BlackAverageBMACouponPricer Class Reference

#include <qle/cashflows/blackaveragebmacouponpricer.hpp>

Inheritance diagram for BlackAverageBMACouponPricer:

Collaboration diagram for BlackAverageBMACouponPricer:

Public Member Functions
void	initialize (const FloatingRateCoupon &coupon) override
Real	swapletPrice () const override
Rate	swapletRate () const override
Real	capletPrice (Rate effectiveCap) const override
Rate	capletRate (Rate effectiveCap) const override
Real	floorletPrice (Rate effectiveFloor) const override
Rate	floorletRate (Rate effectiveFloor) const override
	CapFlooredAverageBMACouponPricer (const Handle< OptionletVolatilityStructure > &v, const bool effectiveVolatilityInput=false)
Public Member Functions inherited from CapFlooredAverageBMACouponPricer
	CapFlooredAverageBMACouponPricer (const Handle< OptionletVolatilityStructure > &v, const bool effectiveVolatilityInput=false)
Handle< OptionletVolatilityStructure >	capletVolatility () const
bool	effectiveVolatilityInput () const
Real	effectiveCapletVolatility () const
Real	effectiveFloorletVolatility () const

Private Member Functions
Real	optionletRate (Option::Type optionType, Real effStrike) const

Private Attributes
Real	gearing_
ext::shared_ptr< BMAIndex >	index_
Real	swapletRate_
Real	forwardRate_
const CappedFlooredAverageBMACoupon *	coupon_

Additional Inherited Members
Protected Attributes inherited from CapFlooredAverageBMACouponPricer
Handle< OptionletVolatilityStructure >	capletVol_
bool	effectiveVolatilityInput_
Real	effectiveCapletVolatility_
Real	effectiveFloorletVolatility_

Detailed Description

Definition at line 32 of file blackaveragebmacouponpricer.hpp.

Member Function Documentation

initialize()

void initialize ( const FloatingRateCoupon &  coupon )

override

Definition at line 26 of file blackaveragebmacouponpricer.cpp.

                                                                             {
    coupon_ = dynamic_cast<const CappedFlooredAverageBMACoupon*>(&coupon);
    QL_REQUIRE(coupon_, "BlackAverageBMACouponPricer: CappedFlooredAverageBMACoupon required");
    gearing_ = coupon.gearing();
    index_ = ext::dynamic_pointer_cast<BMAIndex>(coupon.index());
    if (!index_) {
        // check if the coupon was right
        const CappedFlooredAverageBMACoupon* c = dynamic_cast<const CappedFlooredAverageBMACoupon*>(&coupon);
        QL_REQUIRE(c, "BlackAverageBMACouponPricer: CappedFlooredAverageBMACoupon required");
        // coupon was right, index is not
        QL_FAIL("BlackAverageBMACouponPricer: CappedFlooredAverageBMACoupon required");
    }
    swapletRate_ = coupon_->underlying()->rate();
    forwardRate_ = (swapletRate_ - coupon_->underlying()->spread()) / coupon_->underlying()->gearing();
    effectiveCapletVolatility_ = effectiveFloorletVolatility_ = Null<Real>();
}

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swapletPrice()

Real swapletPrice ( ) const

override

Definition at line 105 of file blackaveragebmacouponpricer.cpp.

                                                     {
    QL_FAIL("BlackAverageBMACouponPricer::swapletPrice() not provided");
}

swapletRate()

Rate swapletRate ( ) const

override

Definition at line 95 of file blackaveragebmacouponpricer.cpp.

{ return swapletRate_; }

capletPrice()

Real capletPrice ( Rate  effectiveCap ) const

override

Definition at line 108 of file blackaveragebmacouponpricer.cpp.

                                                                     {
    QL_FAIL("BlackAverageBMACouponPricer::capletPrice() not provided");
}

capletRate()

Rate capletRate ( Rate  effectiveCap ) const

override

Definition at line 97 of file blackaveragebmacouponpricer.cpp.

                                                                    {
    return optionletRate(Option::Call, effectiveCap);
}

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floorletPrice()

Real floorletPrice ( Rate  effectiveFloor ) const

override

Definition at line 111 of file blackaveragebmacouponpricer.cpp.

                                                                         {
    QL_FAIL("BlackAverageBMACouponPricer::floorletPrice() not provided");
}

floorletRate()

Rate floorletRate ( Rate  effectiveFloor ) const

override

Definition at line 101 of file blackaveragebmacouponpricer.cpp.

