Merge remote-tracking branch 'origin/master' into martin_docs1

Author: Martin Sjogren

Docs/UserGuide/tradedata/indexcdsoption.tex

@@ -3,10 +3,6 @@ \subsubsection{Index Credit Default Swap Option}
 An index CDS option, trade type \lstinline!IndexCreditDefaultSwapOption!, is an option to enter into an index CDS at a specified strike spread or strike price. The Index CDS Option is set up using an \lstinline!IndexCreditDefaultSwapOptionData! node as shown in Listing \ref{lst:indexcdsoptiondata}. Its child nodes have the following meanings:
 
 \begin{itemize}
-\item
-\lstinline!KnockOut!: A boolean node that determines whether front end protection is included or not. When this node evaluates to \lstinline!false!, front end protection is included. When this node evaluates to \lstinline!true!, front end protection is not included.
-
-Allowable values: Boolean node, allowing \emph{Y, N, 1, 0, true, false} etc. The full set of allowable values is given in Table \ref{tab:boolean_allowable}.
 
 \item
 \lstinline!IndexTerm! [Optional]: An optional node giving the term of the underlying index CDS e.g.\ 3Y, 5Y, 7Y, 10Y etc. The main function of this node is to allow for different index CDS option volatility structures for different terms of the same index series e.g.\ a CDX HY Series 34 5Y volatility structure and a CDX HY Series 34 10Y volatility structure. If this node is omitted, the market is searched for a CDS volatility surface with ID equal to the value of the \lstinline!CreditCurveId! node under \lstinline!IndexCreditDefaultSwapData!. There will generally be one \lstinline!CreditCurveId! for each index CDS series e.g.\ \lstinline!CDXHYS34V1! for CDX HY Series 34 Version 1. Consequently, there can only be one CDS volatility surface for this index CDS series. When \lstinline!IndexTerm! is populated with the underlying index term, the market is searched for a CDS volatility surface with ID equal to the value of the \lstinline!CreditCurveId! node with suffix \lstinline!-[IndexTerm]!. For example, if the \lstinline!CreditCurveId! node on an index CDS option trade is \lstinline!CDXHYS34V1! and the \lstinline!IndexTerm! node is populated with \lstinline!5Y!, the market will be searched for a CDS volatility surface with ID \lstinline!CDXHYS34V1-5Y! and this will be used in the trade valuation. In this way, different volatility surfaces can be used to value different terms of the same CDS index series.
@@ -83,7 +79,6 @@ \subsubsection{Index Credit Default Swap Option}
 \begin{listing}[H]
 \begin{minted}[fontsize=\footnotesize]{xml}
 <IndexCreditDefaultSwapOptionData>
-  <KnockOut>N</KnockOut>
   <IndexTerm>5Y</IndexTerm>
   <OptionData>
       <LongShort>Long</LongShort>

Examples/Example_40/Input/portfolio.xml

@@ -267,7 +267,6 @@
     </Envelope>
     <IndexCreditDefaultSwapOptionData>
       <Strike>0.0060</Strike>
-      <KnockOut>N</KnockOut>
       <OptionData>
         <LongShort>Long</LongShort>
         <OptionType>Call</OptionType>

Examples/Example_54/ExpectedOutput/npv.csv

@@ -1,3 +1,3 @@
 #TradeId,TradeType,Maturity,MaturityTime,NPV,NpvCurrency,NPV(Base),BaseCurrency,Notional,NotionalCurrency,Notional(Base),NettingSet,CounterParty
 BermSwp,ScriptedTrade,2036-03-03,20.073770,51640.311738,EUR,51640.311738,EUR,#N/A,#N/A,#N/A,CPTY_A,CPTY_A
-LPISwp,ScriptedTrade,2035-02-01,18.989303,62979.404029,GBP,78301.934721,EUR,#N/A,#N/A,#N/A,CPTY_B,CPTY_B
+LPISwp,ScriptedTrade,2035-02-01,18.989303,53833.516084,GBP,66930.904274,EUR,#N/A,#N/A,#N/A,CPTY_B,CPTY_B

