cpivolatilitystructure.cpp

/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
 
/*
 Copyright (C) 2009, 2011 Chris Kenyon
 
 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/inflation/cpivolatilitystructure.hpp>
#include <ql/termstructures/inflationtermstructure.hpp>
 
namespace QuantLib {
 
    CPIVolatilitySurface::CPIVolatilitySurface(Natural settlementDays,
                                               const Calendar& cal,
                                               BusinessDayConvention bdc,
                                               const DayCounter& dc,
                                               const Period& observationLag,
                                               Frequency frequency,
                                               bool indexIsInterpolated)
    : VolatilityTermStructure(settlementDays, cal, bdc, dc),
      baseLevel_(Null<Volatility>()), observationLag_(observationLag),
      frequency_(frequency), indexIsInterpolated_(indexIsInterpolated)
    {}
 
 
    Date CPIVolatilitySurface::baseDate() const {
        // Depends on interpolation, or not, of observed index
        // and observation lag with which it was built.
        // We want this to work even if the index does not
        // have a term structure.
        if (indexIsInterpolated()) {
            return referenceDate() - observationLag();
        } else {
            return inflationPeriod(referenceDate() - observationLag(),
                                   frequency()).first;
        }
    }
 
 
    void CPIVolatilitySurface::checkRange(const Date& d, Rate strike,
                                          bool extrapolate) const {
        QL_REQUIRE(d >= baseDate(),
                   "date (" << d << ") is before base date");
        QL_REQUIRE(extrapolate || allowsExtrapolation() || d <= maxDate(),
                   "date (" << d << ") is past max curve date ("
                   << maxDate() << ")");
        QL_REQUIRE(extrapolate || allowsExtrapolation() ||
                   (strike >= minStrike() && strike <= maxStrike()),
                   "strike (" << strike << ") is outside the curve domain ["
                   << minStrike() << "," << maxStrike()<< "]] at date = " << d);
    }
 
 
    void CPIVolatilitySurface::checkRange(Time t, Rate strike,
                                          bool extrapolate) const {
        QL_REQUIRE(t >= timeFromReference(baseDate()),
                   "time (" << t << ") is before base date");
        QL_REQUIRE(extrapolate || allowsExtrapolation() || t <= maxTime(),
                   "time (" << t << ") is past max curve time ("
                   << maxTime() << ")");
        QL_REQUIRE(extrapolate || allowsExtrapolation() ||
                   (strike >= minStrike() && strike <= maxStrike()),
                   "strike (" << strike << ") is outside the curve domain ["
                   << minStrike() << "," << maxStrike()<< "] at time = " << t);
    }
 
 
    Volatility CPIVolatilitySurface::volatility(const Date& maturityDate,
                                                Rate strike,
                                                const Period& obsLag,
                                                bool extrapolate) const {
 
        Period useLag = obsLag;
        if (obsLag==Period(-1,Days)) {
            useLag = observationLag();
        }
 
        if (indexIsInterpolated()) {
            checkRange(maturityDate-useLag, strike, extrapolate);
            Time t = timeFromReference(maturityDate-useLag);
            return volatilityImpl(t,strike);
        } else {
            std::pair<Date,Date> dd =
                inflationPeriod(maturityDate-useLag, frequency());
            checkRange(dd.first, strike, extrapolate);
            Time t = timeFromReference(dd.first);
            return volatilityImpl(t,strike);
        }
    }
 
 
    Volatility CPIVolatilitySurface::volatility(const Period& optionTenor,
                                                Rate strike,
                                                const Period& obsLag,
                                                bool extrapolate) const {
        Date maturityDate = optionDateFromTenor(optionTenor);
        return volatility(maturityDate, strike, obsLag, extrapolate);
    }
 
    Volatility CPIVolatilitySurface::volatility(Time time, Rate strike) const {
        return volatilityImpl(time, strike);
    }
 
    Time CPIVolatilitySurface::timeFromBase(const Date& maturityDate,
                                            const Period& obsLag) const {
        Period useLag = obsLag;
        if (obsLag==Period(-1,Days)) {
            useLag = observationLag();
        }
 
        Date useDate;
        if (indexIsInterpolated()) {
            useDate = maturityDate - useLag;
        } else {
            useDate = inflationPeriod(maturityDate - useLag,
                                      frequency()).first;
        }
 
        // This assumes that the inflation term structure starts
        // as late as possible given the inflation index definition,
        // which is the usual case.
        return dayCounter().yearFraction(baseDate(), useDate);
    }
 
 
    Volatility CPIVolatilitySurface::totalVariance(const Date& maturityDate,
                                                   Rate strike,
                                                   const Period& obsLag,
                                                   bool extrapolate) const {
        Volatility vol = volatility(maturityDate, strike, obsLag, extrapolate);
        Time t = timeFromBase(maturityDate, obsLag);
        return vol*vol*t;
    }
 
 
    Volatility CPIVolatilitySurface::totalVariance(const Period& tenor,
                                                   Rate strike,
                                                   const Period& obsLag,
                                                   bool extrap) const {
        Date maturityDate = optionDateFromTenor(tenor);
        return totalVariance(maturityDate, strike, obsLag, extrap);
    }
 
}