forward.hpp

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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
 
/*
 Copyright (C) 2006 Allen Kuo
 
 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.
*/
 
/*! \file forward.hpp
    \brief Base forward class
*/
 
#ifndef quantlib_forward_hpp
#define quantlib_forward_hpp
 
#include <ql/instrument.hpp>
#include <ql/position.hpp>
#include <ql/time/calendar.hpp>
#include <ql/time/daycounter.hpp>
#include <ql/interestrate.hpp>
#include <ql/types.hpp>
#include <ql/handle.hpp>
#include <ql/payoff.hpp>
#include <ql/termstructures/yieldtermstructure.hpp>
 
namespace QuantLib {
 
    //! Abstract base forward class
    /*! Derived classes must implement the virtual functions
        spotValue() (NPV or spot price) and spotIncome() associated
        with the specific relevant underlying (e.g. bond, stock,
        commodity, loan/deposit). These functions must be used to set the
        protected member variables underlyingSpotValue_ and
        underlyingIncome_ within performCalculations() in the derived
        class before the base-class implementation is called.
 
        spotIncome() refers generically to the present value of
        coupons, dividends or storage costs.
 
        discountCurve_ is the curve used to discount forward contract
        cash flows back to the evaluation day, as well as to obtain
        forward values for spot values/prices.
 
        incomeDiscountCurve_, which for generality is not
        automatically set to the discountCurve_, is the curve used to
        discount future income/dividends/storage-costs etc back to the
        evaluation date.
 
        \todo Add preconditions and tests
 
        \warning This class still needs to be rigorously tested
 
        \ingroup instruments
    */
    class Forward : public Instrument {
      public:
        //! \name Inspectors
        //@{
        virtual Date settlementDate() const;
        const Calendar& calendar() const;
        BusinessDayConvention businessDayConvention() const;
        const DayCounter& dayCounter() const;
        //! term structure relevant to the contract (e.g. repo curve)
        Handle<YieldTermStructure> discountCurve() const;
        //! term structure that discounts the underlying's income cash flows
        Handle<YieldTermStructure> incomeDiscountCurve() const;
        //! returns whether the instrument is still tradable.
        bool isExpired() const override;
        //@}
 
        //! returns spot value/price of an underlying financial instrument
        virtual Real spotValue() const = 0;
        //! NPV of income/dividends/storage-costs etc. of underlying instrument
        virtual Real spotIncome(const Handle<YieldTermStructure>&
                                               incomeDiscountCurve) const = 0;
 
        //! \name Calculations
        //@{
        //! forward value/price of underlying, discounting income/dividends
        /*! \note if this is a bond forward price, is must be a dirty
                  forward price.
        */
        virtual Real forwardValue() const;
 
        /*! Simple yield calculation based on underlying spot and
            forward values, taking into account underlying income.
            When \f$ t>0 \f$, call with:
            underlyingSpotValue=spotValue(t),
            forwardValue=strikePrice, to get current yield. For a
            repo, if \f$ t=0 \f$, impliedYield should reproduce the
            spot repo rate. For FRA's, this should reproduce the
            relevant zero rate at the FRA's maturityDate_;
        */
        InterestRate impliedYield(Real underlyingSpotValue,
                                  Real forwardValue,
                                  Date settlementDate,
                                  Compounding compoundingConvention,
                                  const DayCounter& dayCounter);
        //@}
      protected:
        Forward(DayCounter dayCounter,
                Calendar calendar,
                BusinessDayConvention businessDayConvention,
                Natural settlementDays,
                ext::shared_ptr<Payoff> payoff,
                const Date& valueDate,
                const Date& maturityDate,
                Handle<YieldTermStructure> discountCurve = Handle<YieldTermStructure>());
 
        void performCalculations() const override;
        /*! derived classes must set this, typically via spotIncome() */
        mutable Real underlyingIncome_;
        /*! derived classes must set this, typically via spotValue() */
        mutable Real underlyingSpotValue_;
 
        DayCounter dayCounter_;
        Calendar calendar_;
        BusinessDayConvention businessDayConvention_;
        Natural settlementDays_;
        ext::shared_ptr<Payoff> payoff_;
        /*! valueDate = settlement date (date the fwd contract starts
            accruing)
        */
        Date valueDate_;
        //! maturityDate of the forward contract or delivery date of underlying
        Date maturityDate_;
        Handle<YieldTermStructure> discountCurve_;
        /*! must set this in derived classes, based on particular underlying */
        Handle<YieldTermStructure> incomeDiscountCurve_;
    };
 
 
    //! Class for forward type payoffs
    class ForwardTypePayoff : public Payoff {
      public:
        ForwardTypePayoff(Position::Type type, Real strike)
        : type_(type),strike_(strike) {
            QL_REQUIRE(strike >= 0.0,"negative strike given");
        }
        Position::Type forwardType() const { return type_; };
        Real strike() const { return strike_; };
        //! \name Payoff interface
        //@{
        std::string name() const override { return "Forward"; }
        std::string description() const override;
        Real operator()(Real price) const override;
        //@}
      protected:
        Position::Type type_;
        Real strike_;
    };
 
 
 
    // inline definitions
 
    inline const Calendar& Forward::calendar() const {
        return calendar_;
    }
 
    inline BusinessDayConvention Forward::businessDayConvention() const {
        return businessDayConvention_;
    }
 
    inline const DayCounter& Forward::dayCounter() const {
        return dayCounter_;
    }
 
    inline Handle<YieldTermStructure> Forward::discountCurve() const {
        return discountCurve_;
    }
 
    inline Handle<YieldTermStructure> Forward::incomeDiscountCurve() const {
        return incomeDiscountCurve_;
    }
 
 
    inline std::string ForwardTypePayoff::description() const {
        std::ostringstream result;
        result << name() << ", " << strike() << " strike";
        return result.str();
    }
 
    inline Real ForwardTypePayoff::operator()(Real price) const {
        switch (type_) {
          case Position::Long:
            return (price-strike_);
          case Position::Short:
            return (strike_-price);
          default:
            QL_FAIL("unknown/illegal position type");
        }
    }
 
}
 
 
#endif