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QPR-12337 remove outdated sections, wip
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‎Docs/UserGuide/parameterisation/pricingengines.tex‎

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@@ -5,6 +5,75 @@ \subsection{Pricing Engines: {\tt pricingengine.xml}}
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The pricing engine configuration file is provided to select pricing models and pricing engines by product type.
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%--------------------------------------------------------
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\subsubsection{Product Type: BondRepo}
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%--------------------------------------------------------
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Used by trade type: BondRepo
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Available Model/Engine pairs:
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\begin{itemize}
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\item DiscountedCashflows/DiscountingRepoEngine
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\item Accrual/AccrualRepoEngine
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\end{itemize}
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Engine description:
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DiscountedCashflows/DiscountingRepoEngine builds a DiscountingBondRepoEngine. A sample configuration is shown in listing
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\ref{lst:peconfig_BondRepo_DiscountedCashflows_DiscountingRepoEngine}.
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The parameters have the following meaning:
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\begin{itemize}
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\item IncludeSecurityLeg: include the security leg in the valuation
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\item SensitivityTemplate [optional]: the sensitivity template to use
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\end{itemize}
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\begin{longlisting}
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\begin{minted}[fontsize=\footnotesize]{xml}
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<Product type="BondRepo">
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<Model>DiscountedCashflows</Model>
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<ModelParameters>
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<Parameter name="IncludeSecurityLeg">true</Parameter>
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</ModelParameters>
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<Engine>DiscountingRepoEngine</Engine>
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<EngineParameters>
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<Parameter name="SensitivityTemplate">IR_Analytical</Parameter>
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</EngineParameters>
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</Product>
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\end{minted}
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\caption{Configuration for Product BondRepo, Model DiscountedCashflows, Engine DiscountingRepoEngine}
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\label{lst:peconfig_BondRepo_DiscountedCashflows_DiscountingRepoEngine}
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\end{longlisting}
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Accrual/AccrualRepoEngine builds a AccrualBondRepoEngine. A sample configuration is shown in listing
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\ref{lst:peconfig_BondRepo_Accrual_AccrualBondRepoEngine}.
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The parameters have the following meaning:
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\begin{itemize}
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\item IncludeSecurityLeg: include the security leg in the valuation
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\item SensitivityTemplate [optional]: the sensitivity template to use
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\end{itemize}
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\begin{longlisting}
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\begin{minted}[fontsize=\footnotesize]{xml}
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<Product type="BondRepo">
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<Model>Accrual</Model>
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<ModelParameters>
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<Parameter name="IncludeSecurityLeg">true</Parameter>
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</ModelParameters>
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<Engine>AccrualRepoEngine</Engine>
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<EngineParameters>
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<Parameter name="SensitivityTemplate">IR_Analytical</Parameter>
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</EngineParameters>
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</Product>
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\end{minted}
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\caption{Configuration for Product BondRepo, Model Accrual, Engine DiscountingBondRepoEngine}
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\label{lst:peconfig_BondRepo_Accrual_AccrualBondRepoEngine}
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\end{longlisting}
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%--------------------------------------------------------
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\subsubsection{Product Type: BondTRS}
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%--------------------------------------------------------
@@ -1104,6 +1173,41 @@ \subsubsection{Product Type: EquityAsianOptionGeometricStrike}
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\label{lst:peconfig_EquityAsianOptionGeometricStrike_ScriptedTrade_ScriptedTrade}
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\end{longlisting}
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%--------------------------------------------------------
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\subsubsection{Product Type: EquityEuropeanCompositeOption}
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%--------------------------------------------------------
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Used by trade type: EquityOption if a composite option is built
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Available Model/Engine pairs: BlackScholes/AnalyticEuropeanEngine
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Engine description:
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BlackScholes/AnalyticEuropeanEngine builds a AnalyticEuropeanEngine (with a vol composed from the relevant equity and fx
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vol surfaces). A sample configuration is shown in listing
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\ref{lst:peconfig_EquityEuropeanCompositeOption_BlackScholes_AnalyticEuropeanEngine}
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The parameters have the following meaning:
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\begin{itemize}
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\item SensitivityTemplate [optional]: the sensitivity template to use
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\end{itemize}
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\begin{longlisting}
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\begin{minted}[fontsize=\footnotesize]{xml}
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<Product type="EquityEuropeanCompositeOption">
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<Model>BlackScholes</Model>
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<ModelParameters/>
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<Engine>AnalyticEuropeanEngine</Engine>
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<EngineParameters>
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<Parameter name="SensitivityTemplate">EQ_Analytical</Parameter>
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</EngineParameters>
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</Product>
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\end{minted}
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\caption{Configuration for Product EquityEuropeanCompositeOption, Model BlackScholes, Engine AnalyticEuropeanEngine}
