RepresentativeFxOptionMatcher Class Reference

#include <qle/models/representativefxoption.hpp>

Collaboration diagram for RepresentativeFxOptionMatcher:

Public Member Functions
	RepresentativeFxOptionMatcher (const std::vector< Leg > &underlying, const std::vector< bool > &isPayer, const std::vector< std::string > &currencies, const Date &referenceDate, const std::string &forCcy, const std::string &domCcy, const Handle< YieldTermStructure > &forCurve, const Handle< YieldTermStructure > &domCurve, const Handle< Quote > &fxSpot, const bool includeRefDateFlows=false)
std::string	currency1 () const
std::string	currency2 () const
Real	amount1 () const
Real	amount2 () const

Private Attributes
std::string	ccy1_
std::string	ccy2_
Real	amount1_
Real	amount2_

Detailed Description

Given cashflows in two currencies and a reference date >= today, find amounts in the two currencies to be paid on the reference date such that the NPV and FX Delta of the original cashflows and the original cashflows as seen from the reference date are equal.

The output amounts have a sign, i.e. they are received if positive and paid if negative.

Definition at line 41 of file representativefxoption.hpp.

Constructor & Destructor Documentation

RepresentativeFxOptionMatcher()

RepresentativeFxOptionMatcher	(	const std::vector< Leg > &	underlying,
		const std::vector< bool > &	isPayer,
		const std::vector< std::string > &	currencies,
		const Date &	referenceDate,
		const std::string &	forCcy,
		const std::string &	domCcy,
		const Handle< YieldTermStructure > &	forCurve,
		const Handle< YieldTermStructure > &	domCurve,
		const Handle< Quote > &	fxSpot,
		const bool	includeRefDateFlows = false
	)

Definition at line 39 of file representativefxoption.cpp.

                                    {
 
    Date today = Settings::instance().evaluationDate();
 
    // 1 check inputs
 
    QL_REQUIRE(referenceDate >= today, "RepresentativeFxOptionMatcher: referenceDate ("
                                           << referenceDate << ") must be < today (" << today << ")");
    QL_REQUIRE(isPayer.size() == underlying.size(), "RepresentativeFxOptionMatcher: isPayer ("
                                                        << isPayer.size() << ") does not match underlying ("
                                                        << underlying.size() << ")");
    QL_REQUIRE(currencies.size() == underlying.size(), "RepresentativeFxOptionMatcher: currencies ("
                                                           << currencies.size() << ") does not match underlying ("
                                                           << underlying.size() << ")");
 
    // 2a  make a copy of the input fx spot that we can shift later
 
    auto fxScenarioValue = QuantLib::ext::make_shared<SimpleQuote>(fxSpot->value());
    Handle<Quote> fxSpotScen(fxScenarioValue);
 
    // 2b create the inverse spot, this is convenient when we clone fx linked cashflows below
 
    auto m = [](Real x) { return 1.0 / x; };
    Handle<Quote> fxSpotScenInv(QuantLib::ext::make_shared<DerivedQuote<decltype(m)>>(fxSpotScen, m));
 
    // 3 collect cashflows by their pay currencies and link them to the fx spot copy (if applicable)
 
    Leg forCfs, domCfs;
 
    for (Size i = 0; i < underlying.size(); ++i) {
        // 3a check the pay ccy is one of the two currencies to be matched
 
        QL_REQUIRE(currencies[i] == forCcy || currencies[i] == domCcy,
                   "RepresentativeFxOptionMatcher: currency at index "
                       << i << " (" << currencies[i] << ") does not match forCcy (" << forCcy << ") or domCcy ("
                       << domCcy << ")");
 
        for (auto const& c : underlying[i]) {
 
            // 3b skip cashflows with pay date on or
 
            if (c->date() < referenceDate || (c->date() == referenceDate && !includeRefDateFlows))
                continue;
 
            // 3b check for non-supported coupon types that are linked to fx
 
            QL_REQUIRE(!QuantLib::ext::dynamic_pointer_cast<IndexedCoupon>(c),
                       "RepresentativeFxOptionMatcher: Indexed Coupons are not supported");
 
