FRAStandardCapFloor.java

  1. package org.drip.product.fra;

  3. /*
  4.  * -*- mode: java; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*-
  5.  */

  7. /*!
  8.  * Copyright (C) 2020 Lakshmi Krishnamurthy
  9.  * Copyright (C) 2019 Lakshmi Krishnamurthy
  10.  * Copyright (C) 2018 Lakshmi Krishnamurthy
  11.  * Copyright (C) 2017 Lakshmi Krishnamurthy
  12.  * Copyright (C) 2016 Lakshmi Krishnamurthy
  13.  * Copyright (C) 2015 Lakshmi Krishnamurthy
  14.  * Copyright (C) 2014 Lakshmi Krishnamurthy
  15.  * 
  16.  *  This file is part of DROP, an open-source library targeting analytics/risk, transaction cost analytics,
  17.  *      asset liability management analytics, capital, exposure, and margin analytics, valuation adjustment
  18.  *      analytics, and portfolio construction analytics within and across fixed income, credit, commodity,
  19.  *      equity, FX, and structured products. It also includes auxiliary libraries for algorithm support,
  20.  *      numerical analysis, numerical optimization, spline builder, model validation, statistical learning,
  21.  *      and computational support.
  22.  *  
  23.  *      https://lakshmidrip.github.io/DROP/
  24.  *  
  25.  *  DROP is composed of three modules:
  26.  *  
  27.  *  - DROP Product Core - https://lakshmidrip.github.io/DROP-Product-Core/
  28.  *  - DROP Portfolio Core - https://lakshmidrip.github.io/DROP-Portfolio-Core/
  29.  *  - DROP Computational Core - https://lakshmidrip.github.io/DROP-Computational-Core/
  30.  * 
  31.  *  DROP Product Core implements libraries for the following:
  32.  *  - Fixed Income Analytics
  33.  *  - Loan Analytics
  34.  *  - Transaction Cost Analytics
  35.  * 
  36.  *  DROP Portfolio Core implements libraries for the following:
  37.  *  - Asset Allocation Analytics
  38.  *  - Asset Liability Management Analytics
  39.  *  - Capital Estimation Analytics
  40.  *  - Exposure Analytics
  41.  *  - Margin Analytics
  42.  *  - XVA Analytics
  43.  * 
  44.  *  DROP Computational Core implements libraries for the following:
  45.  *  - Algorithm Support
  46.  *  - Computation Support
  47.  *  - Function Analysis
  48.  *  - Model Validation
  49.  *  - Numerical Analysis
  50.  *  - Numerical Optimizer
  51.  *  - Spline Builder
  52.  *  - Statistical Learning
  53.  * 
  54.  *  Documentation for DROP is Spread Over:
  55.  * 
  56.  *  - Main                     => https://lakshmidrip.github.io/DROP/
  57.  *  - Wiki                     => https://github.com/lakshmiDRIP/DROP/wiki
  58.  *  - GitHub                   => https://github.com/lakshmiDRIP/DROP
  59.  *  - Repo Layout Taxonomy     => https://github.com/lakshmiDRIP/DROP/blob/master/Taxonomy.md
  60.  *  - Javadoc                  => https://lakshmidrip.github.io/DROP/Javadoc/index.html
  61.  *  - Technical Specifications => https://github.com/lakshmiDRIP/DROP/tree/master/Docs/Internal
  62.  *  - Release Versions         => https://lakshmidrip.github.io/DROP/version.html
  63.  *  - Community Credits        => https://lakshmidrip.github.io/DROP/credits.html
  64.  *  - Issues Catalog           => https://github.com/lakshmiDRIP/DROP/issues
  65.  *  - JUnit                    => https://lakshmidrip.github.io/DROP/junit/index.html
  66.  *  - Jacoco                   => https://lakshmidrip.github.io/DROP/jacoco/index.html
  67.  * 
  68.  *  Licensed under the Apache License, Version 2.0 (the "License");
  69.  *      you may not use this file except in compliance with the License.
  70.  *   
  71.  *  You may obtain a copy of the License at
  72.  *      http://www.apache.org/licenses/LICENSE-2.0
  73.  *  
  74.  *  Unless required by applicable law or agreed to in writing, software
  75.  *      distributed under the License is distributed on an "AS IS" BASIS,
  76.  *      WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
  77.  *  
  78.  *  See the License for the specific language governing permissions and
  79.  *      limitations under the License.
  80.  */

