1 /* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */ 2 3 /* 4 Copyright (C) 2006 Ferdinando Ametrano 5 Copyright (C) 2006 Mark Joshi 6 7 This file is part of QuantLib, a free-software/open-source library 8 for financial quantitative analysts and developers - http://quantlib.org/ 9 10 QuantLib is free software: you can redistribute it and/or modify it 11 under the terms of the QuantLib license. You should have received a 12 copy of the license along with this program; if not, please email 13 <quantlib-dev@lists.sf.net>. The license is also available online at 14 <http://quantlib.org/license.shtml>. 15 16 This program is distributed in the hope that it will be useful, but WITHOUT 17 ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS 18 FOR A PARTICULAR PURPOSE. See the license for more details. 19 */ 20 21 #include <ql/models/marketmodels/evolvers/lognormalfwdrateeuler.hpp> 22 #include <ql/models/marketmodels/marketmodel.hpp> 23 #include <ql/models/marketmodels/evolutiondescription.hpp> 24 #include <ql/models/marketmodels/browniangenerator.hpp> 25 #include <ql/models/marketmodels/driftcomputation/lmmdriftcalculator.hpp> 26 27 namespace QuantLib { 28 LogNormalFwdRateEuler(const ext::shared_ptr<MarketModel> & marketModel,const BrownianGeneratorFactory & factory,const std::vector<Size> & numeraires,Size initialStep)29 LogNormalFwdRateEuler::LogNormalFwdRateEuler( 30 const ext::shared_ptr<MarketModel>& marketModel, 31 const BrownianGeneratorFactory& factory, 32 const std::vector<Size>& numeraires, 33 Size initialStep) 34 : marketModel_(marketModel), 35 numeraires_(numeraires), 36 initialStep_(initialStep), 37 numberOfRates_(marketModel->numberOfRates()), 38 numberOfFactors_(marketModel_->numberOfFactors()), 39 curveState_(marketModel->evolution().rateTimes()), 40 forwards_(marketModel->initialRates()), 41 displacements_(marketModel->displacements()), 42 logForwards_(numberOfRates_), initialLogForwards_(numberOfRates_), 43 drifts1_(numberOfRates_), initialDrifts_(numberOfRates_), 44 brownians_(numberOfFactors_), correlatedBrownians_(numberOfRates_), 45 alive_(marketModel->evolution().firstAliveRate()) 46 { 47 checkCompatibility(marketModel->evolution(), numeraires); 48 49 Size steps = marketModel->evolution().numberOfSteps(); 50 51 generator_ = factory.create(numberOfFactors_, steps-initialStep_); 52 53 currentStep_ = initialStep_; 54 55 calculators_.reserve(steps); 56 fixedDrifts_.reserve(steps); 57 for (Size j=0; j<steps; ++j) { 58 const Matrix& A = marketModel_->pseudoRoot(j); 59 calculators_.push_back(LMMDriftCalculator(A, 60 displacements_, 61 marketModel->evolution().rateTaus(), 62 numeraires[j], 63 alive_[j])); 64 std::vector<Real> fixed(numberOfRates_); 65 for (Size k=0; k<numberOfRates_; ++k) { 66 Real variance = 67 std::inner_product(A.row_begin(k), A.row_end(k), 68 A.row_begin(k), 0.0); 69 fixed[k] = -0.5*variance; 70 } 71 fixedDrifts_.push_back(fixed); 72 } 73 74 setForwards(marketModel_->initialRates()); 75 } 76 numeraires() const77 const std::vector<Size>& LogNormalFwdRateEuler::numeraires() const { 78 return numeraires_; 79 } 80 setForwards(const std::vector<Real> & forwards)81 void LogNormalFwdRateEuler::setForwards(const std::vector<Real>& forwards) 82 { 83 QL_REQUIRE(forwards.size()==numberOfRates_, 84 "mismatch between forwards and rateTimes"); 85 for (Size i=0; i<numberOfRates_; ++i) 86 initialLogForwards_[i] = std::log(forwards[i] + 87 displacements_[i]); 88 calculators_[initialStep_].compute(forwards, initialDrifts_); 89 } 90 setInitialState(const CurveState & cs)91 void LogNormalFwdRateEuler::setInitialState(const CurveState& cs) { 92 setForwards(cs.forwardRates()); 93 } 94 startNewPath()95 Real LogNormalFwdRateEuler::startNewPath() { 96 currentStep_ = initialStep_; 97 std::copy(initialLogForwards_.begin(), initialLogForwards_.end(), 98 logForwards_.begin()); 99 return generator_->nextPath(); 100 } 101 advanceStep()102 Real LogNormalFwdRateEuler::advanceStep() 103 { 104 // we're going from T1 to T2 105 106 // a) compute drifts D1 at T1; 107 if (currentStep_ > initialStep_) { 108 calculators_[currentStep_].compute(forwards_, drifts1_); 109 } else { 110 std::copy(initialDrifts_.begin(), initialDrifts_.end(), 111 drifts1_.begin()); 112 } 113 114 // b) evolve forwards up to T2 using D1; 115 Real weight = generator_->nextStep(brownians_); 116 const Matrix& A = marketModel_->pseudoRoot(currentStep_); 117 const std::vector<Real>& fixedDrift = fixedDrifts_[currentStep_]; 118 119 Size alive = alive_[currentStep_]; 120 for (Size i=alive; i<numberOfRates_; i++) { 121 logForwards_[i] += drifts1_[i] + fixedDrift[i]; 122 logForwards_[i] += 123 std::inner_product(A.row_begin(i), A.row_end(i), 124 brownians_.begin(), 0.0); 125 forwards_[i] = std::exp(logForwards_[i]) - displacements_[i]; 126 } 127 128 // same as PC evolver with two steps dropped 129 130 // c) update curve state 131 curveState_.setOnForwardRates(forwards_); 132 133 ++currentStep_; 134 135 return weight; 136 } 137 currentStep() const138 Size LogNormalFwdRateEuler::currentStep() const { 139 return currentStep_; 140 } 141 currentState() const142 const CurveState& LogNormalFwdRateEuler::currentState() const { 143 return curveState_; 144 } 145 146 } 147