Package org.drip.dynamics.lmm

Class LognormalLIBORVolatility

java.lang.Object

org.drip.dynamics.hjm.MultiFactorVolatility

org.drip.dynamics.lmm.LognormalLIBORVolatility

public class LognormalLIBORVolatility
extends MultiFactorVolatility

LognormalLIBORVolatility implements the Multi-Factor Log-normal LIBOR Volatility 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
LognormalLIBORVolatility(int iSpotDate, ForwardLabel lslForward, MarketSurface[] aMSVolatility, PrincipalFactorSequenceGenerator pfsg)	LognormalLIBORVolatility Constructor

Method Summary

Modifier and Type	Method	Description
double[]	continuousForwardVolatility(int iTargetDate, MergedDiscountForwardCurve dc)	Compute the Volatility of the Continuously Compounded Forward Rate Up to the Target Date
double[]	continuousForwardVolatility(int iTargetDate, ForwardCurve fc)	Compute the Volatility of the Continuously Compounded Forward Rate Up to the Target Date
double[]	continuousForwardVolatilityConstraint(ForwardCurve fc, int iTargetDate)	Compute the Constraint in the Difference in the Volatility of the Continuously Compounded Forward Rate between the Target Date and the Target Date + Forward Tenor
double	crossVolatilityIntegralProduct(int iForwardDate1, int iForwardDate2, int iTerminalDate)	Multi-Factor Cross Volatility Integral
ForwardLabel	forwardLabel()	Retrieve the Forward Label
int	spotDate()	Retrieve the Spot Date

Methods inherited from class org.drip.dynamics.hjm.MultiFactorVolatility

factorPointVolatility, factorPointVolatility, msg, pointVolatilityModulus, pointVolatilityModulusDerivative, volatilityIntegral, volatilitySurface, weightedFactorPointVolatility, xDateVolatilityFunction

Methods inherited from class java.lang.Object

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

Constructor Details

LognormalLIBORVolatility

public LognormalLIBORVolatility(int iSpotDate,
ForwardLabel lslForward,
MarketSurface[] aMSVolatility,
PrincipalFactorSequenceGenerator pfsg)
                         throws java.lang.Exception

LognormalLIBORVolatility Constructor

Parameters:

iSpotDate - The Spot Date

lslForward - The Forward Label

aMSVolatility - Array of the Multi-Factor Volatility Surfaces

pfsg - Principal Factor Sequence Generator

Throws:

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

Method Details

spotDate

public int spotDate()

Retrieve the Spot Date

Returns:

The Spot Date

forwardLabel

public ForwardLabel forwardLabel()

Retrieve the Forward Label

Returns:

The Forward Label

continuousForwardVolatilityConstraint

public double[] continuousForwardVolatilityConstraint(ForwardCurve fc,
int iTargetDate)

Compute the Constraint in the Difference in the Volatility of the Continuously Compounded Forward Rate between the Target Date and the Target Date + Forward Tenor

Parameters:

fc - The Forward Curve Instance

iTargetDate - The Target Date

Returns:

The Constraint in the Difference in the Volatility of the Continuously Compounded Forward Rate

continuousForwardVolatility

public double[] continuousForwardVolatility(int iTargetDate,
ForwardCurve fc)

Compute the Volatility of the Continuously Compounded Forward Rate Up to the Target Date

Parameters:

iTargetDate - The Target Date

fc - The Forward Curve Instance

Returns:

The Volatility of the Continuously Compounded Forward Rate Up to the Target Date

continuousForwardVolatility

public double[] continuousForwardVolatility(int iTargetDate,
MergedDiscountForwardCurve dc)

Compute the Volatility of the Continuously Compounded Forward Rate Up to the Target Date

Parameters:

iTargetDate - The Target Date

dc - The Discount Curve Instance

Returns:

The Volatility of the Continuously Compounded Forward Rate Up to the Target Date

crossVolatilityIntegralProduct

public double crossVolatilityIntegralProduct(int iForwardDate1,
int iForwardDate2,
int iTerminalDate)
                                      throws java.lang.Exception

Multi-Factor Cross Volatility Integral

Parameters:

iForwardDate1 - Forward Date #1

iForwardDate2 - Forward Date #2

iTerminalDate - The Terminal Date

Returns:

The Multi-Factor Cross Volatility Integral

Throws:

java.lang.Exception - Thrown if the Multi-Factor Cross Volatility Integral cannot be computed