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\label{lst:peconfig_EquityEuropeanCompositeOption_BlackScholes_AnalyticEuropeanEngine}
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\end{longlisting}
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%--------------------------------------------------------
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\subsubsection{Product Type: EquityFutureOption}
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%--------------------------------------------------------
@@ -1845,228 +1949,85 @@ \subsubsection{Product Type: FxDigitalBarrierOption}
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\label{lst:peconfig_FxDigitalBarrierOption_GarmanKohlhagen_FdBlackScholesBarrierEngine}
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\end{longlisting}
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% ===================== template ========================
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%--------------------------------------------------------
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\subsubsection{Product Type: }
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\subsubsection{Product Type: FxForward}
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%--------------------------------------------------------
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Used by trade type:
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Used by trade type: FxForward
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Available Model/Engine pairs:
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\begin{itemize}
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\item DiscountedCashflows/DiscountingFxForwardEngine
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\item CrossAssetModel/AMC (for use in AMC simulations only)
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\end{itemize}
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Engine description:
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builds a . A sample configuration is shown in listing \ref{lst:peconfig_}
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DiscountedCashflows/DiscountingFxForwardEngine builds a DiscountingFxForwardEngine. A sample configuration is shown in
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listing \ref{lst:peconfig_FxForward_DiscountedCashflows_DiscountingFxForwardEngine}.
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The parameters have the following meaning:
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\begin{itemize}
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\item
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\item SensitivityTemplate [optional]: the sensitivity template to use
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\end{itemize}
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\begin{longlisting}
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\begin{minted}[fontsize=\footnotesize]{xml}
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\end{minted}
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\caption{Configuration for Product , Model , Engine }
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\label{lst:peconfig_}
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\end{longlisting}
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The
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following is an overview over the Example section's {\tt pricingengine.xml}. Further below we discuss the Bermudan Swaption engine parametrisation in more detail.
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\begin{longlisting}
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%\hrule\medskip
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\begin{minted}[fontsize=\footnotesize]{xml}
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<PricingEngines>
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<Product type="Swap">
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<Model>DiscountedCashflows</Model>
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<ModelParameters/>
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<Engine>DiscountingSwapEngine</Engine>
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<EngineParameters/>
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</Product>
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<Product type="CrossCurrencySwap">
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<Model>DiscountedCashflows</Model>
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<ModelParameters/>
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<Engine>DiscountingCrossCurrencySwapEngine</Engine>
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<EngineParameters/>
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</Product>
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<Product type="FxForward">
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<Product type="FxForward">
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<Model>DiscountedCashflows</Model>
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<ModelParameters/>
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<Engine>DiscountingFxForwardEngine</Engine>
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<EngineParameters/>
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</Product>
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<Product type="FxOption">
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<Model>GarmanKohlhagen</Model>
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<ModelParameters/>
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<Engine>AnalyticEuropeanEngine</Engine>
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<EngineParameters/>
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</Product>
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<Product type="FxOptionAmerican">
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<Model>GarmanKohlhagen</Model>
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<ModelParameters/>
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<Engine>FdBlackScholesVanillaEngine</Engine>
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<EngineParameters>
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<Parameter name="Scheme">Douglas</Parameter>
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<Parameter name="TimeGridPerYear">100</Parameter>
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<Parameter name="XGrid">100</Parameter>
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<Parameter name="DampingSteps">0</Parameter>
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<!-- optional, prevents too small time grids for increased
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Greek precision when expiry is near, set to 1 if omitted -->
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<Parameter name="TimeGridMinimumSize">1</Parameter>
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</EngineParameters>
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</Product>
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<Product type="EuropeanSwaption">
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<Model>BlackBachelier</Model> <!-- depends on input vol -->
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<ModelParameters/>
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<Engine>BlackBachelierSwaptionEngine</Engine>
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<EngineParameters/>
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</Product>
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<Product type="Bond">
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<Model>DiscountedCashflows</Model>
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<ModelParameters/>
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<Engine>DiscountingRiskyBondEngine</Engine>
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<EngineParameters>
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<Parameter name="TimestepPeriod">6M</Parameter>
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</EngineParameters>
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</Product>
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<Product type="BermudanSwaption">
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<Model>LGM</Model>
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<ModelParameters>
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<Parameter name="Calibration">Bootstrap</Parameter>
