gaussian1dsmilesection.cpp

/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
 
/*
 Copyright (C) 2015 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.
*/
 
#include <ql/instruments/makecapfloor.hpp>
#include <ql/instruments/makeswaption.hpp>
#include <ql/pricingengines/blackformula.hpp>
#include <ql/termstructures/volatility/gaussian1dsmilesection.hpp>
#include <utility>
 
using std::sqrt;
 
namespace QuantLib {
 
    Gaussian1dSmileSection::Gaussian1dSmileSection(
        const Date& fixingDate,
        ext::shared_ptr<SwapIndex> swapIndex,
        const ext::shared_ptr<Gaussian1dModel>& model,
        const DayCounter& dc,
        const ext::shared_ptr<Gaussian1dSwaptionEngine>& swaptionEngine)
    : SmileSection(fixingDate, dc, model->termStructure()->referenceDate()),
      fixingDate_(fixingDate), swapIndex_(std::move(swapIndex)), model_(model),
      engine_(swaptionEngine) {
 
        atm_ = model_->swapRate(fixingDate_, swapIndex_->tenor(), Null<Date>(), 0.0, swapIndex_);
        annuity_ =
            model_->swapAnnuity(fixingDate_, swapIndex_->tenor(), Null<Date>(), 0.0, swapIndex_);
 
        if (engine_ == nullptr) {
            engine_ = ext::make_shared<Gaussian1dSwaptionEngine>(
                model_, 64, 7.0, true, false, swapIndex_->discountingTermStructure());
        }
    }
 
    Gaussian1dSmileSection::Gaussian1dSmileSection(
        const Date& fixingDate,
        ext::shared_ptr<IborIndex> iborIndex,
        const ext::shared_ptr<Gaussian1dModel>& model,
        const DayCounter& dc,
        const ext::shared_ptr<Gaussian1dCapFloorEngine>& capEngine)
    : SmileSection(fixingDate, dc, model->termStructure()->referenceDate()),
      fixingDate_(fixingDate), iborIndex_(std::move(iborIndex)), model_(model), engine_(capEngine) {
 
        atm_ = model_->forwardRate(fixingDate_, Null<Date>(), 0.0, iborIndex_);
        CapFloor c =
            MakeCapFloor(CapFloor::Cap, iborIndex_->tenor(), iborIndex_, Null<Real>(), 0 * Days)
                .withEffectiveDate(fixingDate_, false);
        annuity_ = iborIndex_->dayCounter().yearFraction(c.startDate(), c.maturityDate()) *
                   model_->zerobond(c.maturityDate());
 
        if (engine_ == nullptr) {
            engine_ = ext::make_shared<Gaussian1dCapFloorEngine>(
                model_, 64, 7.0, true,
                false); // use model curve as discounting curve
        }
    }
 
Real Gaussian1dSmileSection::atmLevel() const { return atm_; }
 
Real Gaussian1dSmileSection::optionPrice(Rate strike, Option::Type type,
                                         Real discount) const {
 
    if (swapIndex_ != nullptr) {
        Swaption s = MakeSwaption(swapIndex_, fixingDate_, strike)
                         .withUnderlyingType(type == Option::Call
                                                 ? Swap::Payer
                                                 : Swap::Receiver)
                         .withPricingEngine(engine_);
        Real tmp = s.NPV();
        return tmp / annuity_ * discount;
    } else {
        CapFloor c =
            MakeCapFloor(type == Option::Call ? CapFloor::Cap : CapFloor::Floor,
                         iborIndex_->tenor(), iborIndex_, strike, 0 * Days)
                .withEffectiveDate(fixingDate_, false)
                .withPricingEngine(engine_);
        Real tmp = c.NPV();
        return tmp / annuity_ * discount;
    }
}
 
Real Gaussian1dSmileSection::volatilityImpl(Rate strike) const {
    Real vol = 0.0;
    try {
        Option::Type type = strike >= atm_ ? Option::Call : Option::Put;
        Real o = optionPrice(strike, type);
        vol = blackFormulaImpliedStdDev(type, strike, atm_, o) /
              sqrt(exerciseTime());
    } catch (...) {
    }
    return vol;
}
}