Examples of com.opengamma.analytics.financial.forex.derivative.ForexOptionDigital

Package com.opengamma.analytics.financial.forex.derivative

Examples of com.opengamma.analytics.financial.forex.derivative.ForexOptionDigital

com.opengamma.analytics.financial.forex.derivative.ForexOptionDigital
Class describing a digital foreign exchange European option. The implied strike is the absolute value of ratio of the domestic currency (currency 2) amount and the foreign currency amount (currency1). When the option is a call, it pays the absolute value of the payment currency amount when the spot rate is above the strike and nothing otherwise. When the option is a put, it pays the absolute value of the payment currency amount when the spot rate is below the strike and nothing otherwise.

    ArgumentChecker.notNull(date, "date");
    ArgumentChecker.notNull(yieldCurveNames, "yieldCurveNames");
    final Forex fx = _underlyingForex.toDerivative(date, yieldCurveNames);
    final DayCount actAct = DayCountFactory.INSTANCE.getDayCount("Actual/Actual ISDA");
    final double expirationTime = actAct.getDayCountFraction(date, _expirationDate);
    return new ForexOptionDigital(fx, expirationTime, _isCall, _isLong, _payDomestic);
  }

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  public ForexOptionDigital toDerivative(final ZonedDateTime date) {
    ArgumentChecker.notNull(date, "date");
    final Forex fx = _underlyingForex.toDerivative(date);
    final DayCount actAct = DayCountFactory.INSTANCE.getDayCount("Actual/Actual ISDA");
    final double expirationTime = actAct.getDayCountFraction(date, _expirationDate);
    return new ForexOptionDigital(fx, expirationTime, _isCall, _isLong, _payDomestic);
  }

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      double spot = 1;
      if (forex instanceof ForexOptionVanilla) {
        final ForexOptionVanilla fxDerivative = (ForexOptionVanilla) forex;
        spot = data.getFxRates().getFxRate(fxDerivative.getCurrency1(), fxDerivative.getCurrency2());
      } else if (forex instanceof ForexOptionDigital) {
        final ForexOptionDigital fxDerivative = (ForexOptionDigital) forex;
        if (fxDerivative.payDomestic()) {
          spot = data.getFxRates().getFxRate(fxDerivative.getCurrency1(), fxDerivative.getCurrency2());     
        } else {
          spot = data.getFxRates().getFxRate(fxDerivative.getCurrency2(), fxDerivative.getCurrency1());       
        }
      } else if (forex instanceof ForexOptionSingleBarrier) {
        final ForexOptionSingleBarrier fxDerivative = (ForexOptionSingleBarrier) forex;
        spot = data.getFxRates().getFxRate(fxDerivative.getCurrency1(), fxDerivative.getCurrency2());
        return Collections.singleton(new ComputedValue(spec, gammaValue * spot * spot));
      }
      return Collections.singleton(new ComputedValue(spec, gammaValue * spot));
    }
    throw new OpenGammaRuntimeException("Can only calculate gamma spot for surfaces with smiles");

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    final ZonedDateTime referenceDate = DateUtils.getUTCDate(2011, 5, 20);
    final InstrumentDerivative optionConverted = FX_OPTION_DEFINITION.toDerivative(referenceDate, curves_name);
    final Forex fx = FX_DEFINITION.toDerivative(referenceDate, curves_name);
    final DayCount actAct = DayCountFactory.INSTANCE.getDayCount("Actual/Actual ISDA");
    final double expirationTime = actAct.getDayCountFraction(referenceDate, EXPIRATION_DATE);
    final ForexOptionDigital optionConstructed = new ForexOptionDigital(fx, expirationTime, IS_CALL, IS_LONG, PAY_DOM);
    assertEquals("Convertion to derivative", optionConstructed, optionConverted);
  }

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    final ZonedDateTime referenceDate = DateUtils.getUTCDate(2011, 5, 20);
    final InstrumentDerivative optionConverted = FX_OPTION_DEFINITION.toDerivative(referenceDate);
    final Forex fx = FX_DEFINITION.toDerivative(referenceDate);
    final DayCount actAct = DayCountFactory.INSTANCE.getDayCount("Actual/Actual ISDA");
    final double expirationTime = actAct.getDayCountFraction(referenceDate, EXPIRATION_DATE);
    final ForexOptionDigital optionConstructed = new ForexOptionDigital(fx, expirationTime, IS_CALL, IS_LONG, PAY_DOM);
    assertEquals("Convertion to derivative", optionConstructed, optionConverted);
  }

