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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2012 Peter Caspers
Copyright (C) 2016 Terry Leitch
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 "rquantlib.h"
using namespace QuantLib;
//using namespace boost::unit_test_framework;
using std::fabs;
namespace {
typedef SwaptionVolatilityStructure SwpVolStr; // shorthand used below
typedef SwaptionVolatilityMatrix SwpVolMat; // shorthand used below
Handle<SwpVolStr> swptnVolCube(Rcpp::NumericVector &expiries,
Rcpp::NumericVector &tenors,
Rcpp::NumericMatrix &atmVols,
Rcpp::NumericVector &strikes,
Rcpp::NumericMatrix &smirkVols,
QuantLib::Handle<QuantLib::YieldTermStructure> &yldCrv
) {
std::vector<Period> optionTenors;
std::vector<Period> swapTenors;
QuantLib::Size numExp = expiries.size();
for (Size i = 0; i <numExp ; i++){
if(expiries[i]<1.0){
int n = static_cast<int>(12*expiries[i]);
optionTenors.push_back(Months*n);
} else {
int n = static_cast<int>(expiries[i]);
optionTenors.push_back(Years*n);
}
}
QuantLib::Size numTenor = tenors.size();
for (Size i = 0; i < numTenor; i++){
if(tenors[i]<1.0){
int n = static_cast<int>(12*tenors[i]);
swapTenors.push_back(Months*n);
} else {
int n = static_cast<int>(tenors[i]);
swapTenors.push_back(Years*n);
}
}
std::vector<std::vector<Handle<Quote> > > qSwAtm;
for (unsigned int i = 0; i < numExp; i++) {
std::vector<Handle<Quote> > qSwAtmTmp;
for (unsigned int j = 0; j < numTenor; j++) {
double qt=atmVols(i,j);
qSwAtmTmp.push_back(Handle<Quote>(boost::shared_ptr<Quote>(new SimpleQuote(qt))));
}
qSwAtm.push_back(qSwAtmTmp);
}
Handle<SwpVolStr>
swaptionVolAtm(boost::shared_ptr<SwpVolStr>(new SwpVolMat(TARGET(),
ModifiedFollowing,
optionTenors, swapTenors, qSwAtm,
Actual365Fixed())));
std::vector<Period> optionTenorsSmile;
std::vector<Period> swapTenorsSmile;
std::vector<Real> strikeSpreads;
for (Size i = 0; i < numExp; i++){
if(expiries[i]<1.0){
int n = static_cast<int>(12*expiries[i]);
optionTenorsSmile.push_back(n*Months);
} else {
int n = static_cast<int>(expiries[i]);
optionTenorsSmile.push_back(n*Years);
}
}
for (Size i = 0; i < numTenor; i++){
if(tenors[i]<1.0){
int n = static_cast<int>(12*tenors[i]);
swapTenorsSmile.push_back(Months*n);
} else {
int n = static_cast<int>(tenors[i]);
swapTenorsSmile.push_back(Years*n);
}
}
QuantLib::Size numStrike = strikes.size();
for (Size i = 0; i < numStrike; i++)
strikeSpreads.push_back(strikes[i]);
std::vector<std::vector<Handle<Quote> > > qSwSmile;
for (unsigned int i = 0; i < numExp*numTenor; i++) {
std::vector<Handle<Quote> > qSwSmileTmp;
for (unsigned int j = 0; j < numStrike; j++) {
double qt=smirkVols(i,j);
qSwSmileTmp.push_back(Handle<Quote>(boost::shared_ptr<Quote>(new SimpleQuote(qt))));
}
qSwSmile.push_back(qSwSmileTmp);
}
double qSwSmileh1[] = {
0.01, 0.2, 0.8, -0.2
};
std::vector<bool> parameterFixed;
parameterFixed.push_back(false);
parameterFixed.push_back(false); // beta could be fixed
parameterFixed.push_back(false);
parameterFixed.push_back(false);
std::vector<std::vector<Handle<Quote> > > parameterGuess;
for (unsigned int i = 0; i < numExp*numTenor; i++) {
