interpolatedswaptionvolatilitycube.cpp

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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
 
/*
 Copyright (C) 2006 Ferdinando Ametrano
 Copyright (C) 2006 Katiuscia Manzoni
 Copyright (C) 2015 Peter Caspers
 Copyright (C) 2023 Ignacio Anguita
 
 This file is part of QuantLib, a free-software/open-source library
 for financial quantitative analysts and developers - http://quantlib.org/
 
 QuantLib is free software: you can redistribute it and/or modify it
 under the terms of the QuantLib license.  You should have received a
 copy of the license along with this program; if not, please email
 <quantlib-dev@lists.sf.net>. The license is also available online at
 <http://quantlib.org/license.shtml>.
 
 This program is distributed in the hope that it will be useful, but WITHOUT
 ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS
 FOR A PARTICULAR PURPOSE.  See the license for more details.
*/
 
#include <ql/termstructures/volatility/swaption/interpolatedswaptionvolatilitycube.hpp>
#include <ql/termstructures/volatility/interpolatedsmilesection.hpp>
#include <ql/math/interpolations/bilinearinterpolation.hpp>
#include <ql/math/rounding.hpp>
#include <ql/indexes/swapindex.hpp>
 
namespace QuantLib {
 
    InterpolatedSwaptionVolatilityCube::InterpolatedSwaptionVolatilityCube(
        const Handle<SwaptionVolatilityStructure>& atmVolStructure,
        const std::vector<Period>& optionTenors,
        const std::vector<Period>& swapTenors,
        const std::vector<Spread>& strikeSpreads,
        const std::vector<std::vector<Handle<Quote> > >& volSpreads,
        const ext::shared_ptr<SwapIndex>& swapIndexBase,
        const ext::shared_ptr<SwapIndex>& shortSwapIndexBase,
        bool vegaWeightedSmileFit)
    : SwaptionVolatilityCube(atmVolStructure, optionTenors, swapTenors,
                             strikeSpreads, volSpreads, swapIndexBase,
                             shortSwapIndexBase,
                             vegaWeightedSmileFit),
      volSpreadsInterpolator_(nStrikes_),
      volSpreadsMatrix_(nStrikes_, Matrix(optionTenors.size(), swapTenors.size(), 0.0)) {
    }
 
    void InterpolatedSwaptionVolatilityCube::performCalculations() const{
 
        SwaptionVolatilityCube::performCalculations();
        //! set volSpreadsMatrix_ by volSpreads_ quotes
        for (Size i=0; i<nStrikes_; i++) 
            for (Size j=0; j<nOptionTenors_; j++)
                for (Size k=0; k<nSwapTenors_; k++) {
                    volSpreadsMatrix_[i][j][k] =
                        volSpreads_[j*nSwapTenors_+k][i]->value();
                }
        //! create volSpreadsInterpolator_ 
        for (Size i=0; i<nStrikes_; i++) {
            volSpreadsInterpolator_[i] = BilinearInterpolation(
                swapLengths_.begin(), swapLengths_.end(),
                optionTimes_.begin(), optionTimes_.end(),
                volSpreadsMatrix_[i]);
            volSpreadsInterpolator_[i].enableExtrapolation();
        }
    }
 
    ext::shared_ptr<SmileSection>
    InterpolatedSwaptionVolatilityCube::smileSectionImpl(Time optionTime,
                                       Time swapLength) const {
 
        calculate();
        Date optionDate = optionDateFromTime(optionTime);
        Rounding rounder(0);
        Period swapTenor(static_cast<Integer>(rounder(swapLength*12.0)), Months);
        // ensure that option date is valid fixing date
        optionDate =
            swapTenor > shortSwapIndexBase_->tenor()
                ? swapIndexBase_->fixingCalendar().adjust(optionDate, Following)
                : shortSwapIndexBase_->fixingCalendar().adjust(optionDate,
                                                               Following);
        return smileSectionImpl(optionDate, swapTenor);
    }
 
    ext::shared_ptr<SmileSection>
    InterpolatedSwaptionVolatilityCube::smileSectionImpl(const Date& optionDate,
                                       const Period& swapTenor) const {
        calculate();
        Rate atmForward = atmStrike(optionDate, swapTenor);
        Volatility atmVol = atmVol_->volatility(optionDate,
                                                swapTenor,
                                                atmForward);
        Time optionTime = timeFromReference(optionDate);
        Real exerciseTimeSqrt = std::sqrt(optionTime);
        std::vector<Real> strikes, stdDevs;
        strikes.reserve(nStrikes_);
        stdDevs.reserve(nStrikes_);
        Time length = swapLength(swapTenor);
        for (Size i=0; i<nStrikes_; ++i) {
            strikes.push_back(atmForward + strikeSpreads_[i]);
            stdDevs.push_back(exerciseTimeSqrt*(
                atmVol + volSpreadsInterpolator_[i](length, optionTime)));
        }
        Real shift = atmVol_->shift(optionTime,length);
        return ext::shared_ptr<SmileSection>(new
            InterpolatedSmileSection<Linear>(optionTime,
                                             strikes,
                                             stdDevs,
                                             atmForward,
                                             Linear(),
                                             Actual365Fixed(),
                                             volatilityType(),
                                             shift));
    }
}