Re: add .asOptionlet() to MakeCapFloor ?

Posted by Chris Kenyon-2 on
URL: http://quantlib.414.s1.nabble.com/add-asOptionlet-to-MakeCapFloor-tp11828p11829.html

Hi Nando,

suggested changes below & attached.

in /instruments/capfloor.hpp

after line 104:

        //! Returns the i'th optionlet as a new CapFloor with only one cash flow.
        boost::shared_ptr<CapFloor> optionlet(const Size i) const;

in /instruments/capfloor.cpp

after line 160:

    boost::shared_ptr<CapFloor> CapFloor::optionlet(const Size i) const {
        QL_REQUIRE(i < leg().size(), "optionlet " << i << " does not exist, only " << leg().size());
        Leg cashflowi;
        cashflowi.push_back(leg()[i]);
        boost::shared_ptr<CapFloor> optionleti;
        if (type() == Cap) {
            std::vector<Rate> capRatei;
            capRatei.push_back(capRates()[i]);
            optionleti = boost::shared_ptr<CapFloor>(new CapFloor(type(), cashflowi, capRatei) );
        } else if (type() == Floor) {
            std::vector<Rate> floorRatei;
            floorRatei.push_back(floorRates()[i]);
            optionleti = boost::shared_ptr<CapFloor>(new CapFloor(type(), cashflowi, floorRatei) );
        } else {
            std::vector<Rate> capRatei;
            capRatei.push_back(capRates()[i]);
            std::vector<Rate> floorRatei;
            floorRatei.push_back(floorRates()[i]);
            optionleti = boost::shared_ptr<CapFloor>(new CapFloor(type(), cashflowi, capRatei,
                                                                                     floorRatei) );
        }
        return optionleti;
    }

I've added to testConsistency() as well (checks that sum of optionlet NPV's is the same as the original NPV).  This is a bit longer so I've attached the file.

Regards,
Chris

----- Original Message ----
From: Chris Kenyon <[hidden email]>
To: Ferdinando Ametrano <[hidden email]>
Cc: [hidden email]
Sent: Friday, March 7, 2008 11:37:39 AM
Subject: Re: [Quantlib-dev] add .asOptionlet() to MakeCapFloor ?

Hi Nando,

I like your second suggestion - simple and addresses an equivalent issue directly (getting the n-th caplet), avoids market convention issues, and avoids doing something awkward (forward starts).  The output should still be a capfloor, but with just one cashflow.  I can put a patch together or would you like to?

Regards,
Chris

----- Original Message ----
From: Ferdinando Ametrano <[hidden email]>
To: Chris Kenyon <[hidden email]>
Cc: [hidden email]
Sent: Friday, March 7, 2008 11:15:12 AM
Subject: Re: [Quantlib-dev] add .asOptionlet() to MakeCapFloor ?

Hi Chris,

not sure I get your point.

Couldn't you obtain the same result just using the standard constructor:
       MakeCapFloor(CapFloor::Type capFloorType,
                    const Period& capFloorTenor,
                    const boost::shared_ptr<IborIndex>& iborIndex,
                    Rate strike = Null<Rate>(),
                    const Period& forwardStart = 0*Days);
 
E.g. let's assume you want the last caplet in a 3Y cap on 6M ibor rate:

MakeCapFloor(Cap, 6*Months, my6mIborIndex, myStrike, 30*Months);

If this is not equivalent because of market conventions used in the 30M fwd start swap calculation, then I still have another point.
To obtain the sequence of distinct caplets contained in a standard cap, we could have something like CapFloor::optionlet(Size i) instead: this would allow to create just one single cap and to extract all caplets from it, avoiding multiple redundant cap creations

I look forward to your feedback

ciao -- Nando

On Fri, Mar 7, 2008 at 11:35 AM, Chris Kenyon <[hidden email]> wrote:
>
> Hi,
>
> this would make life easier.  Effect: only the last cashflow is returned.
> The extra code could be something like:
>
> In .hpp after line 66
>
>     //! Only get last coupon, i.e. get caplet version of cap
>     //! or floorlet version of floor, etc.
>     MakeCapFloor& asOptionlet();
>
> Also before closing };
>
>     bool asOptionlet_;
>
> In .cpp after line 38 in constructor (and before {}):
>
>     asOptionlet_(false)
>
> after new line 53
>
>     //! only leaves the last coupon
>     if (asOptionlet_ && leg.size()>1)
>         leg.erase(leg.begin(), --leg.end());
>
> Best regards,
> Chris
>
>
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