            QuantLib::ext::shared_ptr<CashFlow> res;
 
            if (auto fxlinked = QuantLib::ext::dynamic_pointer_cast<FXLinked>(c)) {
 
                // 3c clone fx linked coupons and link them to our scenario fx spot quote
 
                std::set<std::string> ccys = {fxlinked->fxIndex()->sourceCurrency().code(),
                                              fxlinked->fxIndex()->targetCurrency().code()};
                QL_REQUIRE((ccys == std::set<std::string>{forCcy, domCcy}),
                           "RepresentativeFxOptionMatcher: FXLinked coupon ccys "
                               << fxlinked->fxIndex()->sourceCurrency().code() << ", "
                               << fxlinked->fxIndex()->targetCurrency().code()
                               << " do noth match currencies to be matched (" << forCcy << ", " << domCcy << ")");
 
                res = QuantLib::ext::dynamic_pointer_cast<CashFlow>(fxlinked->clone(fxlinked->fxIndex()->clone(
                    fxlinked->fxIndex()->sourceCurrency().code() == forCcy ? fxSpotScen : fxSpotScenInv,
                    fxlinked->fxIndex()->sourceCurve(), fxlinked->fxIndex()->targetCurve())));
                QL_REQUIRE(res, "RepresentativeFxOptionMatcher: internal error, cloned fx linked cashflow could not be "
                                "cast to CashFlow");
 
            } else {
 
                // 3d for all other coupons, just push a fixed cashflow with the amount
 
                res = QuantLib::ext::make_shared<SimpleCashFlow>(c->amount(), c->date());
            }
 
            // 3e push the cashflow with the correct sign to the vector holding the flows in the its pay ccy
 
            res = QuantLib::ext::make_shared<ScaledCashFlow>(isPayer[i] ? -1.0 : 1.0, res);
 
            if (currencies[i] == forCcy)
                forCfs.push_back(res);
            else
                domCfs.push_back(res);
        }
    }
 
    // 4a determine the NPV of the collected cashflows in dom ccy and as seen from the global evaluation date
 
    Real npv =
        CashFlows::npv(forCfs, **forCurve, false) * fxSpotScen->value() + CashFlows::npv(domCfs, **domCurve, false);
 
    // 4b determine the FX Delta of the collected cashflows as seen from the global evaluation date
 
    constexpr Real relShift = 0.01;
 
    Real baseFx = fxScenarioValue->value();
 
    fxScenarioValue->setValue(baseFx * (1.0 + relShift));
    Real npv_up =
        CashFlows::npv(forCfs, **forCurve, false) * fxSpotScen->value() + CashFlows::npv(domCfs, **domCurve, false);
 
    fxScenarioValue->setValue(baseFx * (1.0 - relShift));
    Real npv_down =
        CashFlows::npv(forCfs, **forCurve, false) * fxSpotScen->value() + CashFlows::npv(domCfs, **domCurve, false);
 
    Real fxDelta = (npv_up - npv_down) / (2.0 * baseFx * relShift);
 
    // 4c determine the amounts in for and dom ccy matching the fx delta and the npv, as seen from the global evaluation
    // date, then compound the resulting amounts to the reference date
 
    amount1_ = fxDelta / forCurve->discount(referenceDate);
    amount2_ = (npv - fxDelta * baseFx) / domCurve->discount(referenceDate);
    ccy1_ = forCcy;
    ccy2_ = domCcy;
}

Member Function Documentation

currency1()

std::string currency1

(

)

const

Definition at line 51 of file representativefxoption.hpp.

{ return ccy1_; }

currency2()

std::string currency2

(

)

const

Definition at line 52 of file representativefxoption.hpp.

{ return ccy2_; }

amount1()

Real amount1

(

)

const

Definition at line 53 of file representativefxoption.hpp.

{ return amount1_; }

amount2()

Real amount2

(

)

const

Definition at line 54 of file representativefxoption.hpp.

{ return amount2_; }

Member Data Documentation

ccy1_

std::string ccy1_

private

Definition at line 57 of file representativefxoption.hpp.

ccy2_

std::string ccy2_

private

Definition at line 57 of file representativefxoption.hpp.

amount1_

Real amount1_

private

Definition at line 58 of file representativefxoption.hpp.

amount2_

Real amount2_

private

Definition at line 58 of file representativefxoption.hpp.