1 /* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */ 2 3 /* 4 Copyright (C) 2006 Mario Pucci 5 Copyright (C) 2015 Peter Caspers 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/termstructures/volatility/sabrsmilesection.hpp> 22 #include <ql/termstructures/volatility/sabr.hpp> 23 #include <ql/utilities/dataformatters.hpp> 24 25 namespace QuantLib { 26 SabrSmileSection(Time timeToExpiry,Rate forward,const std::vector<Real> & sabrParams,const Real shift)27 SabrSmileSection::SabrSmileSection(Time timeToExpiry, 28 Rate forward, 29 const std::vector<Real>& sabrParams, 30 const Real shift) 31 : SmileSection(timeToExpiry,DayCounter(), 32 ShiftedLognormal,shift), 33 forward_(forward), shift_(shift) { 34 initialise(sabrParams); 35 } 36 SabrSmileSection(const Date & d,Rate forward,const std::vector<Real> & sabrParams,const DayCounter & dc,const Real shift)37 SabrSmileSection::SabrSmileSection(const Date& d, 38 Rate forward, 39 const std::vector<Real>& sabrParams, 40 const DayCounter& dc, 41 const Real shift) 42 : SmileSection(d, dc,Date(),ShiftedLognormal,shift), 43 forward_(forward), shift_(shift) { 44 initialise(sabrParams); 45 } 46 initialise(const std::vector<Real> & sabrParams)47 void SabrSmileSection::initialise(const std::vector<Real>& sabrParams) { 48 49 alpha_ = sabrParams[0]; 50 beta_ = sabrParams[1]; 51 nu_ = sabrParams[2]; 52 rho_ = sabrParams[3]; 53 54 QL_REQUIRE(forward_ + shift_ > 0.0, 55 "at the money forward rate + shift must be " 56 "positive: " 57 << io::rate(forward_) << " with shift " 58 << io::rate(shift_) << " not allowed"); 59 validateSabrParameters(alpha_, beta_, nu_, rho_); 60 } 61 varianceImpl(Rate strike) const62 Real SabrSmileSection::varianceImpl(Rate strike) const { 63 strike = std::max(0.00001 - shift(),strike); 64 Volatility vol = unsafeShiftedSabrVolatility( 65 strike, forward_, exerciseTime(), alpha_, beta_, nu_, rho_, shift_); 66 return vol * vol * exerciseTime(); 67 } 68 volatilityImpl(Rate strike) const69 Real SabrSmileSection::volatilityImpl(Rate strike) const { 70 strike = std::max(0.00001 - shift(),strike); 71 return unsafeShiftedSabrVolatility(strike, forward_, exerciseTime(), 72 alpha_, beta_, nu_, rho_, shift_); 73 } 74 } 75