net.finmath.singleswaprate.products.ConstantMaturitySwap Maven / Gradle / Ivy
package net.finmath.singleswaprate.products;
import net.finmath.singleswaprate.annuitymapping.AnnuityMapping;
import net.finmath.singleswaprate.annuitymapping.AnnuityMapping.AnnuityMappingType;
import net.finmath.singleswaprate.annuitymapping.AnnuityMappingFactory;
import net.finmath.singleswaprate.model.VolatilityCubeModel;
import net.finmath.time.Schedule;
/**
* A constant maturity swap.
*
* @author Christian Fries
* @author Roland Bachl
*
*/
public class ConstantMaturitySwap extends AbstractSingleSwapRateProduct {
private final AnnuityMappingType annuityMappingType;
/**
* Create the single swap rate product.
*
* @param fixSchedule The fix schedule of the swap.
* @param floatSchedule The float schedule of the swap.
* @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 annuityMappingType The type of annuity mapping to be used for evaluation.
*/
public ConstantMaturitySwap(final Schedule fixSchedule, final Schedule floatSchedule, final String discountCurveName, final String forwardCurveName,
final String volatilityCubeName, final AnnuityMappingType annuityMappingType) {
super(fixSchedule, floatSchedule, discountCurveName, forwardCurveName, volatilityCubeName);
this.annuityMappingType = annuityMappingType;
}
@Override
protected double payoffFunction(final double swapRate, final AnnuityMapping annuityMapping, final VolatilityCubeModel model) {
return swapRate * annuityMapping.getValue(swapRate);
}
@Override
protected double hedgeWeight(final double swapRate, final AnnuityMapping annuityMapping, final VolatilityCubeModel model) {
return 2 *annuityMapping.getFirstDerivative(swapRate) + swapRate *annuityMapping.getSecondDerivative(swapRate);
}
@Override
protected double singularAddon(final double swapRate, final AnnuityMapping annuityMapping, final VolatilityCubeModel model) {
return 0;
}
@Override
protected AnnuityMapping buildAnnuityMapping( final VolatilityCubeModel model) {
final AnnuityMappingFactory factory = new AnnuityMappingFactory(getFixSchedule(), getFloatSchedule(), getDiscountCurveName(), getForwardCurveName(), getVolatilityCubeName());
return factory.build(annuityMappingType, model);
}
/**
* Analytic approximation of a CMS value.
*
* @param swaprate The underlying swap rate.
* @param volatility The volatility of the swap rate.
* @param swapAnnuity The annuity of the swap.
* @param swapFixing The fixing time of the swap.
* @param swapMaturity The maturity time of the swap.
* @param payoffUnit The discount factor to be used.
*
* @return The value of the cms.
*/
public static double analyticApproximation(
final double swaprate,
final double volatility,
final double swapAnnuity,
final double swapFixing,
final double swapMaturity,
final double payoffUnit)
{
final double a = 1.0/(swapMaturity-swapFixing);
final double b = (payoffUnit / swapAnnuity - a) / swaprate;
final double convexityAdjustment = (volatility*volatility*swapFixing);
final double valueAdjusted = swaprate + convexityAdjustment;
return (a * valueAdjusted + b * valueAdjusted * valueAdjusted + b * convexityAdjustment) / (a + b * valueAdjusted);
}
}