Package com.opengamma.strata.pricer.model

Interface SabrVolatilityFormula

All Known Implementing Classes:

SabrHaganNormalVolatilityFormula, SabrHaganVolatilityFunctionProvider

public interface SabrVolatilityFormula

Provides volatility and sensitivity in the SABR model.

Method Summary

Modifier and Type	Method	Description
ValueType	getVolatilityType()	Gets the type of volatility returned by the volatility(double, double, double, double, double, double, double) method.
static SabrVolatilityFormula	hagan()	The Hagan SABR volatility formula.
double	volatility(double forward, double strike, double timeToExpiry, double alpha, double beta, double rho, double nu)	Calculates the volatility.
ValueDerivatives	volatilityAdjoint(double forward, double strike, double timeToExpiry, double alpha, double beta, double rho, double nu)	Calculates volatility and the adjoint (volatility sensitivity to forward, strike and model parameters).

Method Detail

hagan

static SabrVolatilityFormula hagan()

The Hagan SABR volatility formula.

This provides the functions of volatility and its sensitivity to the SABR model parameters based on the original Hagan SABR formula.

Reference: Hagan, P.; Kumar, D.; Lesniewski, A. & Woodward, D. "Managing smile risk", Wilmott Magazine, 2002, September, 84-108

OpenGamma documentation: SABR Implementation, OpenGamma documentation n. 33, April 2016.

Returns:

the SABR Hagan formula

getVolatilityType

ValueType getVolatilityType()

Gets the type of volatility returned by the volatility(double, double, double, double, double, double, double) method.

Returns:

the type

volatility

double volatility(double forward,
                  double strike,
                  double timeToExpiry,
                  double alpha,
                  double beta,
                  double rho,
                  double nu)

Calculates the volatility.

Parameters:

forward - the forward value of the underlying

strike - the strike value of the option

timeToExpiry - the time to expiry of the option

alpha - the SABR alpha value

beta - the SABR beta value

rho - the SABR rho value

nu - the SABR nu value

Returns:

the volatility

volatilityAdjoint

ValueDerivatives volatilityAdjoint(double forward,
                                   double strike,
                                   double timeToExpiry,
                                   double alpha,
                                   double beta,
                                   double rho,
                                   double nu)

Calculates volatility and the adjoint (volatility sensitivity to forward, strike and model parameters).

By default the derivatives are computed by central finite difference approximation. This should be overridden in each subclass.

Parameters:

forward - the forward value of the underlying

strike - the strike value of the option

timeToExpiry - the time to expiry of the option

alpha - the SABR alpha value

beta - the SABR beta value

rho - the SABR rho value

nu - the SABR nu value

Returns:

the volatility and associated derivatives