Examples/Example_54/Input/pricingengine.xml

@@ -8,11 +8,17 @@
       <Parameter name="EnforceBaseCcy">false</Parameter>
       <Parameter name="GridCoarsening">3M(1W),1Y(1M),5Y(3M),10Y(1Y),50Y(5Y)</Parameter>
       <Parameter name="IrReversion_EUR">0.01</Parameter>
-      <Parameter name="IrReversion_GBP">0.01</Parameter>
+      <Parameter name="IrReversion_GBP">0.015</Parameter>
       <Parameter name="FullDynamicFx">true</Parameter>
       <Parameter name="FullDynamicIr">true</Parameter>
       <!-- DK or JY -->
       <Parameter name="InfModelType">JY</Parameter>
+      <!-- explicit overwrite of cam correlations -->
+      <Parameter name="Correlation_IR:GBP_INF:UKRPI:0">0.8</Parameter>
+      <Parameter name="Correlation_IR:GBP_INF:UKRPI:1">0.6</Parameter>
+      <Parameter name="Correlation_INF:UKRPI:0_INF:UKRPI:1">0.3</Parameter>
+      <!-- real to nominal rate vol ratio in jy model -->
+      <Parameter name="InfJyRealToNominalVolRatio">0.6</Parameter>
     </ModelParameters>
     <Engine>Generic</Engine>
     <EngineParameters>

Examples/Example_54/run.py

@@ -5,11 +5,9 @@
 sys.path.append('../')
 from ore_examples_helper import OreExample
 
-samples1=os.environ["OVERWRITE_SCENARIOGENERATOR_SAMPLES"]
-print("samples1 =", samples1)
-os.environ["OVERWRITE_SCENARIOGENERATOR_SAMPLES"]=""
-samples2=os.environ["OVERWRITE_SCENARIOGENERATOR_SAMPLES"]
-print("samples2 =", samples2)
+if "OVERWRITE_SCENARIOGENERATOR_SAMPLES" in os.environ:
+    backupSamples = os.environ["OVERWRITE_SCENARIOGENERATOR_SAMPLES"]
+    os.environ["OVERWRITE_SCENARIOGENERATOR_SAMPLES"] = ""
 
 oreex = OreExample(sys.argv[1] if len(sys.argv)>1 else False)
 
@@ -41,4 +39,5 @@
 oreex.decorate_plot(title="Example Scripting / AMC - DIM Evolution for LPI Swap (sticky date mpor mode)")
 oreex.save_plot_to_file()
 
-os.environ["OVERWRITE_SCENARIOGENERATOR_SAMPLES"]=samples1
+if "OVERWRITE_SCENARIOGENERATOR_SAMPLES" in os.environ:
+    os.environ["OVERWRITE_SCENARIOGENERATOR_SAMPLES"] = backupSamples

OREData/ored/model/crossassetmodelbuilder.cpp

@@ -162,6 +162,35 @@ void CrossAssetModelBuilder::resetModelParams(const CrossAssetModel::AssetType t
     }
 }
 
+void CrossAssetModelBuilder::copyModelParams(const CrossAssetModel::AssetType t0, const Size param0, const Size index0,
+                                             const Size i0, const CrossAssetModel::AssetType t1, const Size param1,
+                                             const Size index1, const Size i1, const Real mult) const {
+    auto mp0 = model_->MoveParameter(t0, param0, index0, i0);
+    auto mp1 = model_->MoveParameter(t1, param1, index1, i1);
+    auto s0 = 0, s1 = 0;
+    for (Size i = 0; i < mp0.size(); ++i)
+        if (mp0[i])
+            s0++;
+    for (Size i = 0; i < mp1.size(); ++i)
+        if (mp1[i])
+            s1++;
+    QL_REQUIRE(s0 == s1, "CrossAssetModelBuilder::copyModelParams(): source range size ("
+                             << s0 << ") does not match target range size (" << s1 << ") when copying (" << t0 << ", "
+                             << param0 << "," << index0 << "," << i0 << ") -> (" << t0 << ", " << param0 << ","
+                             << index0 << "," << i0 << ")");
+    std::vector<Real> sourceValues(s0);
+    for (Size idx0 = 0, count = 0; idx0 < mp0.size(); ++idx0) {
+        if (!mp0[idx0]) {
+            sourceValues[count++] = params_[idx0];
+        }
+    }
+    for (Size idx1 = 0, count = 0; idx1 < mp1.size(); ++idx1) {
+        if (!mp1[idx1]) {
+            model_->setParam(idx1, sourceValues[count++] * mult);
+        }
+    }
+}
+
 void CrossAssetModelBuilder::buildModel() const {
 