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<Parameter name="BermudanStrategy">CoterminalATM</Parameter>
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<!-- ccy specific reversions -->
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<Parameter name="Reversion_EUR">0.03</Parameter>
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<Parameter name="Reversion_USD">0.04</Parameter>
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<!-- reversion to use if no ccy specific value is given -->
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<Parameter name="Reversion">0.02</Parameter>
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<Parameter name="ReversionType">HullWhite</Parameter>
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<Parameter name="Volatility">0.01</Parameter>
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<Parameter name="VolatilityType">Hagan</Parameter>
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<Parameter name="ShiftHorizon">0.5</Parameter>
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<Parameter name="Tolerance">0.0001</Parameter>
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</ModelParameters>
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<Engine>Grid</Engine>
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<EngineParameters>
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<Parameter name="sy">3.0</Parameter>
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<Parameter name="ny">10</Parameter>
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<Parameter name="sx">3.0</Parameter>
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<Parameter name="nx">10</Parameter>
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</EngineParameters>
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</Product>
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<Product type="CapFloor">
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<Model>IborCapModel</Model>
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<ModelParameters/>
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<Engine>IborCapEngine</Engine>
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<EngineParameters/>
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</Product>
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<Product type="CapFlooredIborLeg">
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<Model>BlackOrBachelier</Model>
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<ModelParameters/>
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<Engine>BlackIborCouponPricer</Engine>
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<EngineParameters>
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<!-- Black76 or BivariateLognormal -->
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<TimingAdjustment>Black76</TimingAdjustment>
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<!-- Correlation Parameter for BivariateLognormal -->
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<Correlation>1.0</Correlation>
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</EngineParameters>
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</Product>
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<Product type="EquityForward">
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<Model>DiscountedCashflows</Model>
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<ModelParameters/>
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<Engine>DiscountingEquityForwardEngine</Engine>
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<EngineParameters/>
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</Product>
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<Product type="EquityOption">
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<Model>BlackScholesMerton</Model>
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<ModelParameters/>
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<Engine>AnalyticEuropeanEngine</Engine>
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<EngineParameters/>
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</Product>
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<Product type="Bond">
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<Model>DiscountedCashflows</Model>
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<ModelParameters/>
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<Engine>DiscountingRiskyBondEngine</Engine>
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<EngineParameters>
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<Parameter name="TimestepPeriod">6M</Parameter>
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</EngineParameters>
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</Product>
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<Product type="CreditDefaultSwap">
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<Model>DiscountedCashflows</Model>
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<ModelParameters/>
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<Engine>MidPointCdsEngine</Engine>
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<EngineParameters/>
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</Product>
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<Product type="CMS">
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<Model>Hagan</Model><!-- or LinearTSR -->
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<ModelParameters/>
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<Engine>Analytic</Engine> <!-- or Numerical -->
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<EngineParameters>
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<!-- Alternative Yield Curve Models: ExactYield, ParallelShifts, NonParallelShifts -->
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<Parameter name="YieldCurveModel">Standard</Parameter>
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<Parameter name="MeanReversion_EUR">0.01</Parameter>
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<Parameter name="MeanReversion_USD">0.02</Parameter>
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<Parameter name="MeanReversion">0.0</Parameter>
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</EngineParameters>
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</Product>
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<Product type="CMSSpread">
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<Model>BrigoMercurio</Model>
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<ModelParameters/>
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<Engine>Analytic</Engine>
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<EngineParameters>
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<Parameter name="IntegrationPoints">16</Parameter>
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<Parameter name="SensitivityTemplate">FX_Analytical</Parameter>
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</EngineParameters>
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</Product>
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<GlobalParameters>
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<Parameter name="ContinueOnCalibrationError">true</Parameter>
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<!-- typically not present in a user configuration, but used internally -->
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<Parameter name="Calibrate">true</Parameter>
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<Parameter name="GenerateAdditionalResults">true</Parameter>
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<Parameter name="RunType">NPV</Parameter>
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</GlobalParameters>
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</Product>
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\end{minted}
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\caption{Pricing engine configuration}
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\label{lst:pricingengine_config}
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\caption{Configuration for Product FxForward, Model DiscountedCashflows, Engine DiscountingFxForwardEngine}
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\label{lst:peconfig_FxForward_DiscountedCashflows_DiscountingFxForwardEngine}
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\end{longlisting}
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These settings will be taken into account when the engine factory is asked to build the respective pricing engines and required models, and to calibrate the required model.
