LocalVol Class Reference

#include <ored/scripting/models/localvol.hpp>

Inheritance diagram for LocalVol:

Collaboration diagram for LocalVol:

Public Member Functions
	LocalVol (const Size paths, const std::vector< std::string > &currencies, const std::vector< Handle< YieldTermStructure > > &curves, const std::vector< Handle< Quote > > &fxSpots, const std::vector< std::pair< std::string, QuantLib::ext::shared_ptr< InterestRateIndex > > > &irIndices, const std::vector< std::pair< std::string, QuantLib::ext::shared_ptr< ZeroInflationIndex > > > &infIndices, const std::vector< std::string > &indices, const std::vector< std::string > &indexCurrencies, const Handle< BlackScholesModelWrapper > &model, const std::map< std::pair< std::string, std::string >, Handle< QuantExt::CorrelationTermStructure > > &correlations, const McParams &mcparams, const std::set< Date > &simulationDates, const IborFallbackConfig &iborFallbackConfig=IborFallbackConfig::defaultConfig())
	LocalVol (const Size paths, const std::string &currency, const Handle< YieldTermStructure > &curve, const std::string &index, const std::string &indexCurrency, const Handle< BlackScholesModelWrapper > &model, const McParams &mcparams, const std::set< Date > &simulationDates, const IborFallbackConfig &iborFallbackConfig=IborFallbackConfig::defaultConfig())
Public Member Functions inherited from BlackScholesBase
	BlackScholesBase (const Size paths, const std::vector< std::string > &currencies, const std::vector< Handle< YieldTermStructure > > &curves, const std::vector< Handle< Quote > > &fxSpots, const std::vector< std::pair< std::string, QuantLib::ext::shared_ptr< InterestRateIndex > > > &irIndices, const std::vector< std::pair< std::string, QuantLib::ext::shared_ptr< ZeroInflationIndex > > > &infIndices, const std::vector< std::string > &indices, const std::vector< std::string > &indexCurrencies, const Handle< BlackScholesModelWrapper > &model, const std::map< std::pair< std::string, std::string >, Handle< QuantExt::CorrelationTermStructure > > &correlations, const McParams &mcParams, const std::set< Date > &simulationDates, const IborFallbackConfig &iborFallbackConfig)
	BlackScholesBase (const Size paths, const std::string &currency, const Handle< YieldTermStructure > &curve, const std::string &index, const std::string &indexCurrency, const Handle< BlackScholesModelWrapper > &model, const Model::McParams &mcParams, const std::set< Date > &simulationDates, const IborFallbackConfig &iborFallbackConfig)
Type	type () const override
const Date &	referenceDate () const override
RandomVariable	npv (const RandomVariable &amount, const Date &obsdate, const Filter &filter, const boost::optional< long > &memSlot, const RandomVariable &addRegressor1, const RandomVariable &addRegressor2) const override
RandomVariable	fwdCompAvg (const bool isAvg, const std::string &index, const Date &obsdate, const Date &start, const Date &end, const Real spread, const Real gearing, const Integer lookback, const Natural rateCutoff, const Natural fixingDays, const bool includeSpread, const Real cap, const Real floor, const bool nakedOption, const bool localCapFloor) const override
void	releaseMemory () override
void	resetNPVMem () override
void	toggleTrainingPaths () const override
Size	trainingSamples () const override
