/**
* Copyright (C) 2011 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.interestrate.fra.method;
import java.util.ArrayList;
import java.util.HashMap;
import java.util.List;
import java.util.Map;
import org.apache.commons.lang.Validate;
import com.opengamma.analytics.financial.interestrate.InstrumentDerivative;
import com.opengamma.analytics.financial.interestrate.InterestRateCurveSensitivity;
import com.opengamma.analytics.financial.interestrate.YieldCurveBundle;
import com.opengamma.analytics.financial.interestrate.fra.derivative.ForwardRateAgreement;
import com.opengamma.analytics.financial.interestrate.fra.provider.ForwardRateAgreementDiscountingProviderMethod;
import com.opengamma.analytics.financial.interestrate.method.PricingMethod;
import com.opengamma.analytics.financial.model.interestrate.curve.YieldAndDiscountCurve;
import com.opengamma.util.money.CurrencyAmount;
import com.opengamma.util.tuple.DoublesPair;
/**
* Method to compute the present value and its sensitivities for a FRA with
* discounting. The present value is computed as the (forward rate - FRA rate)
* multiplied by the notional and the payment accrual factor and discounted to
* settlement. The discounting to settlement is done using the forward rate
* over the fixing period. The value is further discounted from settlement to
* today using the discounting curve.
* $$
* \begin{equation*}
* P^D(0,t_1)\frac{\delta_P(F-K)}{1+\delta_P F} \quad \mbox{and}\quad F = \frac{1}{\delta_F}\left( \frac{P^j(0,t_1)}{P^j(0,t_2)}-1\right)
* \end{equation*}
* $$
* This approach is valid subject to a independence hypothesis between the
* discounting curve and some spread.
* <p>
* Reference: Henrard, M. (2010). The irony in the derivatives discounting part
* II: the crisis. Wilmott Journal, 2(6):301-316.
* @deprecated Use {@link ForwardRateAgreementDiscountingProviderMethod}
*/
@Deprecated
public final class ForwardRateAgreementDiscountingMethod implements PricingMethod {
private static final ForwardRateAgreementDiscountingMethod INSTANCE = new ForwardRateAgreementDiscountingMethod();
public static ForwardRateAgreementDiscountingMethod getInstance() {
return INSTANCE;
}
private ForwardRateAgreementDiscountingMethod() {
}
/**
* Compute the present value of a FRA by discounting.
* @param fra The FRA.
* @param curves The yield curves. Should contain the discounting and forward curves associated.
* @return The present value.
*/
public CurrencyAmount presentValue(final ForwardRateAgreement fra, final YieldCurveBundle curves) {
Validate.notNull(fra, "FRA");
Validate.notNull(curves, "Curves");
final YieldAndDiscountCurve discountingCurve = curves.getCurve(fra.getFundingCurveName());
final YieldAndDiscountCurve forwardCurve = curves.getCurve(fra.getForwardCurveName());
final double discountFactorSettlement = discountingCurve.getDiscountFactor(fra.getPaymentTime());
final double forward = (forwardCurve.getDiscountFactor(fra.getFixingPeriodStartTime()) / forwardCurve.getDiscountFactor(fra.getFixingPeriodEndTime()) - 1) / fra.getFixingYearFraction();
final double presentValue = discountFactorSettlement * fra.getPaymentYearFraction() * fra.getNotional() * (forward - fra.getRate()) / (1 + fra.getPaymentYearFraction() * forward);
return CurrencyAmount.of(fra.getCurrency(), presentValue);
}
@Override
public CurrencyAmount presentValue(final InstrumentDerivative instrument, final YieldCurveBundle curves) {
Validate.isTrue(instrument instanceof ForwardRateAgreement, "Forward rate agreement");
return presentValue((ForwardRateAgreement) instrument, curves);
}
/**
* Compute the present value sensitivity to rates of a FRA by discounting.
* @param fra The FRA.
* @param curves The yield curves. Should contain the discounting and forward curves associated.
* @return The present value sensitivity.