                                                                        {
    return optionletRate(Option::Put, effectiveFloor);
}

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optionletRate()

Real optionletRate ( Option::Type  optionType, Real  effStrike  ) const

private

Definition at line 43 of file blackaveragebmacouponpricer.cpp.

                                                                                           {
    Date lastRelevantFixingDate = coupon_->underlying()->fixingDate();
    if (lastRelevantFixingDate <= Settings::instance().evaluationDate()) {
        // the amount is determined
        Real a, b;
        if (optionType == Option::Call) {
            a = forwardRate_;
            b = effStrike;
        } else {
            a = effStrike;
            b = forwardRate_;
        }
        return gearing_ * std::max(a - b, 0.0);
    } else {
        // not yet determined, use Black model
        QL_REQUIRE(!capletVolatility().empty(), "BlackAverageBMACouponPricer: missing optionlet volatility");
        std::vector<Date> fixingDates = coupon_->underlying()->fixingDates();
        QL_REQUIRE(!fixingDates.empty(),
                   "BlackAverageBMACouponPricer: internal error, got empty fixingDates, contact dev.");
        fixingDates.erase(std::next(fixingDates.end(), -1)); // there is one additional date returned!
        QL_REQUIRE(!fixingDates.empty(), "BlackAverageBMACouponPricer: empty fixing dates");
        bool shiftedLn = capletVolatility()->volatilityType() == ShiftedLognormal;
        Real shift = capletVolatility()->displacement();
        Real stdDev;
        Real effectiveTime = capletVolatility()->timeFromReference(fixingDates.back());
        if (effectiveVolatilityInput()) {
            // vol input is effective, i.e. we use a plain black model
            stdDev = capletVolatility()->volatility(fixingDates.back(), effStrike) * std::sqrt(effectiveTime);
        } else {
            // vol input is not effective: we proceed similarly to average on coupon pricing:
            // for the standard deviation see Lyashenko, Mercurio, Looking forward to backward looking rates,
            // section 6.3. the idea is to dampen the average volatility sigma between the fixing start and fixing end
            // date by a linear function going from (fixing start, 1) to (fixing end, 0)
            Real fixingStartTime = capletVolatility()->timeFromReference(fixingDates.front());
            Real fixingEndTime = capletVolatility()->timeFromReference(fixingDates.back());
            Real sigma = capletVolatility()->volatility(
                std::max(fixingDates.front(), capletVolatility()->referenceDate() + 1), effStrike);
            Real T = std::max(fixingStartTime, 0.0);
            if (!close_enough(fixingEndTime, T))
                T += std::pow(fixingEndTime - T, 3.0) / std::pow(fixingEndTime - fixingStartTime, 2.0) / 3.0;
            stdDev = sigma * std::sqrt(T);
        }
        if (optionType == Option::Type::Call)
            effectiveCapletVolatility_ = stdDev / std::sqrt(effectiveTime);
        else
            effectiveFloorletVolatility_ = stdDev / std::sqrt(effectiveTime);
        Real fixing = shiftedLn ? blackFormula(optionType, effStrike, forwardRate_, stdDev, 1.0, shift)
                                : bachelierBlackFormula(optionType, effStrike, forwardRate_, stdDev, 1.0);
        return gearing_ * fixing;
    }
}

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CapFlooredAverageBMACouponPricer()

CapFlooredAverageBMACouponPricer	(	const Handle< OptionletVolatilityStructure > &	v,
		const bool	effectiveVolatilityInput = false
	)

Definition at line 91 of file cappedflooredaveragebmacoupon.cpp.

    : capletVol_(v), effectiveVolatilityInput_(effectiveVolatilityInput) {
    registerWith(capletVol_);
}

Member Data Documentation

gearing_

Real gearing_

private

Definition at line 46 of file blackaveragebmacouponpricer.hpp.

index_

ext::shared_ptr<BMAIndex> index_

private

Definition at line 47 of file blackaveragebmacouponpricer.hpp.

swapletRate_

Real swapletRate_

private

Definition at line 48 of file blackaveragebmacouponpricer.hpp.

forwardRate_

Real forwardRate_

private

Definition at line 48 of file blackaveragebmacouponpricer.hpp.

coupon_

const CappedFlooredAverageBMACoupon* coupon_

private

Definition at line 50 of file blackaveragebmacouponpricer.hpp.