zabrinterpolatedsmilesection.hpp

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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
 
/*
 Copyright (C) 2014 Peter Caspers
 
 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 zabrinterpolatedsmilesection.hpp
    \brief zabr interpolating smile section
*/
 
#ifndef quantlib_zabr_interpolated_smile_section_hpp
#define quantlib_zabr_interpolated_smile_section_hpp
 
#include <ql/experimental/volatility/zabrinterpolation.hpp>
#include <ql/handle.hpp>
#include <ql/patterns/lazyobject.hpp>
#include <ql/quotes/simplequote.hpp>
#include <ql/termstructures/volatility/smilesection.hpp>
#include <ql/time/daycounters/actual365fixed.hpp>
#include <utility>
 
namespace QuantLib {
 
template <typename Evaluation>
class ZabrInterpolatedSmileSection : public SmileSection, public LazyObject {
  public:
    //! \name Constructors
    //@{
    //! all market data are quotes
    ZabrInterpolatedSmileSection(
        const Date& optionDate,
        Handle<Quote> forward,
        const std::vector<Rate>& strikes,
        bool hasFloatingStrikes,
        Handle<Quote> atmVolatility,
        const std::vector<Handle<Quote> >& volHandles,
        Real alpha,
        Real beta,
        Real nu,
        Real rho,
        Real gamma,
        bool isAlphaFixed = false,
        bool isBetaFixed = false,
        bool isNuFixed = false,
        bool isRhoFixed = false,
        bool isGammaFixed = false,
        bool vegaWeighted = true,
        ext::shared_ptr<EndCriteria> endCriteria = ext::shared_ptr<EndCriteria>(),
        ext::shared_ptr<OptimizationMethod> method = ext::shared_ptr<OptimizationMethod>(),
        const DayCounter& dc = Actual365Fixed());
    //! no quotes
    ZabrInterpolatedSmileSection(
        const Date& optionDate,
        const Rate& forward,
        const std::vector<Rate>& strikes,
        bool hasFloatingStrikes,
        const Volatility& atmVolatility,
        const std::vector<Volatility>& vols,
        Real alpha,
        Real beta,
        Real nu,
        Real rho,
        Real gamma,
        bool isAlphaFixed = false,
        bool isBetaFixed = false,
        bool isNuFixed = false,
        bool isRhoFixed = false,
        bool isGammaFixed = false,
        bool vegaWeighted = true,
        ext::shared_ptr<EndCriteria> endCriteria = ext::shared_ptr<EndCriteria>(),
        ext::shared_ptr<OptimizationMethod> method = ext::shared_ptr<OptimizationMethod>(),
        const DayCounter& dc = Actual365Fixed());
    //@}
    //! \name LazyObject interface
    //@{
    void performCalculations() const override;
    void update() override;
    //@}
    //! \name SmileSection interface
    //@{
    Real minStrike() const override;
    Real maxStrike() const override;
    Real atmLevel() const override;
    //@}
    Real varianceImpl(Rate strike) const override;
    Volatility volatilityImpl(Rate strike) const override;
    //! \name Inspectors
    //@{
    Real alpha() const;
    Real beta() const;
    Real nu() const;
    Real rho() const;
    Real gamma() const;
    Real rmsError() const;
    Real maxError() const;
    EndCriteria::Type endCriteria() const;
    //@}
 
  protected:
    //! Creates the mutable SABRInterpolation
    void createInterpolation() const;
    mutable ext::shared_ptr<ZabrInterpolation<Evaluation> > zabrInterpolation_;
 