  82. /**
  83.  * <i>FRAStandardCapFloor</i> implements the Caps and Floors on the Standard FRA.
  84.  *
  85.  *  <br><br>
  86.  *  <ul>
  87.  *      <li><b>Module </b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/ProductCore.md">Product Core Module</a></li>
  88.  *      <li><b>Library</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/FixedIncomeAnalyticsLibrary.md">Fixed Income Analytics</a></li>
  89.  *      <li><b>Project</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/product/README.md">Product Components/Baskets for Credit, FRA, FX, Govvie, Rates, and Option AssetClasses</a></li>
  90.  *      <li><b>Package</b> = <a href = "https://github.com/lakshmiDRIP/DROP/tree/master/src/main/java/org/drip/product/fra/README.md">Standard/Market FRAs - Caps/Floors</a></li>
  91.  *  </ul>
  92.  * <br><br>
  93.  *
  94.  * @author Lakshmi Krishnamurthy
  95.  */

  97. public class FRAStandardCapFloor extends org.drip.product.option.OptionComponent
  98. {
  99.     private boolean _bIsCap = false;
  100.     private double _dblStrike = java.lang.Double.NaN;
  101.     private org.drip.product.rates.Stream _stream = null;

  103.     private java.util.List<org.drip.product.fra.FRAStandardCapFloorlet> _lsFRACapFloorlet = new
  104.         java.util.ArrayList<org.drip.product.fra.FRAStandardCapFloorlet>();

  106.     /**
  107.      * FRAStandardCapFloor constructor
  108.      * 
  109.      * @param strName Name of the Cap/Floor Instance
  110.      * @param stream The Underlying Stream
  111.      * @param strManifestMeasure Measure of the Underlying Component
  112.      * @param bIsCap Is the FRA Option a Cap? TRUE - YES
  113.      * @param dblStrike Strike of the Underlying Component's Measure
  114.      * @param ltds Last Trading Date Setting
  115.      * @param csp Cash Settle Parameters
  116.      * @param fpg The Fokker Planck Pricer Instance
  117.      * 
  118.      * @throws java.lang.Exception Thrown if the Inputs are Invalid
  119.      */

  121.     public FRAStandardCapFloor (
  122.         final java.lang.String strName,
  123.         final org.drip.product.rates.Stream stream,
  124.         final java.lang.String strManifestMeasure,
  125.         final boolean bIsCap,
  126.         final double dblStrike,
  127.         final org.drip.product.params.LastTradingDateSetting ltds,
  128.         final org.drip.param.valuation.CashSettleParams csp,
  129.         final org.drip.pricer.option.FokkerPlanckGenerator fpg)
  130.         throws java.lang.Exception
  131.     {
  132.         super (strName, org.drip.product.creator.SingleStreamComponentBuilder.FRAStandard
  133.             (stream.effective(), stream.forwardLabel(), dblStrike), strManifestMeasure, dblStrike,
  134.                 stream.initialNotional(), ltds, csp);

  136.         if (null == (_stream = stream) || !org.drip.numerical.common.NumberUtil.IsValid (_dblStrike = dblStrike))
  137.             throw new java.lang.Exception ("FRAStandardCapFloor Constructor => Invalid Inputs");

  139.         _bIsCap = bIsCap;

  141.         org.drip.state.identifier.ForwardLabel fri = _stream.forwardLabel();

  143.         if (null == fri)
  144.             throw new java.lang.Exception ("FRAStandardCapFloor Constructor => Invalid Floater Index");