     LOG("Start building CrossAssetModel");
@@ -842,6 +871,15 @@ void CrossAssetModelBuilder::calibrateInflation(const InfJyData& data, Size mode
     // Calibration configuration.
     const auto& cc = data.calibrationConfiguration();
 
+    // if we link the real rate params to the nominal rate params, we copy them over now (ir calibration is done at this point)
+    if(data.linkRealRateParamsToNominalRateParams()) {
+        Size irIdx = model_->ccyIndex(model_->infjy(modelIdx)->currency());
+        copyModelParams(CrossAssetModel::AssetType::IR, 0, irIdx, Null<Size>(), CrossAssetModel::AssetType::INF, 0,
+                        modelIdx, Null<Size>(), data.linkedRealRateVolatilityScaling());
+        copyModelParams(CrossAssetModel::AssetType::IR, 1, irIdx, Null<Size>(), CrossAssetModel::AssetType::INF, 1,
+                        modelIdx, Null<Size>(), 1.0);
+    }
+
     if (data.calibrationType() == CalibrationType::BestFit) {
 
         // If calibration type is BestFit, do a global optimisation on the parameters that need to be calibrated.
@@ -937,6 +975,13 @@ void CrossAssetModelBuilder::calibrateInflation(const InfJyData& data, Size mode
     }
 
     // Log the calibration details.
+    TLOG("INF (JY) " << data.index() << " model parameters after calibration:");
+    TLOG("Real    rate vol times   : " << inflationParam->parameterTimes(0));
+    TLOG("Real    rate vol values  : " << inflationParam->parameterValues(0));
+    TLOG("Real    rate rev times   : " << inflationParam->parameterTimes(1));
+    TLOG("Real    rate rev values  : " << inflationParam->parameterValues(1));
+    TLOG("R/N conversion   times   : " << inflationParam->parameterTimes(2));
+    TLOG("R/N conversion   values  : " << inflationParam->parameterValues(2));
     DLOG("INF (JY) " << data.index() << " calibration errors:");
     inflationCalibrationErrors_[modelIdx] = getCalibrationError(allHelpers);
     if (data.calibrationType() == CalibrationType::Bootstrap) {

OREData/ored/model/crossassetmodelbuilder.hpp

@@ -111,6 +111,9 @@ class CrossAssetModelBuilder : public QuantExt::ModelBuilder {
     void performCalculations() const override;
     void buildModel() const;
     void resetModelParams(const CrossAssetModel::AssetType t, const Size param, const Size index, const Size i) const;
+    void copyModelParams(const CrossAssetModel::AssetType t0, const Size param0, const Size index0, const Size i0,
+                         const CrossAssetModel::AssetType t1, const Size param1, const Size index1, const Size i1,
+                         const Real mult) const;
 
     mutable std::vector<std::vector<boost::shared_ptr<BlackCalibrationHelper>>> swaptionBaskets_;
     mutable std::vector<std::vector<boost::shared_ptr<BlackCalibrationHelper>>> fxOptionBaskets_;