Size	size () const override
Public Member Functions inherited from ModelImpl
	ModelImpl (const DayCounter &dayCounter, const Size size, const std::vector< std::string > &currencies, const std::vector< std::pair< std::string, QuantLib::ext::shared_ptr< InterestRateIndex > > > &irIndices, const std::vector< std::pair< std::string, QuantLib::ext::shared_ptr< ZeroInflationIndex > > > &infIndices, const std::vector< std::string > &indices, const std::vector< std::string > &indexCurrencies, const std::set< Date > &simulationDates, const IborFallbackConfig &iborFallbackConfig)
const std::string &	baseCcy () const override
Real	dt (const Date &d1, const Date &d2) const override
RandomVariable	pay (const RandomVariable &amount, const Date &obsdate, const Date &paydate, const std::string &currency) const override
RandomVariable	discount (const Date &obsdate, const Date &paydate, const std::string &currency) const override
RandomVariable	eval (const std::string &index, const Date &obsdate, const Date &fwddate, const bool returnMissingMissingAsNull=false, const bool ignoreTodaysFixing=false) const override
Real	fxSpotT0 (const std::string &forCcy, const std::string &domCcy) const override
RandomVariable	barrierProbability (const std::string &index, const Date &obsdate1, const Date &obsdate2, const RandomVariable &barrier, const bool above) const override
Real	extractT0Result (const RandomVariable &value) const override
Public Member Functions inherited from Model
	Model (const Size n)
virtual	~Model ()
virtual Type	type () const =0
virtual Size	size () const
virtual Size	trainingSamples () const
virtual void	toggleTrainingPaths () const
virtual const Date &	referenceDate () const =0
virtual const std::string &	baseCcy () const =0
virtual Real	dt (const Date &d1, const Date &d2) const
Real	timeFromReference (const Date &d) const
virtual RandomVariable	pay (const RandomVariable &amount, const Date &obsdate, const Date &paydate, const std::string &currency) const =0
virtual RandomVariable	discount (const Date &obsdate, const Date &paydate, const std::string &currency) const =0
virtual RandomVariable	npv (const RandomVariable &amount, const Date &obsdate, const Filter &filter, const boost::optional< long > &memSlot, const RandomVariable &addRegressor1, const RandomVariable &addRegressor2) const =0
virtual RandomVariable	eval (const std::string &index, const Date &obsdate, const Date &fwddate, const bool returnMissingFixingAsNull=false, const bool ignoreTodaysFixing=false) const =0
virtual RandomVariable	fwdCompAvg (const bool isAvg, const std::string &index, const Date &obsdate, const Date &start, const Date &end, const Real spread, const Real gearing, const Integer lookback, const Natural rateCutoff, const Natural fixingDays, const bool includeSpread, const Real cap, const Real floor, const bool nakedOption, const bool localCapFloor) const =0
virtual RandomVariable	barrierProbability (const std::string &index, const Date &obsdate1, const Date &obsdate2, const RandomVariable &barrier, const bool above) const =0
virtual Real	fxSpotT0 (const std::string &forCcy, const std::string &domCcy) const =0
virtual Real	extractT0Result (const RandomVariable &value) const =0
virtual void	releaseMemory ()
virtual void	resetNPVMem ()
const std::map< std::string, boost::any > &	additionalResults () const