  146.         for (org.drip.analytics.cashflow.CompositePeriod period : _stream.periods()) {
  147.             org.drip.product.fra.FRAStandardComponent fra =
  148.                 org.drip.product.creator.SingleStreamComponentBuilder.FRAStandard (new
  149.                     org.drip.analytics.date.JulianDate (period.startDate()), fri, _dblStrike);

  151.             _lsFRACapFloorlet.add (new org.drip.product.fra.FRAStandardCapFloorlet (fra.name() + "::LET",
  152.                 fra, strManifestMeasure, _bIsCap, _dblStrike, _stream.notional (period.startDate()), ltds,
  153.                     fpg, csp));
  154.         }
  155.     }

  157.     @Override public org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double> value (
  158.         final org.drip.param.valuation.ValuationParams valParams,
  159.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  160.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  161.         final org.drip.param.valuation.ValuationCustomizationParams vcp)
  162.     {
  163.         double dblPV = 0.;
  164.         double dblPrice = 0.;
  165.         double dblUpfront = 0.;
  166.         org.drip.function.r1tor1solver.FixedPointFinderOutput fpfo = null;

  168.         long lStart = System.nanoTime();

  170.         final int iValueDate = valParams.valueDate();

  172.         org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double> mapStreamResult = _stream.value
  173.             (valParams, pricerParams, csqs, vcp);

  175.         for (org.drip.product.fra.FRAStandardCapFloorlet fracfl : _lsFRACapFloorlet) {
  176.             org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double> mapFRAResult = fracfl.value
  177.                 (valParams, pricerParams, csqs, vcp);

  179.             if (null == mapFRAResult) continue;

  181.             if (mapFRAResult.containsKey ("Price")) dblPrice += mapFRAResult.get ("Price");

  183.             if (mapFRAResult.containsKey ("PV")) dblPV += mapFRAResult.get ("PV");

  185.             if (mapFRAResult.containsKey ("Upfront")) dblUpfront += mapFRAResult.get ("Upfront");
  186.         }

  188.         org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double> mapResult = new
  189.             org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double>();

  191.         mapResult.put ("ATMFairPremium", mapStreamResult.get ("FairPremium"));

  193.         mapResult.put ("Price", dblPrice);

  195.         mapResult.put ("PV", dblPV);

  197.         mapResult.put ("Upfront", dblUpfront);

  199.         org.drip.function.definition.R1ToR1 funcVolPricer = new org.drip.function.definition.R1ToR1 (null) {
  200.             @Override public double evaluate (
  201.                 final double dblVolatility)
  202.                 throws java.lang.Exception
  203.             {
  204.                 double dblCapFloorletPrice = 0.;

  206.                 for (org.drip.product.fra.FRAStandardCapFloorlet fracfl : _lsFRACapFloorlet) {
  207.                     int iExerciseDate = fracfl.exerciseDate().julian();

  209.                     if (iExerciseDate <= iValueDate) continue;

  211.                     dblCapFloorletPrice += fracfl.price (valParams, pricerParams, csqs, vcp, dblVolatility);
  212.                 }

  214.                 return dblCapFloorletPrice;
  215.             }
  216.         };

  218.         try {
  219.             fpfo = (new org.drip.function.r1tor1solver.FixedPointFinderBracketing (dblPrice, funcVolPricer,
  220.                 null, org.drip.function.r1tor1solver.VariateIteratorPrimitive.BISECTION, false)).findRoot
  221.                     (org.drip.function.r1tor1solver.InitializationHeuristics.FromHardSearchEdges (0.0001,
  222.                         5.));
  223.         } catch (java.lang.Exception e) {
  224.             e.printStackTrace();

  226.             return mapResult;
  227.         }

  229.         mapResult.put ("CalcTime", (System.nanoTime() - lStart) * 1.e-09);

  231.         if (null != fpfo && fpfo.containsRoot())
  232.             mapResult.put ("FlatVolatility", fpfo.getRoot());
  233.         else
  234.             mapResult.put ("FlatVolatility", java.lang.Double.NaN);