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    final double notional = 100000000;
    final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
    final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
    final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
    final ForexOptionDigitalDefinition forexOptionDefinitionCall = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
    final ForexOptionDigital forexOptionCall = forexOptionDefinitionCall.toDerivative(REFERENCE_DATE, CURVES_NAME);
    final Forex forexForward = forexUnderlyingDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
    final MultipleCurrencyInterestRateCurveSensitivity sensi = METHOD_BLACK_DIGITAL.presentValueCurveSensitivity(forexOptionCall, SMILE_BUNDLE);
    final double dfDomestic = CURVES.getCurve(CURVES_NAME[1]).getDiscountFactor(forexForward.getPaymentTime());
    final double dfForeign = CURVES.getCurve(CURVES_NAME[0]).getDiscountFactor(forexForward.getPaymentTime());
    final double forward = SPOT * dfForeign / dfDomestic;
    final double volatility = SMILE_TERM.getVolatility(new Triple<>(forexOptionCall.getExpirationTime(), forward, forward));
    final double sigmaRootT = volatility * Math.sqrt(forexOptionCall.getExpirationTime());
    final int omega = isCall ? 1 : -1;
    // Finite difference
    final YieldAndDiscountCurve curveDomestic = CURVES.getCurve(forexOptionCall.getUnderlyingForex().getPaymentCurrency2().getFundingCurveName());
    final YieldAndDiscountCurve curveForeign = CURVES.getCurve(forexOptionCall.getUnderlyingForex().getPaymentCurrency1().getFundingCurveName());
    double forwardBumped;
    double dfForeignBumped;
    double dfDomesticBumped;
    double dMBumped;
    final double deltaShift = 0.00001; // 0.1 bp
    final double[] nodeTimes = new double[2];
    nodeTimes[0] = 0.0;
    nodeTimes[1] = forexOptionCall.getUnderlyingForex().getPaymentTime();
    final double[] yields = new double[2];
    YieldAndDiscountCurve curveNode;
    YieldAndDiscountCurve curveBumpedPlus;
    YieldAndDiscountCurve curveBumpedMinus;
    final String bumpedCurveName = "Bumped";
    //Foreign
    yields[0] = curveForeign.getInterestRate(nodeTimes[0]);
    yields[1] = curveForeign.getInterestRate(nodeTimes[1]);
    curveNode = YieldCurve.from(InterpolatedDoublesCurve.fromSorted(nodeTimes, yields, new LinearInterpolator1D()));
    curveBumpedPlus = curveNode.withSingleShift(nodeTimes[1], deltaShift);
    curveBumpedMinus = curveNode.withSingleShift(nodeTimes[1], -deltaShift);
    final YieldCurveBundle curvesForeign = new YieldCurveBundle();
    curvesForeign.setCurve(bumpedCurveName, curveBumpedPlus);
    curvesForeign.setCurve(CURVES_NAME[1], CURVES.getCurve(CURVES_NAME[1]));
    dfForeignBumped = curveBumpedPlus.getDiscountFactor(forexForward.getPaymentTime());
    forwardBumped = SPOT * dfForeignBumped / dfDomestic;
    dMBumped = Math.log(forwardBumped / strike) / sigmaRootT - 0.5 * sigmaRootT;
    final double bumpedPvForeignPlus = Math.abs(forexOptionCall.getUnderlyingForex().getPaymentCurrency2().getAmount()) * dfDomestic * NORMAL.getCDF(omega * dMBumped) * (isLong ? 1.0 : -1.0);
    dfForeignBumped = curveBumpedMinus.getDiscountFactor(forexForward.getPaymentTime());
    forwardBumped = SPOT * dfForeignBumped / dfDomestic;
    dMBumped = Math.log(forwardBumped / strike) / sigmaRootT - 0.5 * sigmaRootT;
    final double bumpedPvForeignMinus = Math.abs(forexOptionCall.getUnderlyingForex().getPaymentCurrency2().getAmount()) * dfDomestic * NORMAL.getCDF(omega * dMBumped) * (isLong ? 1.0 : -1.0);
    final double resultForeign = (bumpedPvForeignPlus - bumpedPvForeignMinus) / (2 * deltaShift);
    assertEquals("Forex Digital option: curve sensitivity", forexForward.getPaymentTime(), sensi.getSensitivity(USD).getSensitivities().get(CURVES_NAME[0]).get(0).first, TOLERANCE_TIME);
    assertEquals("Forex Digital option: curve sensitivity", resultForeign, sensi.getSensitivity(USD).getSensitivities().get(CURVES_NAME[0]).get(0).second, TOLERANCE_DELTA);
    //Domestic
    yields[0] = curveDomestic.getInterestRate(nodeTimes[0]);
    yields[1] = curveDomestic.getInterestRate(nodeTimes[1]);
    curveNode = YieldCurve.from(InterpolatedDoublesCurve.fromSorted(nodeTimes, yields, new LinearInterpolator1D()));
    curveBumpedPlus = curveNode.withSingleShift(nodeTimes[1], deltaShift);
    curveBumpedMinus = curveNode.withSingleShift(nodeTimes[1], -deltaShift);
    final YieldCurveBundle curvesDomestic = new YieldCurveBundle();
    curvesDomestic.setCurve(CURVES_NAME[0], CURVES.getCurve(CURVES_NAME[0]));
    curvesDomestic.setCurve(bumpedCurveName, curveBumpedPlus);
    dfDomesticBumped = curveBumpedPlus.getDiscountFactor(forexForward.getPaymentTime());
    forwardBumped = SPOT * dfForeign / dfDomesticBumped;
    dMBumped = Math.log(forwardBumped / strike) / sigmaRootT - 0.5 * sigmaRootT;
    final double bumpedPvDomesticPlus = Math.abs(forexOptionCall.getUnderlyingForex().getPaymentCurrency2().getAmount()) * dfDomesticBumped * NORMAL.getCDF(omega * dMBumped) * (isLong ? 1.0 : -1.0);
    curvesForeign.replaceCurve(bumpedCurveName, curveBumpedMinus);
    dfDomesticBumped = curveBumpedMinus.getDiscountFactor(forexForward.getPaymentTime());
    forwardBumped = SPOT * dfForeign / dfDomesticBumped;
    dMBumped = Math.log(forwardBumped / strike) / sigmaRootT - 0.5 * sigmaRootT;
    final double bumpedPvDomesticMinus = Math.abs(forexOptionCall.getUnderlyingForex().getPaymentCurrency2().getAmount()) * dfDomesticBumped * NORMAL.getCDF(omega * dMBumped) * (isLong ? 1.0 : -1.0);
    final double resultDomestic = (bumpedPvDomesticPlus - bumpedPvDomesticMinus) / (2 * deltaShift);
    assertEquals("Forex Digital option: curve sensitivity", forexForward.getPaymentTime(), sensi.getSensitivity(USD).getSensitivities().get(CURVES_NAME[1]).get(0).first, TOLERANCE_TIME);
    assertEquals("Forex Digital option: curve sensitivity", resultDomestic, sensi.getSensitivity(USD).getSensitivities().get(CURVES_NAME[1]).get(0).second, TOLERANCE_DELTA);
  }