    //! Market data
    const Handle<Quote> forward_;
    const Handle<Quote> atmVolatility_;
    std::vector<Handle<Quote> > volHandles_;
    mutable std::vector<Rate> strikes_;
    //! Only strikes corresponding to valid market data
    mutable std::vector<Rate> actualStrikes_;
    bool hasFloatingStrikes_;
 
    mutable Real forwardValue_;
    mutable std::vector<Volatility> vols_;
    //! Sabr parameters
    Real alpha_, beta_, nu_, rho_, gamma_;
    //! Sabr interpolation settings
    bool isAlphaFixed_, isBetaFixed_, isNuFixed_, isRhoFixed_, isGammaFixed_;
    bool vegaWeighted_;
    const ext::shared_ptr<EndCriteria> endCriteria_;
    const ext::shared_ptr<OptimizationMethod> method_;
};
 
template <typename Evaluation>
inline void ZabrInterpolatedSmileSection<Evaluation>::update() {
    LazyObject::update();
    SmileSection::update();
}
 
template <typename Evaluation>
inline Real
ZabrInterpolatedSmileSection<Evaluation>::volatilityImpl(Rate strike) const {
    calculate();
    return (*zabrInterpolation_)(strike, true);
}
 
template <typename Evaluation>
inline Real ZabrInterpolatedSmileSection<Evaluation>::alpha() const {
    calculate();
    return zabrInterpolation_->alpha();
}
 
template <typename Evaluation>
inline Real ZabrInterpolatedSmileSection<Evaluation>::beta() const {
    calculate();
    return zabrInterpolation_->beta();
}
 
template <typename Evaluation>
inline Real ZabrInterpolatedSmileSection<Evaluation>::nu() const {
    calculate();
    return zabrInterpolation_->nu();
}
 
template <typename Evaluation>
inline Real ZabrInterpolatedSmileSection<Evaluation>::rho() const {
    calculate();
    return zabrInterpolation_->rho();
}
 
template <typename Evaluation>
inline Real ZabrInterpolatedSmileSection<Evaluation>::gamma() const {
    calculate();
    return zabrInterpolation_->gamma();
}
 
template <typename Evaluation>
inline Real ZabrInterpolatedSmileSection<Evaluation>::rmsError() const {
    calculate();
    return zabrInterpolation_->rmsError();
}
 
template <typename Evaluation>
inline Real ZabrInterpolatedSmileSection<Evaluation>::maxError() const {
    calculate();
    return zabrInterpolation_->maxError();
}
 
template <typename Evaluation>
inline EndCriteria::Type
ZabrInterpolatedSmileSection<Evaluation>::endCriteria() const {
    calculate();
    return zabrInterpolation_->endCriteria();
}
 
template <typename Evaluation>
inline Real ZabrInterpolatedSmileSection<Evaluation>::minStrike() const {
    calculate();
    return actualStrikes_.front();
}
 
template <typename Evaluation>
inline Real ZabrInterpolatedSmileSection<Evaluation>::maxStrike() const {
    calculate();
    return actualStrikes_.back();
}
 
template <typename Evaluation>
inline Real ZabrInterpolatedSmileSection<Evaluation>::atmLevel() const {
    calculate();
    return forwardValue_;
}
 
template <typename Evaluation>
ZabrInterpolatedSmileSection<Evaluation>::ZabrInterpolatedSmileSection(
    const Date& optionDate,
    Handle<Quote> forward,
    const std::vector<Rate>& strikes,
    bool hasFloatingStrikes,
    Handle<Quote> atmVolatility,
    const std::vector<Handle<Quote> >& volHandles,
    Real alpha,
    Real beta,
    Real nu,
    Real rho,
    Real gamma,
    bool isAlphaFixed,
    bool isBetaFixed,
    bool isNuFixed,
    bool isRhoFixed,
    bool isGammaFixed,
    bool vegaWeighted,
    ext::shared_ptr<EndCriteria> endCriteria,
    ext::shared_ptr<OptimizationMethod> method,
    const DayCounter& dc)
: SmileSection(optionDate, dc), forward_(std::move(forward)),
  atmVolatility_(std::move(atmVolatility)), volHandles_(volHandles), strikes_(strikes),
  actualStrikes_(strikes), hasFloatingStrikes_(hasFloatingStrikes), vols_(volHandles.size()),
  alpha_(alpha), beta_(beta), nu_(nu), rho_(rho), gamma_(gamma), isAlphaFixed_(isAlphaFixed),
  isBetaFixed_(isBetaFixed), isNuFixed_(isNuFixed), isRhoFixed_(isRhoFixed),
  isGammaFixed_(isGammaFixed), vegaWeighted_(vegaWeighted), endCriteria_(std::move(endCriteria)),
  method_(std::move(method)) {
 