  236.         return mapResult;
  237.     }

  239.     @Override public java.util.Set<java.lang.String> measureNames()
  240.     {
  241.         java.util.Set<java.lang.String> setstrMeasureNames = new java.util.TreeSet<java.lang.String>();

  243.         setstrMeasureNames.add ("ATMFairPremium");

  245.         setstrMeasureNames.add ("CalcTime");

  247.         setstrMeasureNames.add ("FlatVolatility");

  249.         setstrMeasureNames.add ("Price");

  251.         setstrMeasureNames.add ("PV");

  253.         setstrMeasureNames.add ("Upfront");

  255.         return setstrMeasureNames;
  256.     }

  258.     @Override public double pv (
  259.         final org.drip.param.valuation.ValuationParams valParams,
  260.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  261.         final org.drip.param.market.CurveSurfaceQuoteContainer csqc,
  262.         final org.drip.param.valuation.ValuationCustomizationParams vcp)
  263.         throws java.lang.Exception
  264.     {
  265.         double dblPV = 0.;

  267.         for (org.drip.product.fra.FRAStandardCapFloorlet fracfl : _lsFRACapFloorlet)
  268.             dblPV += fracfl.pv (valParams, pricerParams, csqc, vcp);

  270.         return dblPV;
  271.     }

  273.     /**
  274.      * Retrieve the Stream Instance Underlying the Cap
  275.      * 
  276.      * @return The Stream Instance Underlying the Cap
  277.      */

  279.     public org.drip.product.rates.Stream stream()
  280.     {
  281.         return _stream;
  282.     }

  284.     /**
  285.      * Indicate if this is a Cap or Floor
  286.      * 
  287.      * @return TRUE - The Product is a Cap
  288.      */

  290.     public boolean isCap()
  291.     {
  292.         return _bIsCap;
  293.     }

  295.     /**
  296.      * Retrieve the List of the Underlying Caplets/Floorlets
  297.      * 
  298.      * @return The List of the Underlying Caplets/Floorlets
  299.      */

  301.     public java.util.List<org.drip.product.fra.FRAStandardCapFloorlet> capFloorlets()
  302.     {
  303.         return _lsFRACapFloorlet;
  304.     }

  306.     /**
  307.      * Compute the ATM Cap/Floor Price from the Flat Volatility
  308.      * 
  309.      * @param valParams The Valuation Parameters
  310.      * @param pricerParams The Pricer Parameters
  311.      * @param csqs The Market Parameters
  312.      * @param vcp The Valuation Customization Parameters
  313.      * @param dblFlatVolatility The Flat Volatility
  314.      * 
  315.      * @return The Cap/Floor ATM Price
  316.      * 
  317.      * @throws java.lang.Exception Thrown if the ATM Price cannot be calculated
  318.      */

  320.     public double atmPriceFromVolatility (
  321.         final org.drip.param.valuation.ValuationParams valParams,
  322.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  323.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  324.         final org.drip.param.valuation.ValuationCustomizationParams vcp,
  325.         final double dblFlatVolatility)
  326.         throws java.lang.Exception
  327.     {
  328.         if (null == valParams || !org.drip.numerical.common.NumberUtil.IsValid (dblFlatVolatility))
  329.             throw new java.lang.Exception ("FRAStandardCapFloor::atmPriceFromVolatility => Invalid Inputs");

  331.         int iValueDate = valParams.valueDate();

  333.         double dblPrice = 0.;

  335.         org.drip.product.fra.FRAStandardCapFloorlet fraLeading = _lsFRACapFloorlet.get (0);

  337.         java.lang.String strManifestMeasure = fraLeading.manifestMeasure();

  339.         org.drip.pricer.option.FokkerPlanckGenerator fpg = fraLeading.pricer();

  341.         org.drip.product.params.LastTradingDateSetting ltds = fraLeading.lastTradingDateSetting();

  343.         org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double> mapStreamResult = _stream.value
  344.             (valParams, pricerParams, csqs, vcp);

