QuantLib: a free/open-source library for quantitative finance
fully annotated source code - version 1.34
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lognormalfwdratepc.cpp
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1/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
2
3/*
4 Copyright (C) 2006 Ferdinando Ametrano
5 Copyright (C) 2006 Mark Joshi
6
7 This file is part of QuantLib, a free-software/open-source library
8 for financial quantitative analysts and developers - http://quantlib.org/
9
10 QuantLib is free software: you can redistribute it and/or modify it
11 under the terms of the QuantLib license. You should have received a
12 copy of the license along with this program; if not, please email
13 <quantlib-dev@lists.sf.net>. The license is also available online at
14 <http://quantlib.org/license.shtml>.
15
16 This program is distributed in the hope that it will be useful, but WITHOUT
17 ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS
18 FOR A PARTICULAR PURPOSE. See the license for more details.
19*/
20
26
27namespace QuantLib {
28
30 const ext::shared_ptr<MarketModel>& marketModel,
31 const BrownianGeneratorFactory& factory,
32 const std::vector<Size>& numeraires,
33 Size initialStep)
34 : marketModel_(marketModel),
35 numeraires_(numeraires),
36 initialStep_(initialStep),
37 numberOfRates_(marketModel->numberOfRates()),
38 numberOfFactors_(marketModel_->numberOfFactors()),
39 curveState_(marketModel->evolution().rateTimes()),
40 forwards_(marketModel->initialRates()),
41 displacements_(marketModel->displacements()),
42 logForwards_(numberOfRates_), initialLogForwards_(numberOfRates_),
43 drifts1_(numberOfRates_), drifts2_(numberOfRates_),
44 initialDrifts_(numberOfRates_), brownians_(numberOfFactors_),
45 correlatedBrownians_(numberOfRates_),
46 alive_(marketModel->evolution().firstAliveRate())
47 {
48 checkCompatibility(marketModel->evolution(), numeraires);
49
50 Size steps = marketModel->evolution().numberOfSteps();
51
53
55
56 calculators_.reserve(steps);
57 fixedDrifts_.reserve(steps);
58 for (Size j=0; j<steps; ++j) {
59 const Matrix& A = marketModel_->pseudoRoot(j);
60 calculators_.emplace_back(A, displacements_, marketModel->evolution().rateTaus(),
61 numeraires[j], alive_[j]);
62 std::vector<Real> fixed(numberOfRates_);
63 for (Size k=0; k<numberOfRates_; ++k) {
65 std::inner_product(A.row_begin(k), A.row_end(k),
66 A.row_begin(k), Real(0.0));
67 fixed[k] = -0.5*variance;
68 }
69 fixedDrifts_.push_back(fixed);
70 }
71
72 setForwards(marketModel_->initialRates());
73 }
74
75 const std::vector<Size>& LogNormalFwdRatePc::numeraires() const {
76 return numeraires_;
77 }
78
79 void LogNormalFwdRatePc::setForwards(const std::vector<Real>& forwards)
80 {
81 QL_REQUIRE(forwards.size()==numberOfRates_,
82 "mismatch between forwards and rateTimes");
83 for (Size i=0; i<numberOfRates_; ++i)
84 initialLogForwards_[i] = std::log(forwards[i] +
86 calculators_[initialStep_].compute(forwards, initialDrifts_);
87 }
88
91 }
92
95 std::copy(initialLogForwards_.begin(), initialLogForwards_.end(),
96 logForwards_.begin());
97 return generator_->nextPath();
98 }
99
101 {
102 // we're going from T1 to T2
103
104 // a) compute drifts D1 at T1;
107 } else {
108 std::copy(initialDrifts_.begin(), initialDrifts_.end(),
109 drifts1_.begin());
110 }
111
112 // b) evolve forwards up to T2 using D1;
113 Real weight = generator_->nextStep(brownians_);
114 const Matrix& A = marketModel_->pseudoRoot(currentStep_);
115 const std::vector<Real>& fixedDrift = fixedDrifts_[currentStep_];
116
117 Size i, alive = alive_[currentStep_];
118 for (i=alive; i<numberOfRates_; ++i) {
119 logForwards_[i] += drifts1_[i] + fixedDrift[i];
120 logForwards_[i] +=
121 std::inner_product(A.row_begin(i), A.row_end(i),
122 brownians_.begin(), Real(0.0));
123 forwards_[i] = std::exp(logForwards_[i]) - displacements_[i];
124 }
125
126 // c) recompute drifts D2 using the predicted forwards;
128
129 // d) correct forwards using both drifts
130 for (i=alive; i<numberOfRates_; ++i) {
131 logForwards_[i] += (drifts2_[i]-drifts1_[i])/2.0;
132 forwards_[i] = std::exp(logForwards_[i]) - displacements_[i];
133 }
134
135 // e) update curve state
137
138 ++currentStep_;
139
140 return weight;
141 }
142
144 return currentStep_;
145 }
146
148 return curveState_;
149 }
150
151}
virtual ext::shared_ptr< BrownianGenerator > create(Size factors, Size steps) const =0
Curve state for market-model simulations
Definition: curvestate.hpp:41
virtual const std::vector< Rate > & forwardRates() const =0
void setOnForwardRates(const std::vector< Rate > &fwdRates, Size firstValidIndex=0)
std::vector< Rate > displacements_
LogNormalFwdRatePc(const ext::shared_ptr< MarketModel > &, const BrownianGeneratorFactory &, const std::vector< Size > &numeraires, Size initialStep=0)
const CurveState & currentState() const override
void setForwards(const std::vector< Real > &forwards)
Size currentStep() const override
std::vector< std::vector< Real > > fixedDrifts_
std::vector< Rate > initialLogForwards_
ext::shared_ptr< MarketModel > marketModel_
std::vector< Real > initialDrifts_
const std::vector< Size > & numeraires() const override
std::vector< LMMDriftCalculator > calculators_
ext::shared_ptr< BrownianGenerator > generator_
void setInitialState(const CurveState &) override
Matrix used in linear algebra.
Definition: matrix.hpp:41
const_row_iterator row_begin(Size i) const
Definition: matrix.hpp:360
const_row_iterator row_end(Size i) const
Definition: matrix.hpp:378
#define QL_REQUIRE(condition, message)
throw an error if the given pre-condition is not verified
Definition: errors.hpp:117
LinearInterpolation variance
QL_REAL Real
real number
Definition: types.hpp:50
std::size_t Size
size of a container
Definition: types.hpp:58
Drift computation for Libor market model.
Definition: any.hpp:35
void checkCompatibility(const EvolutionDescription &evolution, const std::vector< Size > &numeraires)