Module net.finmath.lib
Class SwaptionAnalyticApproximationRebonato
- java.lang.Object
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- net.finmath.montecarlo.AbstractMonteCarloProduct
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- net.finmath.montecarlo.interestrate.products.AbstractLIBORMonteCarloProduct
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- net.finmath.montecarlo.interestrate.products.SwaptionAnalyticApproximationRebonato
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- All Implemented Interfaces:
Product
,Swaption
,TermStructureMonteCarloProduct
,MonteCarloProduct
public class SwaptionAnalyticApproximationRebonato extends AbstractLIBORMonteCarloProduct implements Swaption
This class implements an analytic swaption valuation formula under a LIBOR market model. The algorithm implemented here is the OIS discounting version of the algorithm described in ISBN 0470047224 (seeSwaptionSingleCurveAnalyticApproximation
). The approximation assumes that the forward rates (LIBOR) follow a log normal model and that the model provides the integrated instantaneous covariance of the log-forward rates. The getValue method calculates the approximated integrated instantaneous variance of the swap rate, using the approximation of \[ \frac{d log(S(t))}{d log(L(t))} \] according to Rebonato (1999). Since \( L \) is a vector, \( w \) is a gradient (vector). The class then approximates the Black volatility of a swaption via \[ \sigma_S^{2} T := \sum_{i,j} w_{i} \gamma_{i,j} w_{j} \] where \( (\gamma_{i,j})_{i,j = 1,...,m} \) is the covariance matrix of the forward rates. The valuation can be performed in terms of value or implied Black volatility. In this implementation we use the weights as specified by Rebonato (1998) and not the one derived by Hull and White (1999/2000).- Version:
- 1.0
- Author:
- Christian Fries
- Date:
- 17.05.2007.
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Nested Class Summary
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Nested classes/interfaces inherited from interface net.finmath.modelling.products.Swaption
Swaption.ValueUnit
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Constructor Summary
Constructors Constructor Description SwaptionAnalyticApproximationRebonato(double swaprate, double[] swapTenor, Swaption.ValueUnit valueUnit)
Create an analytic swaption approximation product for log normal forward rate model.SwaptionAnalyticApproximationRebonato(double swaprate, TimeDiscretization swapTenor)
Create an analytic swaption approximation product for log normal forward rate model.
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Method Summary
All Methods Static Methods Instance Methods Concrete Methods Modifier and Type Method Description static Map<String,double[]>
getLogSwaprateDerivative(TimeDiscretization liborPeriodDiscretization, DiscountCurve discountCurve, ForwardCurve forwardCurve, double[] swapTenor)
This function calculate the partial derivative d log(S) / d log(Lk) for a given swap rate with respect to a vector of forward rates (on a given forward rate tenor).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.RandomVariable
getValues(double evaluationTime, TimeDiscretization timeDiscretization, LIBORMarketModel model)
Calculates the approximated integrated instantaneous variance of the swap rate, using the approximation d log(S(t))/d log(L(t)) = d log(S(0))/d log(L(0)).-
Methods inherited from class net.finmath.montecarlo.interestrate.products.AbstractLIBORMonteCarloProduct
getFactorDrift, getValue, getValueForModifiedData, getValues
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Methods inherited from class net.finmath.montecarlo.AbstractMonteCarloProduct
getCurrency, getValue, getValue, getValues, getValues, getValues, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, toString
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Methods inherited from class java.lang.Object
clone, equals, finalize, getClass, hashCode, notify, notifyAll, wait, wait, wait
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Methods inherited from interface net.finmath.montecarlo.MonteCarloProduct
getCurrency, getValue, getValue, getValues, getValues, getValues, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData
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Constructor Detail
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SwaptionAnalyticApproximationRebonato
public SwaptionAnalyticApproximationRebonato(double swaprate, TimeDiscretization swapTenor)
Create an analytic swaption approximation product for log normal forward rate model. Note: It is implicitly assumed that swapTenor.getTime(0) is the exercise date (no forward starting).- Parameters:
swaprate
- The strike swap rate of the swaption.swapTenor
- The swap tenor in doubles.
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SwaptionAnalyticApproximationRebonato
public SwaptionAnalyticApproximationRebonato(double swaprate, double[] swapTenor, Swaption.ValueUnit valueUnit)
Create an analytic swaption approximation product for log normal forward rate model. Note: It is implicitly assumed that swapTenor[0] is the exercise date (no forward starting).- Parameters:
swaprate
- The strike swap rate of the swaption.swapTenor
- The swap tenor in doubles.valueUnit
- The unit of the quantity returned by the getValues method.
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Method Detail
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getValue
public RandomVariable getValue(double evaluationTime, LIBORModelMonteCarloSimulationModel model)
Description copied from interface:TermStructureMonteCarloProduct
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 interfaceTermStructureMonteCarloProduct
- Specified by:
getValue
in classAbstractLIBORMonteCarloProduct
- 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
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getValues
public RandomVariable getValues(double evaluationTime, TimeDiscretization timeDiscretization, LIBORMarketModel model)
Calculates the approximated integrated instantaneous variance of the swap rate, using the approximation d log(S(t))/d log(L(t)) = d log(S(0))/d log(L(0)).- Parameters:
evaluationTime
- Time at which the product is evaluated.timeDiscretization
- The time discretization used for integrating the covariance.model
- A model implementing the LIBORModelMonteCarloSimulationModel- Returns:
- Depending on the value of value unit, the method returns either the approximated integrated instantaneous variance of the swap rate (ValueUnit.INTEGRATEDVARIANCE) or the value using the Black formula (ValueUnit.VALUE).
- To dos:
- make initial values an arg and use evaluation time.
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getLogSwaprateDerivative
public static Map<String,double[]> getLogSwaprateDerivative(TimeDiscretization liborPeriodDiscretization, DiscountCurve discountCurve, ForwardCurve forwardCurve, double[] swapTenor)
This function calculate the partial derivative d log(S) / d log(Lk) for a given swap rate with respect to a vector of forward rates (on a given forward rate tenor). It also returns some useful other quantities like the corresponding discout factors and swap annuities.- Parameters:
liborPeriodDiscretization
- The libor period discretization.discountCurve
- The discount curve. If this parameter is null, the discount curve will be calculated from the forward curve.forwardCurve
- The forward curve.swapTenor
- The swap tenor.- Returns:
- A map containing the partial derivatives (key "value"), the discount factors (key "discountFactors") and the annuities (key "annuities") as vectors of double[] (indexed by forward rate tenor index starting at swap start)
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