Module net.finmath.lib

Package net.finmath.montecarlo.interestrate.products

Class SwaprateCovarianceAnalyticApproximation

java.lang.Object

net.finmath.montecarlo.AbstractMonteCarloProduct

net.finmath.montecarlo.interestrate.products.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.

Version:

1.0

Author:

Christian Fries

Constructor Summary

Constructors

Constructor	Description
SwaprateCovarianceAnalyticApproximation(double[] swapTenor1, double[] swapTenor2)	Create the product implementing the analytic approximation of a swap rate covariance in a forward rate model.

Method Summary

Modifier and Type	Method	Description
RandomVariable	getValue(double evaluationTime, MonteCarloSimulationModel model)	This method returns the value random variable of the product within the specified model, evaluated at a given evalutationTime.
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)).

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

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.

Parameters:

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

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.

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)).

Parameters:

evaluationTime - The evaluation time.

timeDiscretization - The time discretization used for integrating the covariance.

model - A model implementing the LIBORMarketModelFromCovarianceModel

Returns:

Returns the approximated integrated instantaneous covariance of two swap rates.