std::vector<Handle<Quote> > parameterGuessTmp;
for (unsigned int j = 0; j < 4; j++) {
parameterGuessTmp.push_back(Handle<Quote>(boost::shared_ptr<Quote>(new SimpleQuote(qSwSmileh1[j]))));
}
parameterGuess.push_back(parameterGuessTmp);
}
boost::shared_ptr<EndCriteria> ec(new EndCriteria(5000000, 250, 1E-6, 1E-6, 1E-6));
boost::shared_ptr<SwapIndex> swapIndex(new EuriborSwapIsdaFixA(30 * Years, Handle<YieldTermStructure>(yldCrv)));
boost::shared_ptr<SwapIndex> shortSwapIndex(new EuriborSwapIsdaFixA(1 * Years, Handle<YieldTermStructure>(yldCrv)));
Handle<SwpVolStr>
res(boost::shared_ptr<SwpVolStr>(new SwaptionVolCube1(swaptionVolAtm, optionTenorsSmile,
swapTenorsSmile, strikeSpreads, qSwSmile,
swapIndex, shortSwapIndex, true,
parameterGuess, parameterFixed, true, ec,
.050)));
// put a big error tolerance here ... we just want a
// smooth cube for testing
res->enableExtrapolation();
return res;
}
} /// closes name space
// [[Rcpp::export]]
Rcpp::List sabrengine(Rcpp::List rparam,
Rcpp::List legParams,
std::vector<QuantLib::Date> dateVec,
std::vector<double> zeroVec,
Rcpp::NumericVector swaptionMat,
Rcpp::NumericVector swapLengths,
Rcpp::NumericMatrix atmVols,
Rcpp::NumericVector strikes,
Rcpp::NumericMatrix smirkVols){
QuantLib::Date todaysDate(Rcpp::as<QuantLib::Date>(rparam["tradeDate"]));
QuantLib::Date settlementDate(Rcpp::as<QuantLib::Date>(rparam["settleDate"]));
QuantLib::Date startDate(Rcpp::as<QuantLib::Date>(rparam["startDate"]));
QuantLib::Date expiryDate(Rcpp::as<QuantLib::Date>(rparam["expiryDate"]));
QuantLib::Date maturity(Rcpp::as<QuantLib::Date>(rparam["maturity"]));
bool european = Rcpp::as<bool>(rparam["european"]);
double strike = Rcpp::as<double>(rparam["strike"]);
//double fixDayCount = Rcpp::as<double>(legParams["dayCounter"]); // currently not used, fix in future
double fixFreq = Rcpp::as<double>(legParams["fixFreq"]) ;
int floatFreq = Rcpp::as<int>(legParams["floatFreq"]);
const Real tol1 = 0.0001; // 1bp tolerance for model engine call put premia
// BOOST_TEST_MESSAGE("Testing Markov functional vanilla engines...");
Date savedEvalDate = Settings::instance().evaluationDate();
Settings::instance().evaluationDate() = todaysDate;
QuantLib::Handle<QuantLib::YieldTermStructure> yldCrv(rebuildCurveFromZeroRates(dateVec, zeroVec));
Handle<SwaptionVolatilityStructure> volCube = swptnVolCube(swaptionMat,swapLengths,atmVols,
strikes,smirkVols,yldCrv);
boost::shared_ptr<IborIndex> iborIndex1(new Euribor(floatFreq * Months, yldCrv));
boost::shared_ptr<SwapIndex> swapIndexBase (new EuriborSwapIsdaFixA(fixFreq * Years));
// create swaps for european swaption here to get atm fwd rate, these are ignored for bermudan //
boost::shared_ptr<VanillaSwap> underlyingCall =
MakeVanillaSwap(Years*(((maturity-expiryDate)/365.0)), iborIndex1, strike)
.withEffectiveDate(expiryDate)
.receiveFixed(false);
boost::shared_ptr<VanillaSwap> underlyingPut =
MakeVanillaSwap(Years*((maturity-expiryDate)/365.0), iborIndex1, strike)
.withEffectiveDate(expiryDate)
.receiveFixed(true);
boost::shared_ptr<PricingEngine> swapEngine(new DiscountingSwapEngine(yldCrv));
underlyingCall->setPricingEngine(swapEngine);