OREData/ored/model/inflation/infjydata.cpp

@@ -29,22 +29,18 @@ namespace data {
 
 InfJyData::InfJyData() {}
 
-InfJyData::InfJyData(CalibrationType calibrationType,
-    const vector<CalibrationBasket>& calibrationBaskets,
-    const std::string& currency,
-    const std::string& index,
-    const ReversionParameter& realRateReversion,
-    const VolatilityParameter& realRateVolatility,
-    const VolatilityParameter& indexVolatility,
-    const LgmReversionTransformation& reversionTransformation,
-    const CalibrationConfiguration& calibrationConfiguration,
-    const bool ignoreDuplicateCalibrationExpiryTimes)
+InfJyData::InfJyData(CalibrationType calibrationType, const vector<CalibrationBasket>& calibrationBaskets,
+                     const std::string& currency, const std::string& index, const ReversionParameter& realRateReversion,
+                     const VolatilityParameter& realRateVolatility, const VolatilityParameter& indexVolatility,
+                     const LgmReversionTransformation& reversionTransformation,
+                     const CalibrationConfiguration& calibrationConfiguration,
+                     const bool ignoreDuplicateCalibrationExpiryTimes, const bool linkRealToNominalRateParams,
+                     const Real linkedRealRateVolatilityScaling)
     : InflationModelData(calibrationType, calibrationBaskets, currency, index, ignoreDuplicateCalibrationExpiryTimes),
-      realRateReversion_(realRateReversion),
-      realRateVolatility_(realRateVolatility),
-      indexVolatility_(indexVolatility),
-      reversionTransformation_(reversionTransformation),
-      calibrationConfiguration_(calibrationConfiguration) {}
+      realRateReversion_(realRateReversion), realRateVolatility_(realRateVolatility), indexVolatility_(indexVolatility),
+      reversionTransformation_(reversionTransformation), calibrationConfiguration_(calibrationConfiguration),
+      linkRealToNominalRateParams_(linkRealToNominalRateParams),
+      linkedRealRateVolatilityScaling_(linkedRealRateVolatilityScaling) {}
 
 const ReversionParameter& InfJyData::realRateReversion() const {
     return realRateReversion_;
@@ -66,6 +62,10 @@ const CalibrationConfiguration& InfJyData::calibrationConfiguration() const {
     return calibrationConfiguration_;
 }
 
+bool InfJyData::linkRealRateParamsToNominalRateParams() const { return linkRealToNominalRateParams_; }
+
+Real InfJyData::linkedRealRateVolatilityScaling() const { return linkedRealRateVolatilityScaling_; }
+
 void InfJyData::fromXML(XMLNode* node) {
 
     // Check the node is not null and that name is LGM or DodgsonKainth. LGM is for backward compatibility.
@@ -88,9 +88,16 @@ void InfJyData::fromXML(XMLNode* node) {
     indexVolatility_.fromXML(XMLUtils::getChildNode(idxNode, "Volatility"));
 
     // Get the calibration configuration
-    XMLNode* ccNode = XMLUtils::getChildNode(node, "CalibrationConfiguration");
-    if (ccNode)
+    if (XMLNode* ccNode = XMLUtils::getChildNode(node, "CalibrationConfiguration"))
         calibrationConfiguration_.fromXML(ccNode);
+
+    // Get the link to nominal param fields
+    linkRealToNominalRateParams_ =
+        parseBool(XMLUtils::getChildValue(node, "LinkRealToNominalRateParams", false, "false"));
+    if (linkRealToNominalRateParams_) {
+        linkedRealRateVolatilityScaling_ =
+            parseReal(XMLUtils::getChildValue(node, "LinkedRealRateVolatilityScaling", false, "1.0"));
+    }
 }
 
 XMLNode* InfJyData::toXML(XMLDocument& doc) const {
@@ -110,6 +117,11 @@ XMLNode* InfJyData::toXML(XMLDocument& doc) const {
 
     XMLUtils::appendNode(node, calibrationConfiguration_.toXML(doc));
 
+    if (linkRealToNominalRateParams_) {
+        XMLUtils::addChild(doc, node, "LinkRealToNominalRateParams", linkRealToNominalRateParams_);
+        XMLUtils::addChild(doc, node, "LinkedRealRateVolatilityScaling", linkedRealRateVolatilityScaling_);
+    }
+
     return node;
 }
 

OREData/ored/model/inflation/infjydata.hpp

@@ -48,16 +48,18 @@ class InfJyData : public InflationModelData {
     InfJyData();
 