  346.         if (null == mapStreamResult || !mapStreamResult.containsKey ("FairPremium"))
  347.             throw new java.lang.Exception
  348.                 ("FRAStandardCapFloor::atmPriceFromVolatility => Cannot calculate Fair Premium");

  350.         double dblCapATMFairPremium = mapStreamResult.get ("FairPremium");

  352.         org.drip.state.identifier.ForwardLabel forwardLabel = _stream.forwardLabel();

  354.         java.util.List<org.drip.product.fra.FRAStandardCapFloorlet> lsATMFRACapFloorlet = new
  355.             java.util.ArrayList<org.drip.product.fra.FRAStandardCapFloorlet>();

  357.         for (org.drip.analytics.cashflow.CompositePeriod period : _stream.periods()) {
  358.             org.drip.product.fra.FRAStandardComponent fra =
  359.                 org.drip.product.creator.SingleStreamComponentBuilder.FRAStandard (new
  360.                     org.drip.analytics.date.JulianDate (period.startDate()), forwardLabel,
  361.                         dblCapATMFairPremium);

  363.             lsATMFRACapFloorlet.add (new org.drip.product.fra.FRAStandardCapFloorlet (fra.name() + "::LET",
  364.                 fra, strManifestMeasure, _bIsCap, dblCapATMFairPremium, _stream.notional
  365.                     (period.startDate()), ltds, fpg, cashSettleParams()));
  366.         }

  368.         for (org.drip.product.fra.FRAStandardCapFloorlet fracfl : lsATMFRACapFloorlet) {
  369.             org.drip.analytics.date.JulianDate dtExercise = fracfl.exerciseDate();

  371.             int iExerciseDate = dtExercise.julian();

  373.             if (iExerciseDate <= iValueDate) continue;

  375.             dblPrice += fracfl.price (valParams, pricerParams, csqs, vcp, dblFlatVolatility);
  376.         }

  378.         return dblPrice;
  379.     }

  381.     /**
  382.      * Imply the Flat Cap/Floor Volatility from the Calibration ATM Price
  383.      * 
  384.      * @param valParams The Valuation Parameters
  385.      * @param pricerParams The Pricer Parameters
  386.      * @param csqs The Market Parameters
  387.      * @param vcp The Valuation Customization Parameters
  388.      * @param dblCalibPrice The Calibration Price
  389.      * 
  390.      * @return The Cap/Floor Flat Volatility
  391.      * 
  392.      * @throws java.lang.Exception Thrown if the Flat Volatility cannot be calculated
  393.      */

  395.     public double volatilityFromATMPrice (
  396.         final org.drip.param.valuation.ValuationParams valParams,
  397.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  398.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  399.         final org.drip.param.valuation.ValuationCustomizationParams vcp,
  400.         final double dblCalibPrice)
  401.         throws java.lang.Exception
  402.     {
  403.         if (null == valParams || !org.drip.numerical.common.NumberUtil.IsValid (dblCalibPrice))
  404.             throw new java.lang.Exception ("FRAStandardCapFloor::volatilityFromATMPrice => Invalid Inputs");

  406.         org.drip.function.definition.R1ToR1 funcVolPricer = new org.drip.function.definition.R1ToR1 (null) {
  407.             @Override public double evaluate (
  408.                 final double dblVolatility)
  409.                 throws java.lang.Exception
  410.             {
  411.                 return atmPriceFromVolatility (valParams, pricerParams, csqs, vcp, dblVolatility);
  412.             }
  413.         };

  415.         org.drip.function.r1tor1solver.FixedPointFinderOutput fpfo = (new
  416.             org.drip.function.r1tor1solver.FixedPointFinderBracketing (dblCalibPrice, funcVolPricer, null,
  417.                 org.drip.function.r1tor1solver.VariateIteratorPrimitive.BISECTION, false)).findRoot
  418.                     (org.drip.function.r1tor1solver.InitializationHeuristics.FromHardSearchEdges (0.0001,
  419.                         5.));

