Module net.finmath.lib
Package net.finmath.marketdata.products

Class Cap

java.lang.Object
net.finmath.marketdata.products.AbstractAnalyticProduct
net.finmath.marketdata.products.Cap
All Implemented Interfaces:
AnalyticProduct, Product
Direct Known Subclasses:
CapShiftedVol
public class Cap extends AbstractAnalyticProduct
Implements the valuation of a cap via an analytic model, i.e. the specification of a forward curve, discount curve and volatility surface. A cap is a portfolio of Caplets with a common strike, i.e., the strike is the same for all Caplets. The class can value a caplet with a given strike or given moneyness. If moneyness is given, the class calculates the ATM forward. Note that this is done by omitting the first (fixed) period, see getATMForward(AnalyticModel, boolean). Note: A fixing in arrears is not handled correctly since a convexity adjustment is currently not applied.
Version:
1.0
Author:
Christian Fries
To dos:
Support convexity adjustment if fixing is in arrears.

  • Constructor Details

    • Cap

      public Cap(Schedule schedule, String forwardCurveName, double strike, boolean isStrikeMoneyness, String discountCurveName, String volatilitySurfaceName, VolatilitySurface.QuotingConvention quotingConvention)
      Create a Caplet with a given schedule, strike on a given forward curve (by name) with a given discount curve and volatility surface (by name). The valuation is performed using analytic valuation formulas for the underlying caplets.
      Parameters:
      schedule - A given payment schedule, i.e., a collection of Periods with fixings, payments and period length.
      forwardCurveName - The forward curve to be used for the forward of the index.
      strike - The given strike (or moneyness).
      isStrikeMoneyness - If true, then the strike argument is interpreted as moneyness, i.e. we calculate an ATM forward from the schedule.
      discountCurveName - The discount curve to be used for discounting.
      volatilitySurfaceName - The volatility surface to be used.
      quotingConvention - The quoting convention of the value returned by the getValue(double, net.finmath.marketdata.model.AnalyticModel)-method.

    • Cap

      public Cap(Schedule schedule, String forwardCurveName, double strike, boolean isStrikeMoneyness, String discountCurveName, String volatilitySurfaceName)
      Create a Caplet with a given schedule, strike on a given forward curve (by name) with a given discount curve and volatility surface (by name). The valuation is performed using analytic valuation formulas for the underlying caplets.
      Parameters:
      schedule - A given payment schedule, i.e., a collection of Periods with fixings, payments and period length.
      forwardCurveName - The forward curve to be used for the forward of the index.
      strike - The given strike (or moneyness).
      isStrikeMoneyness - If true, then the strike argument is interpreted as moneyness, i.e. we calculate an ATM forward from the schedule.
      discountCurveName - The discount curve to be used for discounting.
      volatilitySurfaceName - The volatility surface to be used.

  • Method Details

    • getValue

      public double getValue(double evaluationTime, AnalyticModel model)
      Description copied from interface: AnalyticProduct
      Return the valuation of the product using the given model. The model has to implement the modes of AnalyticModel.
      Parameters:
      evaluationTime - The evaluation time as double. Cash flows prior and including this time are not considered.
      model - The model under which the product is valued.
      Returns:
      The value of the product using the given model.

    • getValueAsPrice

      public double getValueAsPrice(double evaluationTime, AnalyticModel model)
      Returns the value of this product under the given model.
      Parameters:
      evaluationTime - Evaluation time.
      model - The model.
      Returns:
      Value of this product und the given model.

    • getATMForward

      public double getATMForward(AnalyticModel model, boolean isFirstPeriodIncluded)
      Return the ATM forward for this cap. The ATM forward is the fixed rate K such that the value of the payoffs \( F(t_i) - K \) is zero, where \( F(t_i) \) is the ATM forward of the i-th caplet. Note however that the is a convention to determine the ATM forward of a cap from the payoffs excluding the first one. The reason here is that for non-forward starting cap, the first period is already fixed, i.e. it has no vega.
      Parameters:
      model - The model to retrieve the forward curve from (by name).
      isFirstPeriodIncluded - If true, the forward will be determined by considering the periods after removal of the first periods (except, if the Cap consists only of 1 period).
      Returns:
      The ATM forward of this cap.

    • getImpliedVolatility

      public double getImpliedVolatility(double evaluationTime, AnalyticModel model, VolatilitySurface.QuotingConvention quotingConvention)
      Returns the value of this cap in terms of an implied volatility (of a flat caplet surface).
      Parameters:
      evaluationTime - The evaluation time as double. Cash flows prior and including this time are not considered.
      model - The model under which the product is valued.
      quotingConvention - The quoting convention requested for the return value.
      Returns:
      The value of the product using the given model in terms of a implied volatility.

    • getForwardCurveName

      public String getForwardCurveName()
      Returns the name of the forward curve references by this cap.
      Returns:
      the forward curve name.

    • getStrike

      public double getStrike()
      Returns the strike of this caplet.
      Returns:
      the strike

    • getDiscountCurveName

      public String getDiscountCurveName()
      Returns the name of the discount curve referenced by this cap.
      Returns:
      the discount curve name

    • toString

      public String toString()
      Overrides:
      toString in class Object