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CrossAssetModel/AMC builds a McCamFxForwardEngine for use in AMC simulations. We refer to the AMC module documentation
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for further details.
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\medskip
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For example, in case of the Bermudan Swaption, the parameters are interpreted as follows:
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% ===================== template ========================
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\begin{itemize}
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\item The only model currently supported for Bermudan Swaption pricing is the LGM selected here.
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%--------------------------------------------------------
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\subsubsection{Product Type: }
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%--------------------------------------------------------
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\item The first block of model parameters then provides initial values for the model (Reversion, Volatility) and chooses
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the parametrisation of the LGM model with ReversionType and VolatilityType choices {\em HullWhite} and {\em
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Hagan}. Notice the possibility to specify a currency-specific reversion. Calibration and BermudanStrategy can be set
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to {\em None} in order to skip model calibration. Alternatively, Calibration is set to {\em Bootstrap} and
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BermudanStrategy to {\em CoterminalATM} in order to calibrate to instrument-specific co-terminal ATM Swaptions,
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i.e. chosen to match the instruments first expiry and final maturity. If {\em CoterminalDealStrike} is chosen, the
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co-terminal swaptions will match the fixed rate of the deal (if the deal has changing fixed rates, the first rate is
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matched). Finally if the ShiftHorizon parameter is given, its value times the remaining maturity time of the deal is
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chosen as the horizon shift parameter for the LGM model. If not given, this parameter defaults to $0.5$.
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Used by trade type:
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Available Model/Engine pairs:
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\item The second block of engine parameters specifies the Numerical Swaption engine parameters which determine the
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number of standard deviations covered in the probability density integrals (sy and sx), and the number of grid points
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used per standard deviation (ny and nx).
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Engine description:
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builds a . A sample configuration is shown in listing \ref{lst:peconfig_}
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The parameters have the following meaning:
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\begin{itemize}
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\item
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\item SensitivityTemplate [optional]: the sensitivity template to use
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\end{itemize}
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To see the configuration options for the alternative CMS engines (Hagan Numerical, LinearTSR) or the Black Ibor coupon
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pricer (CapFlooredIborLeg), please refer to the commented parts in {\tt Examples/Input/pricingengine.xml}.
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\begin{longlisting}
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\begin{minted}[fontsize=\footnotesize]{xml}
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\end{minted}
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\caption{Configuration for Product , Model , Engine }
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\label{lst:peconfig_}
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\end{longlisting}
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\medskip
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This file is relevant in particular for structured products which are on the roadmap of future ORE releases. But it is also
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intended to allow the selection of optimised pricing engines for vanilla products such as Interest Rate Swaps.
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\medskip
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%--------------------------------------------------------
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\subsubsection{Global Parameters}
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%--------------------------------------------------------
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In addition to product specific settings there is also a block with global parameters with the following meaning:
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\begin{itemize}
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\item ContinueOnCalibrationError: If set to true an exceedence of a prescribed model calibration tolerance (for e.g. the
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LGM model) will not cause the trade building to fail, instead a warning is logged and the trade is processed

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