Private Member Functions
RandomVariable	getFutureBarrierProb (const std::string &index, const Date &obsdate1, const Date &obsdate2, const RandomVariable &barrier, const bool above) const override
void	performCalculations () const override
void	populatePathValues (const Size nSamples, std::map< Date, std::vector< RandomVariable > > &paths, const QuantLib::ext::shared_ptr< MultiPathVariateGeneratorBase > &gen, const Matrix &correlation, const Matrix &sqrtCorr, const std::vector< Array > &deterministicDrift, const std::vector< Size > &eqComIdx, const std::vector< Real > &t, const std::vector< Real > &dt, const std::vector< Real > &sqrtdt) const

Additional Inherited Members
Public Types inherited from Model
enum class	Type { MC , FD }
Protected Member Functions inherited from BlackScholesBase
void	performCalculations () const override
RandomVariable	getIndexValue (const Size indexNo, const Date &d, const Date &fwd=Null< Date >()) const override
RandomVariable	getIrIndexValue (const Size indexNo, const Date &d, const Date &fwd=Null< Date >()) const override
RandomVariable	getInfIndexValue (const Size indexNo, const Date &d, const Date &fwd=Null< Date >()) const override
RandomVariable	getDiscount (const Size idx, const Date &s, const Date &t) const override
RandomVariable	getNumeraire (const Date &s) const override
Real	getFxSpot (const Size idx) const override
Matrix	getCorrelation () const
virtual RandomVariable	getIndexValue (const Size indexNo, const Date &d, const Date &fwd=Null< Date >()) const =0
virtual RandomVariable	getIrIndexValue (const Size indexNo, const Date &d, const Date &fwd=Null< Date >()) const =0
virtual RandomVariable	getInfIndexValue (const Size indexNo, const Date &d, const Date &fwd) const =0
virtual RandomVariable	getDiscount (const Size idx, const Date &s, const Date &t) const =0
virtual RandomVariable	getNumeraire (const Date &s) const =0
virtual Real	getFxSpot (const Size idx) const =0
virtual RandomVariable	getFutureBarrierProb (const std::string &index, const Date &obsdate1, const Date &obsdate2, const RandomVariable &barrier, const bool above) const =0
Protected Member Functions inherited from Model
void	performCalculations () const override
Protected Attributes inherited from BlackScholesBase
const std::vector< Handle< YieldTermStructure > >	curves_
const std::vector< Handle< Quote > >	fxSpots_
const Handle< BlackScholesModelWrapper >	model_
const std::map< std::pair< std::string, std::string >, Handle< QuantExt::CorrelationTermStructure > >	correlations_
const McParams	mcParams_
const std::vector< Date >	simulationDates_
Date	referenceDate_
std::set< Date >	effectiveSimulationDates_
TimeGrid	timeGrid_
std::vector< Size >	positionInTimeGrid_
std::map< Date, std::vector< RandomVariable > >	underlyingPaths_
std::map< Date, std::vector< RandomVariable > >	underlyingPathsTraining_
bool	inTrainingPhase_ = false
std::map< long, std::tuple< Array, Size, Matrix > >	storedRegressionModel_
Protected Attributes inherited from ModelImpl
const DayCounter	dayCounter_
const std::vector< std::string >	currencies_
const std::vector< std::string >	indexCurrencies_
const std::set< Date >	simulationDates_
const IborFallbackConfig	iborFallbackConfig_
std::vector< std::pair< IndexInfo, QuantLib::ext::shared_ptr< InterestRateIndex > > >	irIndices_
std::vector< std::pair< IndexInfo, QuantLib::ext::shared_ptr< ZeroInflationIndex > > >	infIndices_
std::vector< IndexInfo >	indices_
Protected Attributes inherited from Model
std::map< std::string, boost::any >	additionalResults_

Detailed Description

Definition at line 33 of file localvol.hpp.

Constructor & Destructor Documentation

LocalVol() [1/2]

LocalVol	(	const Size	paths,
		const std::vector< std::string > &	currencies,
		const std::vector< Handle< YieldTermStructure > > &	curves,
		const std::vector< Handle< Quote > > &	fxSpots,
		const std::vector< std::pair< std::string, QuantLib::ext::shared_ptr< InterestRateIndex > > > &	irIndices,
		const std::vector< std::pair< std::string, QuantLib::ext::shared_ptr< ZeroInflationIndex > > > &	infIndices,
		const std::vector< std::string > &	indices,
		const std::vector< std::string > &	indexCurrencies,
		const Handle< BlackScholesModelWrapper > &	model,
		const std::map< std::pair< std::string, std::string >, Handle< QuantExt::CorrelationTermStructure > > &	correlations,
		const McParams &	mcparams,
		const std::set< Date > &	simulationDates,
		const IborFallbackConfig &	iborFallbackConfig = IborFallbackConfig::defaultConfig()
	)

Definition at line 41 of file localvol.cpp.

    : BlackScholesBase(paths, currencies, curves, fxSpots, irIndices, infIndices, indices, indexCurrencies, model,
                       correlations, mcParams, simulationDates, iborFallbackConfig) {}

LocalVol() [2/2]

LocalVol	(	const Size	paths,
		const std::string &	currency,
		const Handle< YieldTermStructure > &	curve,
		const std::string &	index,
		const std::string &	indexCurrency,
		const Handle< BlackScholesModelWrapper > &	model,
		const McParams &	mcparams,
		const std::set< Date > &	simulationDates,
		const IborFallbackConfig &	iborFallbackConfig = IborFallbackConfig::defaultConfig()
	)

Definition at line 34 of file localvol.cpp.