underlyingPut->setPricingEngine(swapEngine);
Real vol,pricePay,priceRcv,rate;
vol=volCube->volatility(Years*((expiryDate-settlementDate)/365.0), Years*((maturity-expiryDate)/365.0), strike);
rate=underlyingCall->fairRate();
// calculate if bermudan here //
if(!european) {
boost::shared_ptr<VanillaSwap> underlyingCall2 =
MakeVanillaSwap(Years*(((maturity-startDate)/365.0)), iborIndex1, strike)
.withEffectiveDate(startDate)
.receiveFixed(false);
boost::shared_ptr<VanillaSwap> underlyingPut2 =
MakeVanillaSwap(Years*((maturity-startDate)/365.0), iborIndex1, strike)
.withEffectiveDate(startDate)
.receiveFixed(true);
boost::shared_ptr<PricingEngine> swapEngine(new DiscountingSwapEngine(yldCrv));
underlyingCall2->setPricingEngine(swapEngine);
underlyingPut2->setPricingEngine(swapEngine);
std::vector<Date> volStepDates;
std::vector<Real> vols;
vols.push_back(1.0);
std::vector<QuantLib::Date> exerciseDates;
std::vector<QuantLib::Period> underlyingTenors;
const std::vector<boost::shared_ptr<QuantLib::CashFlow> >& leg = underlyingCall2->fixedLeg();
for (unsigned int i=0; i<leg.size(); i++) {
boost::shared_ptr<QuantLib::Coupon> coupon = boost::dynamic_pointer_cast<QuantLib::Coupon>(leg[i]);
if(coupon->accrualStartDate() <= expiryDate && coupon->accrualStartDate() >= startDate) {
exerciseDates.push_back(coupon->accrualStartDate());
underlyingTenors.push_back(Years*((maturity-(coupon->accrualStartDate()))/365.0));
}
}
// create expiry backet, get maturity
boost::shared_ptr<MarkovFunctional>
mf1(new MarkovFunctional(yldCrv, 0.01, volStepDates, vols,volCube,
exerciseDates, underlyingTenors,
swapIndexBase, MarkovFunctional::ModelSettings()
.withYGridPoints(32)
.withYStdDevs(7.0)
.withGaussHermitePoints(16)
.withMarketRateAccuracy(1e-7)
.withDigitalGap(1e-5)
.withLowerRateBound(0.0)
.withUpperRateBound(2.0)));
boost::shared_ptr<PricingEngine> mfSwaptionEngine1(new Gaussian1dSwaptionEngine(mf1, 64, 7.0));
boost::shared_ptr<Exercise> bermudanExercise(new BermudanExercise(exerciseDates));
Swaption bermudanSwaptionC(underlyingCall2, bermudanExercise);
Swaption bermudanSwaptionP(underlyingPut2, bermudanExercise);
bermudanSwaptionC.setPricingEngine(mfSwaptionEngine1);
bermudanSwaptionP.setPricingEngine(mfSwaptionEngine1);
pricePay = bermudanSwaptionC.NPV();
priceRcv = bermudanSwaptionP.NPV();
} else {
// calculate european here //
boost::shared_ptr<BlackSwaptionEngine> blackSwaptionEngine1(new BlackSwaptionEngine(yldCrv, volCube));
boost::shared_ptr<Exercise> exercise(new EuropeanExercise(startDate));
// Rprintf("%d %d %d\n",outputs1.expiries_[i].dayOfMonth(),outputs1.expiries_[i].month(),outputs1.expiries_[i].year());
Swaption swaptionC(underlyingCall, exercise);
Swaption swaptionP(underlyingPut, exercise);
swaptionC.setPricingEngine(blackSwaptionEngine1);
swaptionP.setPricingEngine(blackSwaptionEngine1);
pricePay = swaptionC.NPV();
priceRcv = swaptionP.NPV();
}
////////men at work/////////////////
return Rcpp::List::create(Rcpp::Named("pay") = pricePay,
Rcpp::Named("rcv") = priceRcv,
Rcpp::Named("sigma") = vol,
Rcpp::Named("atmRate") = rate);
}
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