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finmath lib is a Mathematical Finance Library in Java.
It provides algorithms and methodologies related to mathematical finance.
/*
* (c) Copyright Christian P. Fries, Germany. Contact: [email protected].
*
* Created on 02.10.2016
*/
package net.finmath.functions;
import net.finmath.optimizer.LevenbergMarquardt;
import net.finmath.optimizer.SolverException;
/**
* @author Christian Fries
*
* @version 1.0
*/
public class SABRModel {
/**
*
*/
private SABRModel() {
// TODO Auto-generated constructor stub
}
public static double[] sabrCalibrateParameterForImpliedNormalVols(final double underlying, final double maturity, final double[] givenStrikes, final double[] givenVolatilities) throws SolverException {
final double[] parameterLowerBound = { 0.0, 0.0, 0.0, 0.0, Double.NEGATIVE_INFINITY};
final double[] parameterUpperBound = {Double.POSITIVE_INFINITY, 1.0, 1.0, Double.POSITIVE_INFINITY, Double.POSITIVE_INFINITY};
return sabrCalibrateParameterForImpliedNormalVols(underlying, maturity, givenStrikes, givenVolatilities, parameterLowerBound, parameterUpperBound);
}
public static double[] sabrCalibrateParameterForImpliedNormalVols(final double underlying, final double maturity, final double[] givenStrikes, final double[] givenVolatilities, final double[] parameterLowerBound, final double[] parameterUpperBound) throws SolverException {
final double alpha = 0.006;
final double beta = 0.05;
final double rho = 0.0;
final double nu = 0.075;
final double displacement = 0.02;
final double[] parameterInitialValues = { alpha, beta, rho, nu, displacement };
final double[] parameterSteps = { 0.5/100.0/100.0, 1.0/100.0, 0.5/100.0, 0.5/100.0, 0.1/100.0 };
return sabrCalibrateParameterForImpliedNormalVols(underlying, maturity, givenStrikes, givenVolatilities, parameterInitialValues, parameterSteps, parameterLowerBound, parameterUpperBound);
}
public static double[] sabrCalibrateParameterForImpliedNormalVols(final double underlying, final double maturity, final double[] givenStrikes, final double[] givenVolatilities, final double[] parameterInitialValues, final double[] parameterSteps, final double[] parameterLowerBound, final double[] parameterUpperBound) throws SolverException {
/*
* Using Levenberg Marquardt to calibrate SABR
*/
final double[] targetValues = givenVolatilities;
final int maxIteration = 1000;
final int numberOfThreads = 8;
final LevenbergMarquardt lm = new LevenbergMarquardt(parameterInitialValues, targetValues, maxIteration, numberOfThreads) {
private static final long serialVersionUID = -4481118838855868864L;
@Override
public void setValues(final double[] parameters, final double[] values) {
for(int parameterIndex = 0; parameterIndex