discretizedcallablefixedratebond.cpp

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

/*
 Copyright (C) 2008 Allen Kuo

 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/experimental/callablebonds/discretizedcallablefixedratebond.hpp>

namespace QuantLib {

    namespace {

        bool withinNextWeek(Time t1, Time t2) {
            static const Time dt = 1.0/52;
            return t1 <= t2 && t2 <= t1+dt;
        }

    }


    DiscretizedCallableFixedRateBond::DiscretizedCallableFixedRateBond(
                                          const CallableBond::arguments& args,
                                          const Date& referenceDate,
                                          const DayCounter& dayCounter)
    : arguments_(args) {

        redemptionTime_ = dayCounter.yearFraction(referenceDate,
                                                  args.redemptionDate);

        couponTimes_.resize(args.couponDates.size());
        for (Size i=0; i<couponTimes_.size(); ++i)
            couponTimes_[i] =
                dayCounter.yearFraction(referenceDate,
                                        args.couponDates[i]);

        callabilityTimes_.resize(args.callabilityDates.size());
        for (Size i=0; i<callabilityTimes_.size(); ++i)
            callabilityTimes_[i] =
                dayCounter.yearFraction(referenceDate,
                                        args.callabilityDates[i]);

        // similar to the tree swaption engine, we collapse similar coupon
        // and exercise dates to avoid mispricing. Delete if unnecessary.

        for (Size i=0; i<callabilityTimes_.size(); i++) {
            Time exerciseTime = callabilityTimes_[i];
            for (Size j=0; j<couponTimes_.size(); j++) {
                if (withinNextWeek(exerciseTime, couponTimes_[j]))
                    couponTimes_[j] = exerciseTime;
            }
        }
    }


    void DiscretizedCallableFixedRateBond::reset(Size size) {
        values_ = Array(size, arguments_.redemption);
        adjustValues();
    }


    std::vector<Time> DiscretizedCallableFixedRateBond::mandatoryTimes() const {
        std::vector<Time> times;
        Time t;
        Size i;

        t = redemptionTime_;
        if (t >= 0.0) {
            times.push_back(t);
        }

        for (i=0; i<couponTimes_.size(); i++) {
            t = couponTimes_[i];
            if (t >= 0.0) {
                times.push_back(t);
            }
        }

        for (i=0; i<callabilityTimes_.size(); i++) {
            t = callabilityTimes_[i];
            if (t >= 0.0) {
                times.push_back(t);
            }
        }

        return times;
    }


    void DiscretizedCallableFixedRateBond::preAdjustValuesImpl() { }


    void DiscretizedCallableFixedRateBond::postAdjustValuesImpl() {
        for (Size i=0; i<callabilityTimes_.size(); i++) {
            Time t = callabilityTimes_[i];
            if (t >= 0.0 && isOnTime(t)) {
                applyCallability(i);
            }
        }
        for (Size i=0; i<couponTimes_.size(); i++) {
            Time t = couponTimes_[i];
            if (t >= 0.0 && isOnTime(t)) {
                addCoupon(i);
            }
        }
    }


    void DiscretizedCallableFixedRateBond::applyCallability(Size i) {
        Size j;
        switch (arguments_.putCallSchedule[i]->type() ) {
          case Callability::Call:
            for (j=0; j<values_.size(); j++) {
                values_[j] =
                    std::min(arguments_.callabilityPrices[i],
                             values_[j]);
            }
            break;
          case Callability::Put:
            for (j=0; j<values_.size(); j++) {
                values_[j] = std::max(values_[j],
                                      arguments_.callabilityPrices[i]);
            }
            break;
          default:
            QL_FAIL("unknown callability type");
        }
    }


    void DiscretizedCallableFixedRateBond::addCoupon(Size i) {
        values_ += arguments_.couponAmounts[i];
    }

}