    : LocalVol(paths, {currency}, {curve}, {}, {}, {}, {index}, {indexCurrency}, model, {}, mcParams, simulationDates,
               iborFallbackConfig) {}

Member Function Documentation

getFutureBarrierProb()

RandomVariable getFutureBarrierProb ( const std::string &  index, const Date &  obsdate1, const Date &  obsdate2, const RandomVariable &  barrier, const bool  above  ) const

overrideprivatevirtual

Implements ModelImpl.

Definition at line 216 of file localvol.cpp.

                                                                                                     {
    QL_FAIL("getFutureBarrierProb not implemented by LocalVol");
}

performCalculations()

void performCalculations ( ) const

overrideprivate

Definition at line 53 of file localvol.cpp.

                                         {
 
    BlackScholesBase::performCalculations();
 
    // nothing to do if we do not have any indices
 
    if (indices_.empty())
        return;
 
    // init underlying path where we map a date to a randomvariable representing the path values
 
    for (auto const& d : effectiveSimulationDates_) {
        underlyingPaths_[d] = std::vector<RandomVariable>(model_->processes().size(), RandomVariable(size(), 0.0));
        if (trainingSamples() != Null<Size>())
            underlyingPathsTraining_[d] =
                std::vector<RandomVariable>(model_->processes().size(), RandomVariable(trainingSamples(), 0.0));
    }
 
    // compile the correlation matrix
 
    Matrix correlation = getCorrelation();
 
    // set reference date values, if there are no future simulation dates we are done
 
    for (Size l = 0; l < indices_.size(); ++l) {
        underlyingPaths_[*effectiveSimulationDates_.begin()][l].setAll(model_->processes()[l]->x0());
        if (trainingSamples() != Null<Size>()) {
            underlyingPathsTraining_[*effectiveSimulationDates_.begin()][l].setAll(model_->processes()[l]->x0());
        }
    }
 
    if (effectiveSimulationDates_.size() == 1)
        return;
 
    // compute the sqrt correlation
 
    Matrix sqrtCorr = pseudoSqrt(correlation, SalvagingAlgorithm::Spectral);
 
    // precompute the deterministic part of the drift on each time step
 
    std::vector<Array> deterministicDrift(timeGrid_.size() - 1, Array(indices_.size(), 0.0));
 
    for (Size i = 0; i < timeGrid_.size() - 1; ++i) {
        for (Size j = 0; j < indices_.size(); ++j) {
            Real t0 = timeGrid_[i];
            Real t1 = timeGrid_[i + 1];
            deterministicDrift[i][j] = -std::log(model_->processes()[j]->riskFreeRate()->discount(t1) /
                                                 model_->processes()[j]->dividendYield()->discount(t1) /
                                                 (model_->processes()[j]->riskFreeRate()->discount(t0) /
                                                  model_->processes()[j]->dividendYield()->discount(t0)));
        }
    }
 
    // precompute index for drift adjustment for eq / com indices that are not in base ccy
 
    std::vector<Size> eqComIdx(indices_.size());
    for (Size j = 0; j < indices_.size(); ++j) {
        Size idx = Null<Size>();
        if (!indices_[j].isFx()) {
            // do we have an fx index with the desired currency?
            for (Size jj = 0; jj < indices_.size(); ++jj) {
                if (indices_[jj].isFx()) {
                    if (indexCurrencies_[jj] == indexCurrencies_[j])
                        idx = jj;
                }
            }
        }
        eqComIdx[j] = idx;
    }
 
    // precompute some time related quantities
 
    std::vector<Real> t(timeGrid_.size() - 1), dt(timeGrid_.size() - 1), sqrtdt(timeGrid_.size() - 1);
    for (Size i = 0; i < timeGrid_.size() - 1; ++i) {
        t[i] = timeGrid_[i];
        dt[i] = timeGrid_[i + 1] - timeGrid_[i];
        sqrtdt[i] = std::sqrt(dt[i]);
    }
 
