

	private int		numberOfFactors;
	private double	a;
	private double	b;
	private double	c;
	private final boolean isCalibrateable;

	private transient double[][]	correlationMatrix;
	private transient double[][]	factorMatrix;
	
	public LIBORCorrelationModelThreeParameterExponentialDecay(TimeDiscretizationInterface timeDiscretization, TimeDiscretizationInterface liborPeriodDiscretization, int numberOfFactors, double a, double b, double c, boolean isCalibrateable) {
		super(timeDiscretization, liborPeriodDiscretization);
		
		this.numberOfFactors = numberOfFactors;
		this.a = a;
		this.b = b;
		this.c = c;
		this.isCalibrateable = isCalibrateable;
	}

	@Override
	public double[] getParameter() {
		if(!isCalibrateable) return null;

		double[] parameter = new double[3];

		parameter[0] = a;
		parameter[1] = b;
		parameter[2] = c;

		return parameter;
	}

	@Override
	public void setParameter(double[] parameter) {
		if(!isCalibrateable) return;

		a = parameter[0];
		b = parameter[1];
		c = parameter[2];
		
		factorMatrix = null;
		correlationMatrix = null;
	}
	
	@Override
    public double	getFactorLoading(int timeIndex, int factor, int component) {
		if(factorMatrix == null) initialize(numberOfFactors, a, b, c);

		return factorMatrix[component][factor];
	}
	@Override
    public double	getCorrelation(int timeIndex, int component1, int component2) {
		if(correlationMatrix == null) initialize(numberOfFactors, a, b, c);

		return correlationMatrix[component1][component2];
	}

	@Override
    public int		getNumberOfFactors() {
		return numberOfFactors;
	}

	private synchronized void initialize(int numberOfFactors, double a, double b, double c) {
		/*
		 * Create instantaneous correlation matrix
		 */

		a = Math.max(a, 0.0);
		b = Math.min(Math.max(b, 0.0), 1.0);
		c = Math.max(c, 0.0);

		correlationMatrix = new double[liborPeriodDiscretization.getNumberOfTimeSteps()][liborPeriodDiscretization.getNumberOfTimeSteps()];
		for(int row=0; row