Module net.finmath.lib

Package net.finmath.montecarlo.interestrate.products

Class Caplet

java.lang.Object

net.finmath.montecarlo.AbstractMonteCarloProduct

net.finmath.montecarlo.interestrate.products.AbstractLIBORMonteCarloProduct

net.finmath.montecarlo.interestrate.products.Caplet

All Implemented Interfaces:

Product, TermStructureMonteCarloProduct, MonteCarloProduct

public class Caplet
extends AbstractLIBORMonteCarloProduct

Implements the pricing of a Caplet using a given AbstractLIBORMarketModel.

Version:

1.0

Author:

Christian Fries

Nested Class Summary

Nested Classes

Modifier and Type	Class	Description
static class	Caplet.ValueUnit

Constructor Summary

Constructors

Constructor	Description
Caplet(double maturity, double periodLength, double strike)	Create a caplet.
Caplet(double maturity, double periodLength, double strike, boolean isFloorlet)	Create a caplet or a floorlet.
Caplet(double maturity, double periodLength, double strike, double daycountFraction, boolean isFloorlet, Caplet.ValueUnit valueUnit)	Create a caplet or a floorlet.

Method Summary

Modifier and Type	Method	Description
RandomVariable	getValue(double evaluationTime, LIBORModelMonteCarloSimulationModel model)	This method returns the value random variable of the product within the specified model, evaluated at a given evalutationTime.

Methods inherited from class net.finmath.montecarlo.interestrate.products.AbstractLIBORMonteCarloProduct

getFactorDrift, getValue, getValueForModifiedData, getValues

Methods inherited from class net.finmath.montecarlo.AbstractMonteCarloProduct

getCurrency, getValue, getValue, getValues, getValues, getValues, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, toString

Methods inherited from class java.lang.Object

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

Methods inherited from interface net.finmath.montecarlo.MonteCarloProduct

getCurrency, getValue, getValue, getValues, getValues, getValues, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData

Constructor Detail

Caplet

public Caplet(double maturity,
              double periodLength,
              double strike,
              double daycountFraction,
              boolean isFloorlet,
              Caplet.ValueUnit valueUnit)

Create a caplet or a floorlet. A caplet pays \( max(L-K,0) * daycountFraction \) at maturity+periodLength where L is fixed at maturity. A floorlet pays \( -min(L-K,0) * daycountFraction \) at maturity+periodLength where L is fixed at maturity.

Parameters:

maturity - The fixing date given as double. The payment is at the period end.

periodLength - The length of the forward rate period.

strike - The strike given as double.

daycountFraction - The daycount fraction used in the payout function.

isFloorlet - If true, this object will represent a floorlet, otherwise a caplet.

valueUnit - The unit of the value returned by the getValue method.

Caplet

public Caplet(double maturity,
              double periodLength,
              double strike,
              boolean isFloorlet)

Create a caplet or a floorlet. A caplet pays \( max(L-K,0) * daycountFraction \) at maturity+periodLength where L is fixed at maturity. A floorlet pays \( -min(L-K,0) * daycountFraction \) at maturity+periodLength where L is fixed at maturity. This simplified constructor uses daycountFraction = periodLength.

Parameters:

maturity - The fixing date given as double. The payment is at the period end.

periodLength - The length of the forward rate period in ACT/365 convention.

strike - The strike given as double.

isFloorlet - If true, this object will represent a floorlet, otherwise a caplet.

Caplet

public Caplet(double maturity,
              double periodLength,
              double strike)

Create a caplet. A caplet pays \( max(L-K,0) * periodLength \) at maturity+periodLength where L is fixed at maturity.

Parameters:

maturity - The fixing date given as double. The payment is at the period end.

periodLength - The length of the forward rate period.

strike - The strike given as double.

Method Detail

getValue

public RandomVariable getValue(double evaluationTime,
                               LIBORModelMonteCarloSimulationModel model)
                        throws CalculationException

This method returns the value random variable of the product within the specified model, evaluated at a given evalutationTime. Note: For a lattice this is often the value conditional to evalutationTime, for a Monte-Carlo simulation this is the (sum of) value discounted to evaluation time. Cashflows prior evaluationTime are not considered.

Specified by:

getValue in interface TermStructureMonteCarloProduct

Specified by:

getValue in class AbstractLIBORMonteCarloProduct

Parameters:

evaluationTime - The time on which this products value should be observed.

model - The model used to price the product.

Returns:

The random variable representing the value of the product discounted to evaluation time

Throws:

CalculationException - Thrown if the valuation fails, specific cause may be available via the cause() method.