*/
public InterestRateCurveSensitivity presentValueCurveSensitivity(final ForwardRateAgreement fra, final YieldCurveBundle curves) {
Validate.notNull(fra, "FRA");
Validate.notNull(curves, "Curves");
final YieldAndDiscountCurve discountingCurve = curves.getCurve(fra.getFundingCurveName());
final YieldAndDiscountCurve forwardCurve = curves.getCurve(fra.getForwardCurveName());
final double df = discountingCurve.getDiscountFactor(fra.getPaymentTime());
final double dfForwardStart = forwardCurve.getDiscountFactor(fra.getFixingPeriodStartTime());
final double dfForwardEnd = forwardCurve.getDiscountFactor(fra.getFixingPeriodEndTime());
final double forward = (dfForwardStart / dfForwardEnd - 1.0) / fra.getFixingYearFraction();
// Backward sweep
final double pvBar = 1.0;
final double forwardBar = df * fra.getPaymentYearFraction() * fra.getNotional() * (1 - (forward - fra.getRate()) / (1 + fra.getPaymentYearFraction() * forward) * fra.getPaymentYearFraction())
/ (1 + fra.getPaymentYearFraction() * forward);
final double dfForwardEndBar = -dfForwardStart / (dfForwardEnd * dfForwardEnd) / fra.getFixingYearFraction() * forwardBar;
final double dfForwardStartBar = 1.0 / (fra.getFixingYearFraction() * dfForwardEnd) * forwardBar;
final double dfBar = fra.getPaymentYearFraction() * fra.getNotional() * (forward - fra.getRate()) / (1 + fra.getFixingYearFraction() * forward) * pvBar;
final Map<String, List<DoublesPair>> resultMapDiscouting = new HashMap<>();
final List<DoublesPair> listDiscounting = new ArrayList<>();
listDiscounting.add(new DoublesPair(fra.getPaymentTime(), -fra.getPaymentTime() * df * dfBar));
resultMapDiscouting.put(fra.getFundingCurveName(), listDiscounting);
final InterestRateCurveSensitivity result = new InterestRateCurveSensitivity(resultMapDiscouting);
final Map<String, List<DoublesPair>> resultMapForward = new HashMap<>();
final List<DoublesPair> listForward = new ArrayList<>();
listForward.add(new DoublesPair(fra.getFixingPeriodStartTime(), -fra.getFixingPeriodStartTime() * dfForwardStart * dfForwardStartBar));
listForward.add(new DoublesPair(fra.getFixingPeriodEndTime(), -fra.getFixingPeriodEndTime() * dfForwardEnd * dfForwardEndBar));
resultMapForward.put(fra.getForwardCurveName(), listForward);
return result.plus(new InterestRateCurveSensitivity(resultMapForward));
}
/**
* Compute the par rate or forward rate of the FRA.
* @param fra The FRA.
* @param curves The yield curves. Should contain the discounting and forward curves associated.
* @return The par rate.
*/
public double parRate(final ForwardRateAgreement fra, final YieldCurveBundle curves) {
Validate.notNull(fra, "FRA");
Validate.notNull(curves, "Curves");
final YieldAndDiscountCurve forwardCurve = curves.getCurve(fra.getForwardCurveName());
final double forward = (forwardCurve.getDiscountFactor(fra.getFixingPeriodStartTime()) / forwardCurve.getDiscountFactor(fra.getFixingPeriodEndTime()) - 1) / fra.getFixingYearFraction();
return forward;
}
/**
* Compute the par rate sensitivity to the rates for a FRA.
* @param fra The FRA.
* @param curves The yield curves. Should contain the discounting and forward curves associated.
* @return The par rate sensitivity.
