FdmQuantoHelper Class Reference

#include <qle/methods/fdmquantohelper.hpp>

Inheritance diagram for FdmQuantoHelper:

Collaboration diagram for FdmQuantoHelper:

Public Member Functions
	FdmQuantoHelper (const ext::shared_ptr< YieldTermStructure > &rTS, const ext::shared_ptr< YieldTermStructure > &fTS, const ext::shared_ptr< BlackVolTermStructure > &fxVolTS, const Real equityFxCorrelation, const Real fxStrike, Real initialFxSpot=Null< Real >(), const bool discounting=true, const bool ensureNonNegativeForwardVariance=false)
Rate	quantoAdjustment (Volatility equityVol, Time t1, Time t2) const
Array	quantoAdjustment (const Array &equityVol, Time t1, Time t2) const

Private Attributes
const ext::shared_ptr< YieldTermStructure >	rTS_
const ext::shared_ptr< YieldTermStructure >	fTS_
const ext::shared_ptr< BlackVolTermStructure >	fxVolTS_
const Real	equityFxCorrelation_
const Real	fxStrike_
const Real	initialFxSpot_
const bool	discounting_
const bool	ensureNonNegativeForwardVariance_

Detailed Description

As the ql class, but fxStrike can be null in which case the atmf level is used as a strike, more precisely we compute

forward vol = sqrt( ( V(t2, k2) - V(t1, k1) ) / (t2-t1) )

where k1, k2 are the atmf levels at t1 and t2. If fxStrike = null, the initialFxSpot value must be given.

If discounting = false, the adjustment will omit the rTS and fTS terms.

If ensureNonNegativeForwardVariance is true, the forward variances from the input vol ts are floored at zero.

Definition at line 46 of file fdmquantohelper.hpp.

Constructor & Destructor Documentation

FdmQuantoHelper()

FdmQuantoHelper	(	const ext::shared_ptr< YieldTermStructure > &	rTS,
		const ext::shared_ptr< YieldTermStructure > &	fTS,
		const ext::shared_ptr< BlackVolTermStructure > &	fxVolTS,
		const Real	equityFxCorrelation,
		const Real	fxStrike,
		Real	initialFxSpot = Null<Real>(),
		const bool	discounting = true,
		const bool	ensureNonNegativeForwardVariance = false
	)

Definition at line 27 of file fdmquantohelper.cpp.

    : rTS_(rTS), fTS_(fTS), fxVolTS_(fxVolTS), equityFxCorrelation_(equityFxCorrelation), fxStrike_(fxStrike),
      initialFxSpot_(initialFxSpot), discounting_(discounting),
      ensureNonNegativeForwardVariance_(ensureNonNegativeForwardVariance) {
    QL_REQUIRE(fxStrike_ != Null<Real>() || initialFxSpot != Null<Real>(),
               "initialFxSpot must be given, if fxStrike is null (=atmf)");
}

Member Function Documentation

quantoAdjustment() [1/2]

Rate quantoAdjustment	(	Volatility	equityVol,
		Time	t1,
		Time	t2
	)		const

Definition at line 39 of file fdmquantohelper.cpp.

                                                                                   {
    Rate rDomestic = 0.0, rForeign = 0.0;
    if (fxStrike_ == Null<Real>() || discounting_) {
        rDomestic = rTS_->forwardRate(t1, t2, Continuous).rate();
        rForeign = fTS_->forwardRate(t1, t2, Continuous).rate();
    }
    Real k1, k2;
    if (fxStrike_ == Null<Real>()) {
        k1 = initialFxSpot_ * fTS_->discount(t1) / rTS_->discount(t1);
        k2 = initialFxSpot_ * fTS_->discount(t2) / rTS_->discount(t2);
    } else {
        k1 = k2 = fxStrike_;
    }
    Real v = ((close_enough(t2, 0.0) ? 0.0 : fxVolTS_->blackVariance(t2, k2)) -
              (close_enough(t1, 0.0) ? 0.0 : fxVolTS_->blackVariance(t1, k1))) /
             (t2 - t1);
    if (ensureNonNegativeForwardVariance_)
        v = std::max(v, 0.0);
    const Volatility fxVol = std::sqrt(v);
    return (discounting_ ? (rDomestic - rForeign) : 0.0) + equityVol * fxVol * equityFxCorrelation_;
}

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quantoAdjustment() [2/2]

Array quantoAdjustment	(	const Array &	equityVol,
		Time	t1,
		Time	t2
	)		const

Definition at line 61 of file fdmquantohelper.cpp.

                                                                                      {
    Rate rDomestic = 0.0, rForeign = 0.0;
    if (fxStrike_ == Null<Real>() || discounting_) {
        rDomestic = rTS_->forwardRate(t1, t2, Continuous).rate();
        rForeign = fTS_->forwardRate(t1, t2, Continuous).rate();
    }
    Real k1, k2;
    if (fxStrike_ == Null<Real>()) {
        k1 = initialFxSpot_ * fTS_->discount(t1) / rTS_->discount(t1);
        k2 = initialFxSpot_ * fTS_->discount(t2) / rTS_->discount(t2);
    } else {
        k1 = k2 = fxStrike_;
    }
    Real v = ((close_enough(t2, 0.0) ? 0.0 : fxVolTS_->blackVariance(t2, k2)) -
              (close_enough(t1, 0.0) ? 0.0 : fxVolTS_->blackVariance(t1, k1))) /
             (t2 - t1);
    if (ensureNonNegativeForwardVariance_)
        v = std::max(v, 0.0);
    const Volatility fxVol = std::sqrt(v);
    Array retVal(equityVol.size());
    for (Size i = 0; i < retVal.size(); ++i) {
        retVal[i] = (discounting_ ? (rDomestic - rForeign) : 0.0) + equityVol[i] * fxVol * equityFxCorrelation_;
    }
 
    return retVal;
}

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Member Data Documentation

rTS_

const ext::shared_ptr<YieldTermStructure> rTS_

private

Definition at line 57 of file fdmquantohelper.hpp.

fTS_

const ext::shared_ptr<YieldTermStructure> fTS_

private

Definition at line 57 of file fdmquantohelper.hpp.

fxVolTS_

const ext::shared_ptr<BlackVolTermStructure> fxVolTS_

private

Definition at line 58 of file fdmquantohelper.hpp.

equityFxCorrelation_

const Real equityFxCorrelation_

private

Definition at line 59 of file fdmquantohelper.hpp.

fxStrike_

const Real fxStrike_

private

Definition at line 59 of file fdmquantohelper.hpp.

initialFxSpot_

const Real initialFxSpot_

private

Definition at line 59 of file fdmquantohelper.hpp.

discounting_

const bool discounting_

private

Definition at line 60 of file fdmquantohelper.hpp.

ensureNonNegativeForwardVariance_

const bool ensureNonNegativeForwardVariance_

private

Definition at line 60 of file fdmquantohelper.hpp.