localvol.cpp File Reference

#include <boost/test/unit_test.hpp>
#include <boost/test/data/test_case.hpp>
#include <ored/scripting/scriptengine.hpp>
#include <ored/scripting/models/localvol.hpp>
#include <ored/scripting/staticanalyser.hpp>
#include <ored/scripting/scriptparser.hpp>
#include <ored/scripting/astprinter.hpp>
#include <ored/scripting/models/blackscholes.hpp>
#include <ored/scripting/models/dummymodel.hpp>
#include <oret/toplevelfixture.hpp>
#include <ored/model/localvolmodelbuilder.hpp>
#include <qle/termstructures/flatcorrelation.hpp>
#include <qle/methods/multipathgeneratorbase.hpp>
#include <ql/exercise.hpp>
#include <ql/time/daycounters/actualactual.hpp>
#include <ql/quotes/simplequote.hpp>
#include <ql/instruments/vanillaoption.hpp>
#include <ql/pricingengines/vanilla/analyticeuropeanengine.hpp>
#include <ql/processes/stochasticprocessarray.hpp>
#include <ql/termstructures/yield/flatforward.hpp>
#include <ql/termstructures/volatility/equityfx/blackconstantvol.hpp>
#include <ql/time/calendars/nullcalendar.hpp>
#include <ql/pricingengines/blackformula.hpp>
#include <ql/termstructures/volatility/sabr.hpp>
#include <iomanip>

Go to the source code of this file.

Functions
	BOOST_AUTO_TEST_CASE (testFlatVols)
	BOOST_AUTO_TEST_CASE (testSabrVols)

Function Documentation

BOOST_AUTO_TEST_CASE() [1/2]

BOOST_AUTO_TEST_CASE

(

testFlatVols

)

Definition at line 137 of file localvol.cpp.

                                   {
    BOOST_TEST_MESSAGE("Testing LocalVol with flat input vols...");
 
    Date ref(7, May, 2019);
    Settings::instance().evaluationDate() = ref;
 
    std::vector<Date> expiries{ref + 1 * Months, ref + 3 * Months, ref + 6 * Months, ref + 9 * Months,
                               ref + 1 * Years,  ref + 2 * Years,  ref + 3 * Years,  ref + 4 * Years,
                               ref + 5 * Years,  ref + 7 * Years,  ref + 10 * Years};
 
    std::vector<Real> moneyness{-3.0, -2.0, -1.0, 0.0, 1.0, 2.0, 3.0};
 
    Handle<YieldTermStructure> r(QuantLib::ext::make_shared<FlatForward>(0, NullCalendar(), 0.02, Actual365Fixed()));
    Handle<YieldTermStructure> q(QuantLib::ext::make_shared<FlatForward>(0, NullCalendar(), 0.03, Actual365Fixed()));
    Handle<BlackVolTermStructure> vol(QuantLib::ext::make_shared<BlackConstantVol>(0, NullCalendar(), 0.10, Actual365Fixed()));
    Handle<Quote> spot(QuantLib::ext::make_shared<SimpleQuote>(100.0));
 
    auto process = QuantLib::ext::make_shared<GeneralizedBlackScholesProcess>(spot, q, r, vol);
 
    testCalibrationInstrumentRepricing(expiries, moneyness, process, 20, 10000, 0.30);
}

BOOST_AUTO_TEST_CASE() [2/2]

BOOST_AUTO_TEST_CASE

(

testSabrVols

)

Definition at line 159 of file localvol.cpp.

                                   {
    BOOST_TEST_MESSAGE("Testing LocalVol with sabr input vols...");
 
    Date ref(7, May, 2019);
    Settings::instance().evaluationDate() = ref;
 
    std::vector<Date> expiries{ref + 1 * Months, ref + 3 * Months, ref + 6 * Months, ref + 9 * Months,
                               ref + 1 * Years,  ref + 2 * Years,  ref + 3 * Years,  ref + 4 * Years,
                               ref + 5 * Years,  ref + 7 * Years,  ref + 10 * Years};
 
    std::vector<Real> moneyness{-3.0, -2.0, -1.0, 0.0, 1.0, 2.0, 3.0};
 
    Handle<YieldTermStructure> r(QuantLib::ext::make_shared<FlatForward>(0, NullCalendar(), 0.02, Actual365Fixed()));
    Handle<YieldTermStructure> q(QuantLib::ext::make_shared<FlatForward>(0, NullCalendar(), 0.03, Actual365Fixed()));
 
    class SabrTestSurface : public BlackVolatilityTermStructure {
    public:
        SabrTestSurface(const Handle<Quote>& spot, const Handle<YieldTermStructure>& r,
                        const Handle<YieldTermStructure>& q)
            : BlackVolatilityTermStructure(0, NullCalendar(), Following, ActualActual(ActualActual::ISDA)), spot_(spot), r_(r), q_(q) {}
        Date maxDate() const override { return Date::maxDate(); }
        Real minStrike() const override { return 0.0; }
        Real maxStrike() const override { return QL_MAX_REAL; }
 
    private:
        Real blackVolImpl(Time maturity, Real strike) const override {
            Real forward = spot_->value() / r_->discount(maturity) * q_->discount(maturity);
            Real w2 = std::min(maturity, 10.0) / 10.0, w1 = 1.0 - w2;
            Real alpha = 0.17 * w1 + 0.10 * w2;
            Real beta = 0.99;
            Real nu = 0.3 * w1 + 0.05 * w2;
            Real rho = -0.2;
            return sabrVolatility(strike, forward, maturity, alpha, beta, nu, rho);
        }
        Handle<Quote> spot_;
        Handle<YieldTermStructure> r_, q_;
    };
 
    Handle<Quote> spot(QuantLib::ext::make_shared<SimpleQuote>(100.0));
    Handle<BlackVolTermStructure> vol(QuantLib::ext::make_shared<SabrTestSurface>(spot, r, q));
 
    auto process = QuantLib::ext::make_shared<GeneralizedBlackScholesProcess>(spot, q, r, vol);
 
    testCalibrationInstrumentRepricing(expiries, moneyness, process, 20, 10000, 0.30);
}