Module net.finmath.lib

Package net.finmath.montecarlo.interestrate.products

Class CMSOption

java.lang.Object

net.finmath.montecarlo.AbstractMonteCarloProduct

net.finmath.montecarlo.interestrate.products.AbstractTermStructureMonteCarloProduct

net.finmath.montecarlo.interestrate.products.CMSOption

All Implemented Interfaces:

Product, TermStructureMonteCarloProduct, MonteCarloProduct

public class CMSOption
extends AbstractTermStructureMonteCarloProduct

Implements the valuation of an option on a CMS rate.

Version:

1.1

Author:

Christian Fries

Constructor Summary

Constructors

Constructor	Description
CMSOption(double exerciseDate, double[] fixingDates, double[] paymentDates, double[] periodLengths, double strike)	Create the option on a CMS rate.

Method Summary

Modifier and Type	Method	Description
RandomVariable	getValue(double evaluationTime, TermStructureMonteCarloSimulationModel model)	This method returns the value random variable of the product within the specified model, evaluated at a given evalutationTime.
double	getValue(ForwardCurve forwardCurve, double swaprateVolatility)	This method returns the value of the product using a Black-Scholes model for the swap rate with the Hunt-Kennedy convexity adjustment.

Methods inherited from class net.finmath.montecarlo.interestrate.products.AbstractTermStructureMonteCarloProduct

getFactorDrift, getValue, getValueForModifiedData, getValues

Methods inherited from class net.finmath.montecarlo.AbstractMonteCarloProduct

getCurrency, getValue, getValue, getValues, getValues, getValues, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, toString

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, wait, wait, wait

Methods inherited from interface net.finmath.montecarlo.MonteCarloProduct

getCurrency, getValue, getValue, getValues, getValues, getValues, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData

Constructor Details

CMSOption

public CMSOption(double exerciseDate,
 double[] fixingDates,
 double[] paymentDates,
 double[] periodLengths,
 double strike)

Create the option on a CMS rate.

Parameters:

exerciseDate - The exercise date of the option.

fixingDates - Vector of fixing dates.

paymentDates - Vector of payment dates (must have same length as fixing dates)

periodLengths - Vector of period length (must have same length as fixing dates)

strike - Strike swap rate.

Method Details

getValue

public RandomVariable getValue(double evaluationTime,
 TermStructureMonteCarloSimulationModel model)
                        throws CalculationException

This method returns the value random variable of the product within the specified model, evaluated at a given evalutationTime. Note: For a lattice this is often the value conditional to evalutationTime, for a Monte-Carlo simulation this is the (sum of) value discounted to evaluation time. Cashflows prior evaluationTime are not considered.

Specified by:

getValue in interface TermStructureMonteCarloProduct

Specified by:

getValue in class AbstractTermStructureMonteCarloProduct

Parameters:

evaluationTime - The time on which this products value should be observed.

model - The model used to price the product.

Returns:

The random variable representing the value of the product discounted to evaluation time

Throws:

CalculationException - Thrown if the valuation fails, specific cause may be available via the cause() method.

getValue

public double getValue(ForwardCurve forwardCurve,
 double swaprateVolatility)

This method returns the value of the product using a Black-Scholes model for the swap rate with the Hunt-Kennedy convexity adjustment. The model is determined by a discount factor curve and a swap rate volatility.

Parameters:

forwardCurve - The forward curve from which the swap rate is calculated. The discount curve, associated with this forward curve is used for discounting this option.

swaprateVolatility - The volatility of the log-swaprate.

Returns:

Value of this product