net.finmath.singleswaprate.annuitymapping.MultiPiterbargAnnuityMapping 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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package net.finmath.singleswaprate.annuitymapping;

import java.time.LocalDate;

import net.finmath.marketdata.model.curves.ForwardCurve;
import net.finmath.marketdata.model.curves.ForwardCurveFromDiscountCurve;
import net.finmath.marketdata.products.Swap;
import net.finmath.singleswaprate.model.VolatilityCubeModel;
import net.finmath.singleswaprate.model.volatilities.ScaledVolatilityCube;
import net.finmath.singleswaprate.model.volatilities.VolatilityCube;
import net.finmath.time.Schedule;

/**
 * Implements an annuity mapping following Vladimir Piterbarg's approach.
 *
 * @author Christian Fries
 * @author Roland Bachl
 *
 */
public class MultiPiterbargAnnuityMapping implements AnnuityMapping {

	private final BasicPiterbargAnnuityMapping basicMapping;

	private final double iborOisDecorrelation;
	private final double oisSwapRate;
	private final double iborSwapRate;

	/**
	 * Create the annuity mapping. When used without strike the volatilities are taken out of the cube at par swap rate.
	 *
	 * @param fixSchedule Fix leg schedule of the swap.
	 * @param floatSchedule Float leg schedule of the swap.
	 * @param model The model containing curve and cube.
	 * @param discountCurveName The name of the discount curve.
	 * @param forwardCurveName The name of the forward curve.
	 * @param volatilityCubeName The name of the volatility cube.
	 */
	public MultiPiterbargAnnuityMapping(Schedule fixSchedule, Schedule floatSchedule, VolatilityCubeModel model,
			String discountCurveName, String forwardCurveName, String volatilityCubeName) {
		this(
				fixSchedule,
				floatSchedule,
				Swap.getForwardSwapRate(fixSchedule, floatSchedule, model.getForwardCurve(forwardCurveName), model),
				model,
				discountCurveName,
				forwardCurveName,
				volatilityCubeName,
				0,0,-1);
	}


	/**
	 * Create the annuity mapping.
	 *
	 * @param fixSchedule Fix leg schedule of the swap.
	 * @param floatSchedule Float leg schedule of the swap.
	 * @param strike The strike of the product this annuity mapping is being created for.
	 * @param model The model containing curve and cube.
	 * @param discountCurveName The name of the discount curve.
	 * @param forwardCurveName The name of the forward curve.
	 * @param volatilityCubeName The name of the volatility cube.
	 * @param lowerBound The lowest strike the Piterbarg annuity mapping may use during replication, when normalizing.
	 * @param upperBound The maximum strike the Piterbarg annuity mapping may use during replication, when normalizing.
	 * @param numberOfEvaluationPoints The number of points the replication may evaluate Piterbarg annuity mapping is normalizing.
	 */
	public MultiPiterbargAnnuityMapping(Schedule fixSchedule, Schedule floatSchedule, double strike,
			VolatilityCubeModel model, String discountCurveName, String forwardCurveName, String volatilityCubeName,
			double lowerBound, double upperBound, int numberOfEvaluationPoints) {
		super();

		//create a new volatility cube out of the given one, scaled by the iborOisDecorrelation
		VolatilityCube baseCube = model.getVolatilityCube(volatilityCubeName);
		LocalDate referenceDate = baseCube.getReferenceDate();
		this.iborOisDecorrelation = model.getVolatilityCube(volatilityCubeName).getIborOisDecorrelation();
		VolatilityCube tempCube = new ScaledVolatilityCube("MultiPiterbargCubeFrom"+volatilityCubeName, referenceDate, volatilityCubeName,
				iborOisDecorrelation, baseCube.getCorrelationDecay());
		VolatilityCubeModel tempModel = model.addVolatilityCube(tempCube);

		String offsetCode = getOffsetCode(forwardCurveName);
		ForwardCurve forwardFromDiscount = new ForwardCurveFromDiscountCurve(discountCurveName, referenceDate, offsetCode);

		this.basicMapping = new BasicPiterbargAnnuityMapping(fixSchedule, floatSchedule, strike, tempModel, discountCurveName, tempCube.getName(),
				lowerBound, upperBound, numberOfEvaluationPoints);
		this.iborSwapRate = Swap.getForwardSwapRate(fixSchedule, floatSchedule, model.getForwardCurve(forwardCurveName), tempModel);
		this.oisSwapRate = Swap.getForwardSwapRate(fixSchedule, floatSchedule, forwardFromDiscount, tempModel);
	}

	@Override
	public double getValue(double swapRate) {
		return basicMapping.getValue(oisSwapRate + iborOisDecorrelation * (swapRate - iborSwapRate));
	}

	@Override
	public double getFirstDerivative(double swapRate) {
		return basicMapping.getFirstDerivative(oisSwapRate + iborOisDecorrelation * (swapRate - iborSwapRate)) * iborOisDecorrelation;
	}

	@Override
	public double getSecondDerivative(double swapRate) {
		return basicMapping.getSecondDerivative(oisSwapRate + iborOisDecorrelation * (swapRate - iborSwapRate)) * iborOisDecorrelation * iborOisDecorrelation;
	}

	// gets the offset code from from the forward curve name
	private static String getOffsetCode(String forwardCurveName) {
		String[] splits = forwardCurveName.split("(?<=\\D)(?=\\d)");
		String offsetCode = splits[splits.length-1];
		if(offsetCode != null && offsetCode.length() > 0 && offsetCode.charAt(offsetCode.length() - 1) == ')') {
			offsetCode = offsetCode.substring(0, offsetCode.length() - 1);
		}
		return offsetCode;
	}

}