    // evolve the process using correlated normal variates and set the underlying path values
 
    populatePathValues(size(), underlyingPaths_,
                       makeMultiPathVariateGenerator(mcParams_.sequenceType, indices_.size(), timeGrid_.size() - 1,
                                                     mcParams_.seed, mcParams_.sobolOrdering,
                                                     mcParams_.sobolDirectionIntegers),
                       correlation, sqrtCorr, deterministicDrift, eqComIdx, t, dt, sqrtdt);
 
    if (trainingSamples() != Null<Size>()) {
        populatePathValues(trainingSamples(), underlyingPathsTraining_,
                           makeMultiPathVariateGenerator(mcParams_.trainingSequenceType, indices_.size(),
                                                         timeGrid_.size() - 1, mcParams_.trainingSeed,
                                                         mcParams_.sobolOrdering, mcParams_.sobolDirectionIntegers),
                           correlation, sqrtCorr, deterministicDrift, eqComIdx, t, dt, sqrtdt);
    }
 
} // initPaths()

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populatePathValues()

void populatePathValues ( const Size  nSamples, std::map< Date, std::vector< RandomVariable > > &  paths, const QuantLib::ext::shared_ptr< MultiPathVariateGeneratorBase > &  gen, const Matrix &  correlation, const Matrix &  sqrtCorr, const std::vector< Array > &  deterministicDrift, const std::vector< Size > &  eqComIdx, const std::vector< Real > &  t, const std::vector< Real > &  dt, const std::vector< Real > &  sqrtdt  ) const

private

Definition at line 150 of file localvol.cpp.

                                                                       {
 
    Array stateDiff(indices_.size()), logState(indices_.size()), logState0(indices_.size());
    for (Size j = 0; j < indices_.size(); ++j) {
        logState0[j] = std::log(model_->processes()[j]->x0());
    }
 
    std::vector<std::vector<RandomVariable*>> rvs(indices_.size(),
                                                  std::vector<RandomVariable*>(effectiveSimulationDates_.size() - 1));
    auto date = effectiveSimulationDates_.begin();
    for (Size i = 0; i < effectiveSimulationDates_.size() - 1; ++i) {
        ++date;
        for (Size j = 0; j < indices_.size(); ++j) {
            rvs[j][i] = &paths[*date][j];
            rvs[j][i]->expand();
        }
    }
 
    for (Size path = 0; path < size(); ++path) {
        auto p = gen->next();
        logState = logState0;
        std::size_t date = 0;
        auto pos = positionInTimeGrid_.begin();
        ++pos;
        // evolve the process on the refined time grid
        for (Size i = 0; i < timeGrid_.size() - 1; ++i) {
            for (Size j = 0; j < indices_.size(); ++j) {
                // localVol might throw / return nan, inf, handle these cases here
                // by setting the local vol to zero
                Real volj = 0.0;
                try {
                    volj = model_->processes()[j]->localVolatility()->localVol(t[i], std::exp(logState[j]));
                } catch (...) {
                }
                if (!std::isfinite(volj))
                    volj = 0.0;
                Real dw = 0;
                for (Size k = 0; k < indices_.size(); ++k) {
                    dw += sqrtCorr[j][k] * p.value[i][k];
                }
                stateDiff[j] = volj * dw * sqrtdt[i] - 0.5 * volj * volj * dt[i];
                // drift adjustment for eq / com indices that are not in base ccy
                if (eqComIdx[j] != Null<Size>()) {
                    Real volIdx = model_->processes()[eqComIdx[j]]->localVolatility()->localVol(
                        t[i], std::exp(logState[eqComIdx[j]]));
                    stateDiff[j] -= correlation[eqComIdx[j]][j] * volIdx * volj * dt[i];
                }
            }
            // update state with stateDiff from above and deterministic part of the drift
            logState += stateDiff + deterministicDrift[i];
            // on the effective simulation dates populate the underlying paths
            if (i + 1 == *pos) {
                for (Size j = 0; j < indices_.size(); ++j)
                    rvs[j][date]->data()[path] = std::exp(logState[j]);
                ++date;
                ++pos;
            }
        }
    }
} // populatePathValues()

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