     //! Detailed constructor
-    InfJyData(CalibrationType calibrationType,
-        const std::vector<CalibrationBasket>& calibrationBaskets,
-        const std::string& currency,
-        const std::string& index,
-        const ReversionParameter& realRateReversion,
-        const VolatilityParameter& realRateVolatility,
-        const VolatilityParameter& indexVolatility,
-        const LgmReversionTransformation& reversionTransformation = LgmReversionTransformation(),
-        const CalibrationConfiguration& calibrationConfiguration = CalibrationConfiguration(),
-        const bool ignoreDuplicateCalibrationExpiryTimes = false);
+    /* Note: If linkRealRateToNominalRateParams == true, the realRateVolatility and realRateReversion should be set to
+       the nominal rate parameters and the calibrate flag in these new parameters should be set to false. Also, the
+       scaling linkRealRateVolatilityScaling should have been applied to the new parameters. All this is not automatic
+       neither cheked in this class (lack of info on the nominal parameters, but required to ensure a calibration of the
+       jy model as part of the cam to work consistently. */
+    InfJyData(CalibrationType calibrationType, const std::vector<CalibrationBasket>& calibrationBaskets,
+              const std::string& currency, const std::string& index, const ReversionParameter& realRateReversion,
+              const VolatilityParameter& realRateVolatility, const VolatilityParameter& indexVolatility,
+              const LgmReversionTransformation& reversionTransformation = LgmReversionTransformation(),
+              const CalibrationConfiguration& calibrationConfiguration = CalibrationConfiguration(),
+              const bool ignoreDuplicateCalibrationExpiryTimes = false, const bool linkRealToNominalRateParams = false,
+              const Real linkedRealRateVolatilityScaling = 1.0);
 
     //! \name Inspectors
     //@{
@@ -66,6 +68,8 @@ class InfJyData : public InflationModelData {
     const VolatilityParameter& indexVolatility() const;
     const LgmReversionTransformation& reversionTransformation() const;
     const CalibrationConfiguration& calibrationConfiguration() const;
+    bool linkRealRateParamsToNominalRateParams() const;
+    Real linkedRealRateVolatilityScaling() const;
     //@}
 
     //! \name Serialisation
@@ -80,6 +84,8 @@ class InfJyData : public InflationModelData {
     VolatilityParameter indexVolatility_;
     LgmReversionTransformation reversionTransformation_;
     CalibrationConfiguration calibrationConfiguration_;
+    bool linkRealToNominalRateParams_;
+    Real linkedRealRateVolatilityScaling_;
 };
 
 }

OREData/ored/model/lgmdata.cpp

@@ -17,6 +17,7 @@
 */
 
 #include <ored/model/lgmdata.hpp>
+#include <ored/model/modelparameter.hpp>
 #include <ored/utilities/correlationmatrix.hpp>
 #include <ored/utilities/log.hpp>
 #include <ored/utilities/parsers.hpp>
@@ -212,19 +213,22 @@ XMLNode* LgmData::toXML(XMLDocument& doc) const {
     return lgmNode;
 }
 
-LgmReversionTransformation::LgmReversionTransformation()
-    : horizon_(0.0), scaling_(1.0) {}
+ReversionParameter LgmData::reversionParameter() const {
+    return ReversionParameter(revType_, calibrateH_, hType_, hTimes_, hValues_);
+}
+
+VolatilityParameter LgmData::volatilityParameter() const {
+    return VolatilityParameter(volType_, calibrateA_, aType_, aTimes_, aValues_);
+}
+
+LgmReversionTransformation::LgmReversionTransformation() : horizon_(0.0), scaling_(1.0) {}
 
 LgmReversionTransformation::LgmReversionTransformation(Time horizon, Real scaling)
     : horizon_(horizon), scaling_(scaling) {}
 
-Time LgmReversionTransformation::horizon() const {
-    return horizon_;
-}
+Time LgmReversionTransformation::horizon() const { return horizon_; }
 
-Real LgmReversionTransformation::scaling() const {
-    return scaling_;
-}
+Real LgmReversionTransformation::scaling() const { return scaling_; }
 
 void LgmReversionTransformation::fromXML(XMLNode* node) {
     XMLUtils::checkNode(node, "ParameterTransformation");