Package org.drip.dynamics.lmm

Class ContinuousForwardRateEvolver

java.lang.Object

org.drip.dynamics.lmm.ContinuousForwardRateEvolver

All Implemented Interfaces:

PointStateEvolver

public class ContinuousForwardRateEvolver
extends java.lang.Object
implements PointStateEvolver

ContinuousForwardRateEvolver sets up and implements the Multi-Factor No-arbitrage Dynamics of the Rates State Quantifiers traced from the Evolution of the Continuously Compounded Forward Rate as formulated in:

• Goldys, B., M. Musiela, and D. Sondermann (1994): Log-normality of Rates and Term Structure Models The University of New South Wales
• Musiela, M. (1994): Nominal Annual Rates and Log-normal Volatility Structure The University of New South Wales
• Brace, A., D. Gatarek, and M. Musiela (1997): The Market Model of Interest Rate Dynamics Mathematical Finance 7 (2) 127-155

• Module = Product Core Module
• Library = Fixed Income Analytics
• Project = HJM, Hull White, LMM, and SABR Dynamic Evolution Models
• Package = LMM Based Latent State Evolution

Author:

Lakshmi Krishnamurthy

Constructor Summary

Constructors

Constructor	Description
ContinuousForwardRateEvolver(FundingLabel lslFunding, ForwardLabel lslForward, MultiFactorVolatility mfv, R1ToR1 auInitialInstantaneousForwardRate)	ContinuousForwardRateEvolver Constructor

Method Summary

Modifier and Type	Method	Description
ContinuousForwardRateUpdate	evolve(int iSpotDate, int iViewDate, int iSpotTimeIncrement, LSQMPointUpdate lsqmPrev)	Evolve the Latent State and return the LSQM Point Update
ForwardLabel	forwardLabel()	Retrieve the Forward Label
FundingLabel	fundingLabel()	Retrieve the Funding Label
MultiFactorVolatility	mfv()	Retrieve the Multi-factor Volatility Instance
double	zeroCouponForwardPrice(int iSpotDate, int iForwardDate, int iMaturityDate, double dblSpotPrice, double dblSpotForwardReinvestmentAccrual)	Compute the Realized Zero Coupon Bond Forward Price

Methods inherited from class java.lang.Object

equals, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Constructor Details

ContinuousForwardRateEvolver

public ContinuousForwardRateEvolver(FundingLabel lslFunding,
ForwardLabel lslForward,
MultiFactorVolatility mfv,
R1ToR1 auInitialInstantaneousForwardRate)
                             throws java.lang.Exception

ContinuousForwardRateEvolver Constructor

Parameters:

lslFunding - The Funding Latent State Label

lslForward - The Forward Latent State Label

mfv - The Multi-Factor Volatility Instance

auInitialInstantaneousForwardRate - The Instantaneous Forward Rate Function

Throws:

java.lang.Exception - Thrown if Inputs are Invalid

Method Details

fundingLabel

public FundingLabel fundingLabel()

Retrieve the Funding Label

Returns:

The Funding Label

forwardLabel

public ForwardLabel forwardLabel()

Retrieve the Forward Label

Returns:

The Forward Label

mfv

public MultiFactorVolatility mfv()

Retrieve the Multi-factor Volatility Instance

Returns:

The Multi-factor Volatility Instance

evolve

public ContinuousForwardRateUpdate evolve(int iSpotDate,
int iViewDate,
int iSpotTimeIncrement,
LSQMPointUpdate lsqmPrev)

Description copied from interface: PointStateEvolver

Evolve the Latent State and return the LSQM Point Update

Specified by:

evolve in interface PointStateEvolver

Parameters:

iSpotDate - The Spot Date

iViewDate - The View Date

iSpotTimeIncrement - The Spot Time Increment

lsqmPrev - The Previous LSQM Point Update

Returns:

The LSQM Point Update

zeroCouponForwardPrice

public double zeroCouponForwardPrice(int iSpotDate,
int iForwardDate,
int iMaturityDate,
double dblSpotPrice,
double dblSpotForwardReinvestmentAccrual)
                              throws java.lang.Exception

Compute the Realized Zero Coupon Bond Forward Price

Parameters:

iSpotDate - The Spot Date

iForwardDate - The Forward Date

iMaturityDate - The Maturity Date

dblSpotPrice - The Spot Price

dblSpotForwardReinvestmentAccrual - The Continuously Re-invested Accruing Bank Account

Returns:

The Realized Zero Coupon Bond Forward Price

Throws:

java.lang.Exception - Thrown if the Inputs are invalid