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correlations.cpp

/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */

/*
 Copyright (C) 2007 Ferdinando Ametrano
 Copyright (C) 2007 François du Vignaud

 This file is part of QuantLib, a free-software/open-source library
 for financial quantitative analysts and developers - http://quantlib.org/

 QuantLib is free software: you can redistribute it and/or modify it
 under the terms of the QuantLib license.  You should have received a
 copy of the license along with this program; if not, please email
 <quantlib-dev@lists.sf.net>. The license is also available online at
 <http://quantlib.org/license.shtml>.

 This program is distributed in the hope that it will be useful, but WITHOUT
 ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS
 FOR A PARTICULAR PURPOSE.  See the license for more details.
*/

#include <ql/models/marketmodels/correlations/correlations.hpp>
#include <ql/models/marketmodels/utilities.hpp>

namespace QuantLib {

    Disposable<Matrix> exponentialCorrelations(
                                        const std::vector<Rate>& rateTimes,
                                        Real longTermCorr,
                                        Real beta) {
        checkIncreasingTimes(rateTimes);
        Size nbRows = rateTimes.size()-1;
        Matrix correlations(nbRows, nbRows);
        for (Size i=0; i<nbRows; ++i) {
            correlations[i][i] = 1.0;
            for (Size j=0; j<i; ++j)
                correlations[i][j] = correlations[j][i] =
                    longTermCorr + (1.0-longTermCorr) *
                        std::exp(-beta*std::fabs(rateTimes[i]-rateTimes[j]));
        }
        return correlations;
    }

}

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