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    final double dMMinus = Math.log(forward / strike) / sigmaRootTMinus - 0.5 * sigmaRootTMinus;
    final double pvMinus = Math.abs(FOREX_DIGITAL_CALL_DOM.getUnderlyingForex().getPaymentCurrency2().getAmount()) * dfDomestic * NORMAL.getCDF(omega * dMMinus)
        * (FOREX_DIGITAL_CALL_DOM.isLong() ? 1.0 : -1.0);
    assertEquals("Forex Digital option: vega", (pvPlus - pvMinus) / (2 * shift), sensi.getVega().getMap().get(point), TOLERANCE_PV);
    final ForexOptionDigitalDefinition optionShortDefinition = new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, IS_CALL, !IS_LONG);
    final ForexOptionDigital optionShort = optionShortDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
    final PresentValueForexBlackVolatilitySensitivity sensiShort = METHOD_BLACK_DIGITAL.presentValueBlackVolatilitySensitivity(optionShort, SMILE_BUNDLE);
    assertEquals("Forex Digital option: vega short", -sensi.getVega().getMap().get(point), sensiShort.getVega().getMap().get(point));
    // Put/call parity
    final ForexOptionDigitalDefinition optionShortPutDefinition = new ForexOptionDigitalDefinition(FOREX_DEFINITION, OPTION_EXP_DATE, !IS_CALL, IS_LONG);
    final ForexOptionDigital optionShortPut = optionShortPutDefinition.toDerivative(REFERENCE_DATE, CURVES_NAME);
    final PresentValueForexBlackVolatilitySensitivity sensiShortPut = METHOD_BLACK_DIGITAL.presentValueBlackVolatilitySensitivity(optionShortPut, SMILE_BUNDLE);
    assertEquals("Forex Digital option: vega short", sensiShortPut.getVega().getMap().get(point) + sensi.getVega().getMap().get(point), 0.0, TOLERANCE_PV);
  }

