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capfloor.hpp

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

/*
 Copyright (C) 2006 Ferdinando Ametrano
 Copyright (C) 2006 François du Vignaud
 Copyright (C) 2001, 2002, 2003 Sadruddin Rejeb
 Copyright (C) 2006, 2007 StatPro Italia srl

 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.
*/

/*! \file capfloor.hpp
    \brief cap and floor class
*/

#ifndef quantlib_instruments_capfloor_hpp
#define quantlib_instruments_capfloor_hpp

#include <ql/numericalmethod.hpp>
#include <ql/instrument.hpp>
#include <ql/cashflow.hpp>
#include <ql/cashflows/iborcoupon.hpp>
#include <ql/handle.hpp>
#include <ql/quotes/simplequote.hpp>

namespace QuantLib {

    class YieldTermStructure;

    //! Base class for cap-like instruments
    /*! \ingroup instruments

        \test
        - the correctness of the returned value is tested by checking
          that the price of a cap (resp. floor) decreases
          (resp. increases) with the strike rate.
        - the relationship between the values of caps, floors and the
          resulting collars is checked.
        - the put-call parity between the values of caps, floors and
          swaps is checked.
        - the correctness of the returned implied volatility is tested
          by using it for reproducing the target value.
        - the correctness of the returned value is tested by checking
          it against a known good value.
    */
00057     class CapFloor : public Instrument {
      public:
        enum Type { Cap, Floor, Collar };
        class arguments;
        class engine;
        CapFloor(Type type,
                 const Leg& floatingLeg,
                 const std::vector<Rate>& capRates,
                 const std::vector<Rate>& floorRates,
                 const Handle<YieldTermStructure>& termStructure,
                 const boost::shared_ptr<PricingEngine>& engine);
        CapFloor(Type type,
                 const Leg& floatingLeg,
                 const std::vector<Rate>& strikes,
                 const Handle<YieldTermStructure>& termStructure,
                 const boost::shared_ptr<PricingEngine>& engine);
        //! \name Instrument interface
        //@{
        bool isExpired() const;
        void setupArguments(PricingEngine::arguments*) const;
        //@}
        //! \name Inspectors
        //@{
        Type type() const { return type_; }
        const Leg& leg() const {
            return floatingLeg_;
        }
        const std::vector<Rate>& capRates() const {
            return capRates_;
        }
        const std::vector<Rate>& floorRates() const {
            return floorRates_;
        }
        const Leg& floatingLeg() const {
            return floatingLeg_;
        }
        Rate atmRate() const;
        Date startDate() const;
        Date maturityDate() const;
        Date lastFixingDate() const;
        //@}
        //! implied term volatility
        Volatility impliedVolatility(Real price,
                                     Real accuracy = 1.0e-4,
                                     Size maxEvaluations = 100,
                                     Volatility minVol = 1.0e-7,
                                     Volatility maxVol = 4.0) const;
      private:
        Type type_;
        Leg floatingLeg_;
        std::vector<Rate> capRates_;
        std::vector<Rate> floorRates_;
        Handle<YieldTermStructure> termStructure_;
        // helper class for implied volatility calculation
        class ImpliedVolHelper {
          public:
            ImpliedVolHelper(const CapFloor&,
                             const Handle<YieldTermStructure>&,
                             Real targetValue);
            Real operator()(Volatility x) const;
            Real derivative(Volatility x) const;
          private:
            boost::shared_ptr<PricingEngine> engine_;
            Handle<YieldTermStructure> termStructure_;
            Real targetValue_;
            boost::shared_ptr<SimpleQuote> vol_;
            const Instrument::results* results_;
        };
    };

    //! Concrete cap class
    /*! \ingroup instruments */
00129     class Cap : public CapFloor {
      public:
        Cap(const Leg& floatingLeg,
            const std::vector<Rate>& exerciseRates,
            const Handle<YieldTermStructure>& termStructure,
            const boost::shared_ptr<PricingEngine>& engine)
        : CapFloor(CapFloor::Cap, floatingLeg,
                   exerciseRates, std::vector<Rate>(),
                   termStructure, engine) {}
    };

    //! Concrete floor class
    /*! \ingroup instruments */
00142     class Floor : public CapFloor {
      public:
        Floor(const Leg& floatingLeg,
              const std::vector<Rate>& exerciseRates,
              const Handle<YieldTermStructure>& termStructure,
              const boost::shared_ptr<PricingEngine>& engine)
        : CapFloor(CapFloor::Floor, floatingLeg,
                   std::vector<Rate>(), exerciseRates,
                   termStructure, engine) {}
    };

    //! Concrete collar class
    /*! \ingroup instruments */
00155     class Collar : public CapFloor {
      public:
        Collar(const Leg& floatingLeg,
               const std::vector<Rate>& capRates,
               const std::vector<Rate>& floorRates,
               const Handle<YieldTermStructure>& termStructure,
               const boost::shared_ptr<PricingEngine>& engine)
        : CapFloor(CapFloor::Collar, floatingLeg, capRates, floorRates,
                   termStructure, engine) {}
    };


    //! %Arguments for cap/floor calculation
00168     class CapFloor::arguments : public virtual PricingEngine::arguments {
      public:
        arguments() : type(CapFloor::Type(-1)) {}
        CapFloor::Type type;
        std::vector<Time> startTimes;
        std::vector<Date> fixingDates;
        std::vector<Time> fixingTimes;
        std::vector<Time> endTimes;
        std::vector<Time> accrualTimes;
        std::vector<Rate> capRates;
        std::vector<Rate> floorRates;
        std::vector<Rate> forwards;
        std::vector<Real> gearings;
        std::vector<Real> spreads;
        std::vector<DiscountFactor> discounts;
        std::vector<Real> nominals;
        void validate() const;
    };

    //! base class for cap/floor engines
00188     class CapFloor::engine
        : public GenericEngine<CapFloor::arguments, CapFloor::results> {};

    std::ostream& operator<<(std::ostream&, CapFloor::Type);

}

#endif

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