    LazyObject::registerWith(forward_);
    LazyObject::registerWith(atmVolatility_);
    for (auto& volHandle : volHandles_)
        LazyObject::registerWith(volHandle);
}
 
template <typename Evaluation>
ZabrInterpolatedSmileSection<Evaluation>::ZabrInterpolatedSmileSection(
    const Date& optionDate,
    const Rate& forward,
    const std::vector<Rate>& strikes,
    bool hasFloatingStrikes,
    const Volatility& atmVolatility,
    const std::vector<Volatility>& volHandles,
    Real alpha,
    Real beta,
    Real nu,
    Real rho,
    Real gamma,
    bool isAlphaFixed,
    bool isBetaFixed,
    bool isNuFixed,
    bool isRhoFixed,
    bool isGammaFixed,
    bool vegaWeighted,
    ext::shared_ptr<EndCriteria> endCriteria,
    ext::shared_ptr<OptimizationMethod> method,
    const DayCounter& dc)
: SmileSection(optionDate, dc),
  forward_(Handle<Quote>(ext::shared_ptr<Quote>(new SimpleQuote(forward)))),
  atmVolatility_(Handle<Quote>(ext::shared_ptr<Quote>(new SimpleQuote(atmVolatility)))),
  volHandles_(volHandles.size()), strikes_(strikes), actualStrikes_(strikes),
  hasFloatingStrikes_(hasFloatingStrikes), vols_(volHandles.size()), alpha_(alpha), beta_(beta),
  nu_(nu), rho_(rho), gamma_(gamma), isAlphaFixed_(isAlphaFixed), isBetaFixed_(isBetaFixed),
  isNuFixed_(isNuFixed), isRhoFixed_(isRhoFixed), isGammaFixed_(isGammaFixed),
  vegaWeighted_(vegaWeighted), endCriteria_(std::move(endCriteria)), method_(std::move(method)) {
 
    for (Size i = 0; i < volHandles_.size(); ++i)
        volHandles_[i] = Handle<Quote>(
            ext::shared_ptr<Quote>(new SimpleQuote(volHandles[i])));
}
 
template <typename Evaluation>
void ZabrInterpolatedSmileSection<Evaluation>::createInterpolation() const {
    ext::shared_ptr<ZabrInterpolation<Evaluation> > tmp(
        new ZabrInterpolation<Evaluation>(
            actualStrikes_.begin(), actualStrikes_.end(), vols_.begin(),
            exerciseTime(), forwardValue_, alpha_, beta_, nu_, rho_, gamma_,
            isAlphaFixed_, isBetaFixed_, isNuFixed_, isRhoFixed_, isGammaFixed_,
            vegaWeighted_, endCriteria_, method_));
    swap(tmp, zabrInterpolation_);
}
 
template <typename Evaluation>
void ZabrInterpolatedSmileSection<Evaluation>::performCalculations() const {
    forwardValue_ = forward_->value();
    vols_.clear();
    actualStrikes_.clear();
    // we populate the volatilities, skipping the invalid ones
    for (Size i = 0; i < volHandles_.size(); ++i) {
        if (volHandles_[i]->isValid()) {
            if (hasFloatingStrikes_) {
                actualStrikes_.push_back(forwardValue_ + strikes_[i]);
                vols_.push_back(atmVolatility_->value() +
                                volHandles_[i]->value());
            } else {
                actualStrikes_.push_back(strikes_[i]);
                vols_.push_back(volHandles_[i]->value());
            }
        }
    }
    // we are recreating the sabrinterpolation object unconditionnaly to
    // avoid iterator invalidation
    createInterpolation();
    zabrInterpolation_->update();
}
 
template <typename Evaluation>
Real ZabrInterpolatedSmileSection<Evaluation>::varianceImpl(Real strike) const {
    calculate();
    Real v = (*zabrInterpolation_)(strike, true);
    return v * v * exerciseTime();
}
}
 
#endif