  421.         if (null == fpfo || !fpfo.containsRoot())
  422.             throw new java.lang.Exception
  423.                 ("FRAStandardCapFloor::volatilityFromATMPrice => Cannot imply Flat Vol");

  425.         return fpfo.getRoot();
  426.     }

  428.     /**
  429.      * Compute the Cap/Floor Price from the Flat Volatility
  430.      * 
  431.      * @param valParams The Valuation Parameters
  432.      * @param pricerParams The Pricer Parameters
  433.      * @param csqs The Market Parameters
  434.      * @param vcp The Valuation Customization Parameters
  435.      * @param dblFlatVolatility The Flat Volatility
  436.      * 
  437.      * @return The Cap/Floor Price
  438.      * 
  439.      * @throws java.lang.Exception Thrown if the Price cannot be calculated
  440.      */

  442.     public double priceFromFlatVolatility (
  443.         final org.drip.param.valuation.ValuationParams valParams,
  444.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  445.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  446.         final org.drip.param.valuation.ValuationCustomizationParams vcp,
  447.         final double dblFlatVolatility)
  448.         throws java.lang.Exception
  449.     {
  450.         if (null == valParams || !org.drip.numerical.common.NumberUtil.IsValid (dblFlatVolatility))
  451.             throw new java.lang.Exception ("FRAStandardCapFloor::priceFromFlatVolatility => Invalid Inputs");

  453.         int iValueDate = valParams.valueDate();

  455.         double dblPrice = 0.;

  457.         for (org.drip.product.fra.FRAStandardCapFloorlet fracfl : _lsFRACapFloorlet) {
  458.             org.drip.analytics.date.JulianDate dtExercise = fracfl.exerciseDate();

  460.             int iExerciseDate = dtExercise.julian();

  462.             if (iExerciseDate <= iValueDate) continue;

  464.             dblPrice += fracfl.price (valParams, pricerParams, csqs, vcp, dblFlatVolatility);
  465.         }

  467.         return dblPrice;
  468.     }

  470.     /**
  471.      * Imply the Flat Cap/Floor Volatility from the Calibration Price
  472.      * 
  473.      * @param valParams The Valuation Parameters
  474.      * @param pricerParams The Pricer Parameters
  475.      * @param csqs The Market Parameters
  476.      * @param vcp The Valuation Customization Parameters
  477.      * @param dblCalibPrice The Calibration Price
  478.      * 
  479.      * @return The Cap/Floor Flat Volatility
  480.      * 
  481.      * @throws java.lang.Exception Thrown if the Price cannot be calculated
  482.      */

  484.     public double flatVolatilityFromPrice (
  485.         final org.drip.param.valuation.ValuationParams valParams,
  486.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  487.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  488.         final org.drip.param.valuation.ValuationCustomizationParams vcp,
  489.         final double dblCalibPrice)
  490.         throws java.lang.Exception
  491.     {
  492.         if (null == valParams || !org.drip.numerical.common.NumberUtil.IsValid (dblCalibPrice))
  493.             throw new java.lang.Exception ("FRAStandardCapFloor::flatVolatilityFromPrice => Invalid Inputs");

  495.         org.drip.function.definition.R1ToR1 funcVolPricer = new org.drip.function.definition.R1ToR1 (null) {
  496.             @Override public double evaluate (
  497.                 final double dblVolatility)
  498.                 throws java.lang.Exception
  499.             {
  500.                 return priceFromFlatVolatility (valParams, pricerParams, csqs, vcp, dblVolatility);
  501.             }
  502.         };

  504.         org.drip.function.r1tor1solver.FixedPointFinderOutput fpfo = (new
  505.             org.drip.function.r1tor1solver.FixedPointFinderBracketing (dblCalibPrice, funcVolPricer, null,
  506.                 org.drip.function.r1tor1solver.VariateIteratorPrimitive.BISECTION, false)).findRoot
  507.                     (org.drip.function.r1tor1solver.InitializationHeuristics.FromHardSearchEdges (0.0001,
  508.                         5.));

