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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.DiscountCurve;
import net.finmath.montecarlo.BrownianMotion;
import net.finmath.montecarlo.assetderivativevaluation.AssetModelMonteCarloSimulationModel;
import net.finmath.montecarlo.assetderivativevaluation.MonteCarloMultiAssetBlackScholesModel;
import net.finmath.montecarlo.assetderivativevaluation.products.EuropeanOption;
import net.finmath.montecarlo.interestrate.LIBORModelMonteCarloSimulationModel;
import net.finmath.optimizer.LevenbergMarquardt;
import net.finmath.optimizer.Optimizer;
import net.finmath.optimizer.SolverException;

/**
 * Helper factory to create a simple equity hybrid LIBOR market model.
 *
 * @author Christian Fries
 * @version 1.0
 */
public class ModelFactory {

	private static ModelFactory modelFactory;

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

	public static synchronized 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 BrownianMotion} 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 HybridAssetLIBORModelMonteCarloSimulation}, where each asset process is calibrated to a given option.
	 * @throws CalculationException Thrown if calibration fails.
	 */
	public HybridAssetLIBORModelMonteCarloSimulation getHybridAssetLIBORModel(
			final LIBORModelMonteCarloSimulationModel baseModel,
			final BrownianMotion brownianMotion,
			final double[] initialValues,
			final double riskFreeRate,
			final double[][] correlations,
			final double[] maturities,
			final double[] strikes,
			final double[] volatilities,
			final DiscountCurve discountCurve) throws CalculationException {

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

			@Override
			public void setValues(final double[] parameters, final double[] values) throws SolverException {
				final AssetModelMonteCarloSimulationModel model = new MonteCarloMultiAssetBlackScholesModel(brownianMotion, initialValues, riskFreeRate, parameters, correlations);
				final HybridAssetLIBORModelMonteCarloSimulationFromModels hybridModel = new HybridAssetLIBORModelMonteCarloSimulationFromModels(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).
		 */
		final HybridAssetLIBORModelMonteCarloSimulationFromModels hybridModel = new HybridAssetLIBORModelMonteCarloSimulationFromModels(baseModel, model, discountCurve);
		return hybridModel;
	}
}