*/
public InterestRateCurveSensitivity parRateCurveSensitivity(final ForwardRateAgreement fra, final YieldCurveBundle curves) {
Validate.notNull(fra, "FRA");
Validate.notNull(curves, "Curves");
final YieldAndDiscountCurve forwardCurve = curves.getCurve(fra.getForwardCurveName());
final double dfForwardStart = forwardCurve.getDiscountFactor(fra.getFixingPeriodStartTime());
final double dfForwardEnd = forwardCurve.getDiscountFactor(fra.getFixingPeriodEndTime());
// Backward sweep
final double forwardBar = 1.0;
final double dfForwardEndBar = -dfForwardStart / (dfForwardEnd * dfForwardEnd) / fra.getFixingYearFraction() * forwardBar;
final double dfForwardStartBar = 1.0 / (fra.getFixingYearFraction() * dfForwardEnd) * forwardBar;
final Map<String, List<DoublesPair>> resultMap = new HashMap<>();
final List<DoublesPair> listForward = new ArrayList<>();
listForward.add(new DoublesPair(fra.getFixingPeriodStartTime(), -fra.getFixingPeriodStartTime() * dfForwardStart * dfForwardStartBar));
listForward.add(new DoublesPair(fra.getFixingPeriodEndTime(), -fra.getFixingPeriodEndTime() * dfForwardEnd * dfForwardEndBar));
resultMap.put(fra.getForwardCurveName(), listForward);
final InterestRateCurveSensitivity result = new InterestRateCurveSensitivity(resultMap);
return result;
}
/**
* Computes the sensitivity of the present value of a FRA with notional 1 to the change of fixed rate.
* @param fra The FRA.
* @param curves The curve bundle.
* @return The sensitivity.
*/
public double presentValueCouponSensitivity(final ForwardRateAgreement fra, final YieldCurveBundle curves) {
Validate.notNull(fra, "FRA");
Validate.notNull(curves, "Curves");
final YieldAndDiscountCurve fundingCurve = curves.getCurve(fra.getFundingCurveName());
final YieldAndDiscountCurve liborCurve = curves.getCurve(fra.getForwardCurveName());
final double fixingAF = fra.getFixingYearFraction();
final double paymentAF = fra.getPaymentYearFraction();
final double forward = (liborCurve.getDiscountFactor(fra.getFixingPeriodStartTime()) / liborCurve.getDiscountFactor(fra.getFixingPeriodEndTime()) - 1.0) / fixingAF;
final double res = -fundingCurve.getDiscountFactor(fra.getPaymentTime()) * paymentAF / (1 + forward * paymentAF);
return res;
}
/**
* Computes the par spread (spread to be added to the fixed rate to have a present value of 0).
* @param fra The FRA.
* @param curves The yield curve bundle.
* @return The par spread.
*/
public double parSpread(final ForwardRateAgreement fra, final YieldCurveBundle curves) {
Validate.notNull(fra, "FRA");
Validate.notNull(curves, "Curves");
final YieldAndDiscountCurve forwardCurve = curves.getCurve(fra.getForwardCurveName());
final double dfStart = forwardCurve.getDiscountFactor(fra.getFixingPeriodStartTime());
final double dfEnd = forwardCurve.getDiscountFactor(fra.getFixingPeriodEndTime());
final double forward = (dfStart / dfEnd - 1) / fra.getFixingYearFraction();
return forward - fra.getRate();
}
/**
* Computes the par spread curve sensitivity.
* @param fra The FRA.
* @param curves The yield curve bundle.
* @return The par spread sensitivity.
*/
public InterestRateCurveSensitivity parSpreadCurveSensitivity(final ForwardRateAgreement fra, final YieldCurveBundle curves) {
Validate.notNull(fra, "FRA");
Validate.notNull(curves, "Curves");
final YieldAndDiscountCurve forwardCurve = curves.getCurve(fra.getForwardCurveName());
final double dfStart = forwardCurve.getDiscountFactor(fra.getFixingPeriodStartTime());
final double dfEnd = forwardCurve.getDiscountFactor(fra.getFixingPeriodEndTime());
// Backward sweep
final double parSpreadBar = 1.0;
final double dfEndBar = -dfStart / (dfEnd * dfEnd * fra.getFixingYearFraction()) * parSpreadBar;
final double dfStartBar = 1 / (dfEnd * fra.getFixingYearFraction()) * parSpreadBar;
final Map<String, List<DoublesPair>> resultMapDsc = new HashMap<>();
final List<DoublesPair> listDiscounting = new ArrayList<>();
listDiscounting.add(new DoublesPair(fra.getFixingPeriodStartTime(), -fra.getFixingPeriodStartTime() * dfStart * dfStartBar));
listDiscounting.add(new DoublesPair(fra.getFixingPeriodEndTime(), -fra.getFixingPeriodEndTime() * dfEnd * dfEndBar));
resultMapDsc.put(fra.getForwardCurveName(), listDiscounting);
return new InterestRateCurveSensitivity(resultMapDsc);
}
}