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

/*
 Copyright (C) 2009 Chris Kenyon

 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/cashflows/inflationcouponpricer.hpp>
#include <ql/termstructures/volatility/inflation/yoyinflationoptionletvolatilitystructure.hpp>
#include <ql/pricingengines/blackformula.hpp>

namespace QuantLib {

    YoYInflationCouponPricer::
    YoYInflationCouponPricer(const Handle<YoYOptionletVolatilitySurface>& capletVol)
    : capletVol_(capletVol) {

        if( !capletVol_.empty() ) registerWith(capletVol_);
    }


    void YoYInflationCouponPricer::setCapletVolatility(
       const Handle<YoYOptionletVolatilitySurface>& capletVol) {
        QL_REQUIRE(!capletVol.empty(),"empty capletVol handle")
        capletVol_ = capletVol;
        registerWith(capletVol_);
    }


    Real YoYInflationCouponPricer::floorletPrice(Rate effectiveFloor) const{
        Real floorletPrice = optionletPrice(Option::Put, effectiveFloor);
        return gearing_ * floorletPrice;
    }

    Real YoYInflationCouponPricer::capletPrice(Rate effectiveCap) const{
        Real capletPrice = optionletPrice(Option::Call, effectiveCap);
        return gearing_ * capletPrice;
    }


    Rate YoYInflationCouponPricer::floorletRate(Rate effectiveFloor) const{
        return floorletPrice(effectiveFloor)/
        (coupon_->accrualPeriod()*discount_);
    }

    Rate YoYInflationCouponPricer::capletRate(Rate effectiveCap) const{
        return capletPrice(effectiveCap)/(coupon_->accrualPeriod()*discount_);
    }


00063     Real YoYInflationCouponPricer::optionletPriceImp(
                                                    //Option::Type optionType,
                                                    //Real effStrike,
                                                    //Real forward,
                                                    //Real stdDev) const {
                                                    Option::Type,
                                                    Real,
                                                    Real,
                                                    Real) const {
        QL_FAIL("you must implement this to get a vol-dependent price");
        //return effStrike*forward*stdDev*optionType;
    }


00077     Real YoYInflationCouponPricer::optionletPrice(Option::Type optionType,
                                                  Real effStrike) const {
        Date fixingDate = coupon_->fixingDate();
        if (fixingDate <= Settings::instance().evaluationDate()) {
            // the amount is determined
            Real a, b;
            if (optionType==Option::Call) {
                a = coupon_->indexFixing();
                b = effStrike;
            } else {
                a = effStrike;
                b = coupon_->indexFixing();
            }
            return std::max(a - b, 0.0)* coupon_->accrualPeriod()*discount_;
        } else {
            // not yet determined, use Black/DD1/Bachelier/whatever from Impl
            QL_REQUIRE(!capletVolatility().empty(),
                       "missing optionlet volatility");
            Real stdDev =
            std::sqrt(capletVolatility()->totalVariance(fixingDate,
                                                        effStrike));
            Rate fixing = optionletPriceImp(optionType,
                                            effStrike,
                                            adjustedFixing(),
                                            stdDev);
            return fixing * coupon_->accrualPeriod() * discount_;
        }
    }


    Rate YoYInflationCouponPricer::adjustedFixing(Rate fixing) const {

        if (fixing == Null<Rate>())
            fixing = coupon_->indexFixing();

        // no adjustment
        return fixing;
    }


    void YoYInflationCouponPricer::initialize(const InflationCoupon& coupon) {
        coupon_ = dynamic_cast<const YoYInflationCoupon*>(&coupon);
        QL_REQUIRE(coupon_, "year-on-year inflation coupon needed");
        gearing_ = coupon_->gearing();
        spread_ = coupon_->spread();
        paymentDate_ = coupon_->date();
        rateCurve_ = boost::dynamic_pointer_cast<YoYInflationIndex>(coupon.index())
            ->yoyInflationTermStructure()
            ->nominalTermStructure();

        // past or future fixing is managed in YoYInflationIndex::fixing()
        // use yield curve from index (which sets discount)

        discount_ = 1.0;
        if (paymentDate_ > rateCurve_->referenceDate())
            discount_ = rateCurve_->discount(paymentDate_);

        spreadLegValue_ = spread_ * coupon_->accrualPeriod()* discount_;

    }


    Real YoYInflationCouponPricer::swapletPrice() const {

        Real swapletPrice = adjustedFixing() * coupon_->accrualPeriod() * discount_;
        return gearing_ * swapletPrice + spreadLegValue_;
    }


    Rate YoYInflationCouponPricer::swapletRate() const {
        // This way we do not require the index to have
        // a yield curve, i.e. we do not get the problem
        // that a discounting-instrument-pricer is used
        // with a different yield curve
        return gearing_ * adjustedFixing() + spread_;
    }

    //=========================================================================
    // vol-dependent pricers, note that these do not discount
    //=========================================================================



00160     Real BlackYoYInflationCouponPricer::optionletPriceImp(Option::Type optionType,
                                                     Real  effStrike,
                                                     Real  forward,
                                                     Real stdDev
                                                     ) const {

        return blackFormula(optionType,
                            effStrike,
                            forward,
                            stdDev);
    }

00172     Real UnitDisplacedBlackYoYInflationCouponPricer::optionletPriceImp(Option::Type optionType,
                                                                  Real  effStrike,
                                                                  Real  forward,
                                                                  Real stdDev
                                                          ) const {

        return blackFormula(optionType,
                            effStrike + 1.0,
                            forward + 1.0,
                            stdDev);
    }

00184     Real BachelierYoYInflationCouponPricer::optionletPriceImp(Option::Type optionType,
                                                              Real  effStrike,
                                                              Real  forward,
                                                              Real stdDev
                                                          ) const {
        return bachelierBlackFormula(optionType,
                                     effStrike,
                                     forward,
                                     stdDev);
    }



}

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