  510.         if (null == fpfo || !fpfo.containsRoot())
  511.             throw new java.lang.Exception
  512.                 ("FRAStandardCapFloor::flatVolatilityFromPrice => Cannot imply Flat Vol");

  514.         return fpfo.getRoot();
  515.     }

  517.     /**
  518.      * Strip the Piece-wise Constant Forward Rate Volatility of the Unmarked Segment of the Volatility Term
  519.      *  Structure
  520.      * 
  521.      * @param valParams The Valuation Parameters
  522.      * @param pricerParams The pricer Parameters
  523.      * @param csqs The Market Parameters
  524.      * @param vcp The Valuation Customization Parameters
  525.      * @param dblCapVolatility The Flat Cap Volatility
  526.      * @param mapDateVol The Date/Volatility Map
  527.      * 
  528.      * @return TRUE - The Forward Rate Volatility of the Unmarked Segment of the Volatility Term Structure
  529.      *  successfully implied
  530.      */

  532.     public boolean stripPiecewiseForwardVolatility (
  533.         final org.drip.param.valuation.ValuationParams valParams,
  534.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  535.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  536.         final org.drip.param.valuation.ValuationCustomizationParams vcp,
  537.         final double dblCapVolatility,
  538.         final java.util.Map<org.drip.analytics.date.JulianDate, java.lang.Double> mapDateVol)
  539.     {
  540.         if (null == valParams || null == mapDateVol) return false;

  542.         int iIndex = 0;
  543.         double dblPreceedingCapFloorletPV = 0.;
  544.         double dblCapPrice = java.lang.Double.NaN;
  545.         org.drip.function.r1tor1solver.FixedPointFinderOutput fpfo = null;

  547.         try {
  548.             dblCapPrice = priceFromFlatVolatility (valParams, pricerParams, csqs, vcp, dblCapVolatility);
  549.         } catch (java.lang.Exception e) {
  550.             e.printStackTrace();

  552.             return false;
  553.         }

  555.         final int iValueDate = valParams.valueDate();

  557.         final java.util.List<java.lang.Integer> lsCalibCapFloorletIndex = new
  558.             java.util.ArrayList<java.lang.Integer>();

  560.         for (org.drip.product.fra.FRAStandardCapFloorlet fracfl : _lsFRACapFloorlet) {
  561.             org.drip.analytics.date.JulianDate dtExercise = fracfl.exerciseDate();

  563.             int iExerciseDate = dtExercise.julian();

  565.             if (iExerciseDate <= iValueDate) continue;

  567.             if (mapDateVol.containsKey (dtExercise)) {
  568.                 double dblExerciseVolatility = mapDateVol.get (dtExercise);

  570.                 org.drip.analytics.support.CaseInsensitiveTreeMap<java.lang.Double> mapCapFloorlet =
  571.                     fracfl.valueFromSurfaceVariance (valParams, pricerParams, csqs, vcp,
  572.                         dblExerciseVolatility * dblExerciseVolatility * (iExerciseDate - iValueDate) /
  573.                             365.25);

  575.                 if (null == mapCapFloorlet || !mapCapFloorlet.containsKey ("Price")) return false;

  577.                 dblPreceedingCapFloorletPV += mapCapFloorlet.get ("Price");
  578.             } else
  579.                 lsCalibCapFloorletIndex.add (iIndex);

  581.             ++iIndex;
  582.         }

  584.         org.drip.function.definition.R1ToR1 funcVolPricer = new org.drip.function.definition.R1ToR1 (null) {
  585.             @Override public double evaluate (
  586.                 final double dblVolatility)
  587.                 throws java.lang.Exception
  588.             {
  589.                 int iIndex = 0;
  590.                 double dblSucceedingCapFloorletPV = 0.;

  592.                 for (org.drip.product.fra.FRAStandardCapFloorlet fracfl : _lsFRACapFloorlet) {
  593.                     int iExerciseDate = fracfl.exerciseDate().julian();

  595.                     if (iExerciseDate <= iValueDate) continue;

