Module net.finmath.lib

Package net.finmath.marketdata.model.volatilities

Class CapletVolatilitiesParametricDisplacedFourParameterAnalytic

java.lang.Object

net.finmath.marketdata.model.volatilities.AbstractVolatilitySurface

net.finmath.marketdata.model.volatilities.AbstractVolatilitySurfaceParametric

net.finmath.marketdata.model.volatilities.CapletVolatilitiesParametricDisplacedFourParameterAnalytic

All Implemented Interfaces:

Cloneable, ParameterObject, VolatilitySurface

public class CapletVolatilitiesParametricDisplacedFourParameterAnalytic
extends AbstractVolatilitySurfaceParametric

A parametric caplet volatility surface created form the four parameter model for the instantaneous displaced forward rate lognormal volatility given by \( \sigma(t) = (a + b t) \exp(- c t) + d \). In other words, the Black volatility of the displaced rate for maturity T is given by \[ \sqrt{ \frac{1}{T} \int_0^T ((a + b t) \exp(- c t) + d)^2 dt } \]. The displacement may be either set as a fixed parameter (isDisplacementCalibrateable = false) or as a free parameter (isDisplacementCalibrateable = true). This will alter the behavior of the getCloneForParameter method which either requires a double[4] or a double[5] argument.

Version:

1.0

Author:

Christian Fries

Nested Class Summary

Nested classes/interfaces inherited from interface net.finmath.marketdata.model.volatilities.VolatilitySurface

VolatilitySurface.QuotingConvention

Constructor Summary

Constructors

Constructor	Description
CapletVolatilitiesParametricDisplacedFourParameterAnalytic(String name, LocalDate referenceDate, ForwardCurve forwardCurve, DiscountCurve discountCurve, double displacement, boolean isDisplacementCalibrateable, double a, double b, double c, double d, double timeScaling)	Create a model with parameters a,b,c,d defining a displaced lognormal volatility surface.

Method Summary

Modifier and Type	Method	Description
AbstractVolatilitySurfaceParametric	getCloneForParameter(double[] value)	Returns a clone of this volatility surface with modified parameters.
double[]	getParameter()	Get the current parameter associated with the state of the objects.
double	getValue(double maturity, double strike, VolatilitySurface.QuotingConvention quotingConvention)	Returns the price or implied volatility for the corresponding maturity and strike.
double	getValue(AnalyticModel model, double maturity, double strike, VolatilitySurface.QuotingConvention quotingConvention)	Returns the price or implied volatility for the corresponding maturity and strike.
void	setParameter(double[] parameter)	Set the current parameter and change the state of the objects.

Methods inherited from class net.finmath.marketdata.model.volatilities.AbstractVolatilitySurfaceParametric

getCloneCalibrated, getCloneCalibrated, getCloneCalibrated

Methods inherited from class net.finmath.marketdata.model.volatilities.AbstractVolatilitySurface

clone, convertFromTo, convertFromTo, getDaycountConvention, getDiscountCurve, getForwardCurve, getName, getQuotingConvention, getReferenceDate, toString

Methods inherited from class java.lang.Object

equals, finalize, getClass, hashCode, notify, notifyAll, wait, wait, wait

Constructor Detail

CapletVolatilitiesParametricDisplacedFourParameterAnalytic

public CapletVolatilitiesParametricDisplacedFourParameterAnalytic(String name,
                                                                  LocalDate referenceDate,
                                                                  ForwardCurve forwardCurve,
                                                                  DiscountCurve discountCurve,
                                                                  double displacement,
                                                                  boolean isDisplacementCalibrateable,
                                                                  double a,
                                                                  double b,
                                                                  double c,
                                                                  double d,
                                                                  double timeScaling)

Create a model with parameters a,b,c,d defining a displaced lognormal volatility surface.

Parameters:

name - The name of this volatility surface.

referenceDate - The reference date for this volatility surface, i.e., the date which defined t=0.

forwardCurve - The underlying forward curve.

discountCurve - The associated discount curve.

displacement - The displacement for the forward rate.

isDisplacementCalibrateable - Boolean specifying if the displacement parameter is considered a free parameter of the model.

a - The parameter a

b - The parameter b

c - The parameter c

d - The parameter d

timeScaling - A scaling factor applied to t when converting from global double time to the parametric function argument t.

Method Detail

getValue

public double getValue(double maturity,
                       double strike,
                       VolatilitySurface.QuotingConvention quotingConvention)

Description copied from interface: VolatilitySurface

Returns the price or implied volatility for the corresponding maturity and strike.

Parameters:

maturity - The option maturity for which the price or implied volatility is requested.

strike - The option strike for which the price or implied volatility is requested.

quotingConvention - The quoting convention to be used for the return value.

Returns:

The price or implied volatility depending on the quoting convention.

getValue

public double getValue(AnalyticModel model,
                       double maturity,
                       double strike,
                       VolatilitySurface.QuotingConvention quotingConvention)

Description copied from interface: VolatilitySurface

Returns the price or implied volatility for the corresponding maturity and strike.

Parameters:

model - An analytic model providing a context. Some curves do not need this (may be null).

maturity - The option maturity for which the price or implied volatility is requested.

strike - The option strike for which the price or implied volatility is requested.

quotingConvention - The quoting convention to be used for the return value.

Returns:

The price or implied volatility depending on the quoting convention.

getParameter

public double[] getParameter()

Description copied from interface: ParameterObject

Get the current parameter associated with the state of the objects.

Returns:

The parameter.

setParameter

public void setParameter(double[] parameter)

Description copied from interface: ParameterObject

Set the current parameter and change the state of the objects.

Parameters:

parameter - The parameter associated with the new state of the objects.

getCloneForParameter

public AbstractVolatilitySurfaceParametric getCloneForParameter(double[] value)
                                                         throws CloneNotSupportedException

Description copied from class: AbstractVolatilitySurfaceParametric

Returns a clone of this volatility surface with modified parameters.

Specified by:

getCloneForParameter in interface ParameterObject

Specified by:

getCloneForParameter in class AbstractVolatilitySurfaceParametric

Parameters:

value - Parameter array.

Returns:

Clone with new parameters.

Throws:

CloneNotSupportedException - Thrown if this object cannot be cloned.