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    final double notional = 100000000;
    final ZonedDateTime expiryDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofYears(1), BUSINESS_DAY, CALENDAR, true);
    final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, ScheduleCalculator.getAdjustedDate(expiryDate, SETTLEMENT_DAYS, CALENDAR), notional,
        strike);
    final ForexOptionDigitalDefinition forexOptionDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expiryDate, isCall, isLong);
    final ForexOptionDigital forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
    final double dfDomestic = MULTICURVES.getDiscountFactor(USD, forexOption.getUnderlyingForex().getPaymentTime());
    final double dfForeign = MULTICURVES.getDiscountFactor(EUR, forexOption.getUnderlyingForex().getPaymentTime());
    final double forward = SPOT * dfForeign / dfDomestic;
    final double volatility = SMILE_TERM.getVolatility(new Triple<>(TimeCalculator.getTimeBetween(REFERENCE_DATE, expiryDate), strike, forward));
    final double sigmaRootT = volatility * Math.sqrt(forexOption.getExpirationTime());
    final double dM = Math.log(forward / strike) / sigmaRootT - 0.5 * sigmaRootT;
    final int omega = isCall ? 1 : -1;
    final double pvExpected = Math.abs(forexOption.getUnderlyingForex().getPaymentCurrency2().getAmount()) * dfDomestic * NORMAL.getCDF(omega * dM)
        * (isLong ? 1.0 : -1.0);
    final MultipleCurrencyAmount pvComputed = METHOD_BLACK_DIGITAL.presentValue(forexOption, SMILE_MULTICURVES);
    assertEquals("Forex Digital option: present value", pvExpected, pvComputed.getAmount(USD), TOLERANCE_PV);
  }

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    final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
    final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
    final double timeToExpiry = TimeCalculator.getTimeBetween(REFERENCE_DATE, expDate);
    final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, notional, strike);
    final ForexOptionDigitalDefinition forexOptionDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
    final ForexOptionDigital forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
    final double dfDomestic = MULTICURVES.getDiscountFactor(USD, forexOption.getUnderlyingForex().getPaymentTime());
    final double dfForeign = MULTICURVES.getDiscountFactor(EUR, forexOption.getUnderlyingForex().getPaymentTime());
    final double forward = SPOT * dfForeign / dfDomestic;
    final double volatility = SMILE_TERM.getVolatility(new Triple<>(timeToExpiry, strike, forward));
    final double sigmaRootT = volatility * Math.sqrt(forexOption.getExpirationTime());
    final double dM = Math.log(forward / strike) / sigmaRootT - 0.5 * sigmaRootT;
    final int omega = isCall ? 1 : -1;
    final double pvExpected = Math.abs(forexOption.getUnderlyingForex().getPaymentCurrency2().getAmount()) * dfDomestic * NORMAL.getCDF(omega * dM)
        * (isLong ? 1.0 : -1.0);
    final MultipleCurrencyAmount pvComputed = METHOD_BLACK_DIGITAL.presentValue(forexOption, SMILE_MULTICURVES);
    assertEquals("Forex Digital option: present value", pvExpected, pvComputed.getAmount(USD), TOLERANCE_PV);
  }

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    final boolean isLong = true;
    final ZonedDateTime payDate = ScheduleCalculator.getAdjustedDate(REFERENCE_DATE, Period.ofMonths(9), BUSINESS_DAY, CALENDAR);
    final ZonedDateTime expDate = ScheduleCalculator.getAdjustedDate(payDate, -SETTLEMENT_DAYS, CALENDAR);
    final ForexDefinition forexUnderlyingDefinition = new ForexDefinition(EUR, USD, payDate, 1.0 / strike, strike);
    final ForexOptionDigitalDefinition forexOptionDefinition = new ForexOptionDigitalDefinition(forexUnderlyingDefinition, expDate, isCall, isLong);
    final ForexOptionDigital forexOption = forexOptionDefinition.toDerivative(REFERENCE_DATE);
    final int nbSpot = 50;
    final double range = 0.75;
    final double[] spot = new double[nbSpot + 1];
    final double[] pv = new double[nbSpot + 1];
    final MulticurveProviderDiscount multicurveForex = MULTICURVES.copy();

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