  597.                     if (lsCalibCapFloorletIndex.contains (iIndex)) {
  598.                         java.util.Map<java.lang.String, java.lang.Double> mapOutput =
  599.                             fracfl.valueFromSurfaceVariance (valParams, pricerParams, csqs, vcp,
  600.                                 dblVolatility * dblVolatility * (iExerciseDate - iValueDate) / 365.25);
  601.     
  602.                         if (null == mapOutput || !mapOutput.containsKey ("Price"))
  603.                             throw new java.lang.Exception
  604.                                 ("FRAStandardCapFloor::implyVolatility => Cannot generate Calibration Measure");
  605.     
  606.                         dblSucceedingCapFloorletPV += mapOutput.get ("Price");
  607.                     }

  609.                     ++iIndex;
  610.                 }

  612.                 return dblSucceedingCapFloorletPV;
  613.             }
  614.         };

  616.         try {
  617.             fpfo = (new org.drip.function.r1tor1solver.FixedPointFinderBracketing (dblCapPrice -
  618.                 dblPreceedingCapFloorletPV, funcVolPricer, null,
  619.                     org.drip.function.r1tor1solver.VariateIteratorPrimitive.BISECTION, false)).findRoot
  620.                         (org.drip.function.r1tor1solver.InitializationHeuristics.FromHardSearchEdges (0.0001,
  621.                             5.));
  622.         } catch (java.lang.Exception e) {
  623.             e.printStackTrace();
  624.         }

  626.         if (null == fpfo || !fpfo.containsRoot()) return false;

  628.         double dblVolatility = fpfo.getRoot();

  630.         iIndex = 0;

  632.         for (org.drip.product.fra.FRAStandardCapFloorlet fracfl : _lsFRACapFloorlet) {
  633.             if (lsCalibCapFloorletIndex.contains (iIndex))
  634.                 mapDateVol.put (fracfl.exerciseDate(), dblVolatility);

  636.             ++iIndex;
  637.         }

  639.         return true;
  640.     }

  642.     @Override public org.drip.state.estimator.PredictorResponseWeightConstraint volatilityPRWC (
  643.         final org.drip.param.valuation.ValuationParams valParams,
  644.         final org.drip.param.pricer.CreditPricerParams pricerParams,
  645.         final org.drip.param.market.CurveSurfaceQuoteContainer csqs,
  646.         final org.drip.param.valuation.ValuationCustomizationParams vcp,
  647.         final org.drip.product.calib.ProductQuoteSet pqs)
  648.     {
  649.         if (null == pqs || null == valParams || !(pqs instanceof
  650.             org.drip.product.calib.VolatilityProductQuoteSet))
  651.             return null;

  653.         if (valParams.valueDate() > maturityDate().julian()) return null;

  655.         double dblOptionPV = 0.;
  656.         org.drip.product.calib.VolatilityProductQuoteSet vpqs =
  657.             (org.drip.product.calib.VolatilityProductQuoteSet) pqs;

  659.         if (!vpqs.containsOptionPV()) return null;

  661.         try {
  662.             dblOptionPV = vpqs.optionPV();
  663.         } catch (java.lang.Exception e) {
  664.             e.printStackTrace();

  666.             return null;
  667.         }

  669.         org.drip.state.estimator.PredictorResponseWeightConstraint prwc = new
  670.             org.drip.state.estimator.PredictorResponseWeightConstraint();

  672.         for (org.drip.product.fra.FRAStandardCapFloorlet frascf : _lsFRACapFloorlet) {
  673.             org.drip.state.estimator.PredictorResponseWeightConstraint prwcFRASCF = frascf.volatilityPRWC
  674.                 (valParams, pricerParams, csqs, vcp, pqs);

  676.             if (null == prwcFRASCF || !prwc.absorb (prwcFRASCF)) return null;
  677.         }

  679.         return !prwc.updateValue (dblOptionPV) || !prwc.updateDValueDManifestMeasure ("OptionPV", 1.) ? null
  680.             : prwc;
  681.     }
  682. }
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