Class SwaprateCovarianceAnalyticApproximation

All Implemented Interfaces:
Product, MonteCarloProduct

public class SwaprateCovarianceAnalyticApproximation extends AbstractMonteCarloProduct
This class implements an analytic approximation of the integrated instantaneous covariance of two swap rates under a LIBOR market model.
Christian Fries
  • Constructor Details

    • SwaprateCovarianceAnalyticApproximation

      public SwaprateCovarianceAnalyticApproximation(double[] swapTenor1, double[] swapTenor2)
      Create the product implementing the analytic approximation of a swap rate covariance in a forward rate model.
      swapTenor1 - The swap tenor of the first rate in doubles.
      swapTenor2 - The swap tenor of the second rate in doubles.
  • Method Details

    • getValue

      public RandomVariable getValue(double evaluationTime, MonteCarloSimulationModel model) throws CalculationException
      Description copied from interface: MonteCarloProduct
      This method returns the value random variable of the product within the specified model, evaluated at a given evalutationTime. 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. More generally: The value random variable is a random variable V*(t) such that the time-t conditional expectation of V*(t) is equal to the value of the financial product in time t. An example for V*(t) is the sum of t-discounted payoffs. Cashflows prior evaluationTime are not considered.
      Specified by:
      getValue in interface MonteCarloProduct
      Specified by:
      getValue in class AbstractMonteCarloProduct
      evaluationTime - The time on which this products value should be observed.
      model - The model used to price the product.
      The random variable representing the value of the product discounted to evaluation time
      CalculationException - Thrown if the valuation fails, specific cause may be available via the cause() method.
    • getValues

      public RandomVariable getValues(double evaluationTime, TimeDiscretization timeDiscretization, LIBORMarketModel model)
      Calculates the approximated integrated instantaneous covariance of two swap rates, using the approximation d log(S(t))/d log(L(t)) = d log(S(0))/d log(L(0)).
      evaluationTime - The evaluation time.
      timeDiscretization - The time discretization used for integrating the covariance.
      model - A model implementing the LIBORMarketModelFromCovarianceModel
      Returns the approximated integrated instantaneous covariance of two swap rates.