Merge branch 'feature/QPR-12825' into 'master'

QPR-12825 Add sticky SABR sensitivity calculation

Closes QPR-12825

See merge request qs/oreplus!3018

Author: pcaspers

Docs/UserGuide/parameterisation/simulation.tex

@@ -665,15 +665,22 @@ \subsubsection{Market}\label{sec:sim_market}
 \item Extrapolation: This can be FlatFwd or FlatZero. If not given, the value defaults to FlatFwd.
 \end{itemize}
 
-For swap, yield, interest cap-floor, yoy inflation cap-floor, zc inflation cap-floor, cds, fx, equity, commodity
-volatilities the smile dynamics can be specified as shown in listing \ref{lst:smile_dynamics_configuration} for swap
+For swaption, yield, interest rate cap-floor, yoy inflation cap-floor, zc inflation cap-floor, cds, fx, equity, commodity
+volatilities the smile dynamics can be specified as shown in listing \ref{lst:smile_dynamics_configuration} for swaption
 vols. The empty key serves as a default configuration for all keys for which no own smile dynamics node is present. The
-allowed smile dynamics values are StickyStrike and StickyMoneyness. If not given, the smile dynamics defaults to
-StickyStrike.
+allowed smile dynamics values are StickyStrike, StickyMoneyness and StickySABR.
+If not given, the smile dynamics defaults to StickyStrike.
+
+Note that StickySABR is only available for swaption volatilities, yield volatilities and interest rate cap-floor volatilities,
+and can only be used if the corresponding T0 surface has been calibrated using a SABR model.
+The SABR volatility surface in the simulation market is recalibrated to the expiry/term/strike grid specified in the simulation
+configuration, using the initial SABR configuration from the T0 surface. Any subsequent recalibration will keep all SABR parameters
+except for $\alpha$ fixed.
 \begin{listing}
   \begin{minted}[fontsize=\footnotesize]{xml}
     <SmileDynamics key="">StickyStrike</SmileDynamics>
     <SmileDynamics key="EUR-ESTER">StickyMoneyness</SmileDynamics>
+    <SmileDynamics key="USD-SOFR-3M">StickySABR</SmileDynamics>
   \end{minted}
 \caption{Smile Configuration Node}
 \label{lst:smile_dynamics_configuration}

OREAnalytics/orea/engine/parsensitivityinstrumentbuilder.cpp

@@ -434,7 +434,7 @@ void ParSensitivityInstrumentBuilder::createParInstruments(
             Size n_expiries = data.shiftExpiries.size();
 
             // Determine if the cap floor is ATM
-            bool isAtm = data.shiftStrikes.size() == 1 && data.shiftStrikes[0] == 0.0 && data.isRelative;
+            bool isAtm = data.shiftStrikes.size() == 1 && data.shiftStrikes[0] == 0.0;
 
             for (Size j = 0; j < n_strikes; ++j) {
                 Real strike = data.shiftStrikes[j];

OREAnalytics/orea/scenario/scenariosimmarket.cpp

@@ -1361,7 +1361,7 @@ void SensitivityScenarioGenerator::generateCapFloorVolScenarios(bool up) {
         vector<Real> shiftStrikes = data.shiftStrikes;
         // Has an ATM shift been configured?
         bool sensiIsAtm = false;
-        if (shiftStrikes.size() == 1 && shiftStrikes[0] == 0.0 && data.isRelative) {
+        if (shiftStrikes.size() == 1 && shiftStrikes[0] == 0.0) {
             sensiIsAtm = true;
         }
 

OREAnalytics/orea/scenario/sensitivityscenariogenerator.cpp

@@ -423,6 +423,7 @@ termstructures/spreadedsmilesection2.cpp
 termstructures/spreadedsurvivalprobabilitytermstructure.cpp
 termstructures/spreadedswaptionvolatility.cpp
 termstructures/spreadedyoyvolsurface.cpp
+termstructures/strippedoptionlet.cpp
 termstructures/strippedoptionletadapter2.cpp
 termstructures/strippedyoyinflationoptionletvol.cpp
 termstructures/subperiodsswaphelper.cpp
@@ -1041,6 +1042,7 @@ termstructures/spreadedswaptionvolatility.hpp
 termstructures/spreadedyoyvolsurface.hpp
 termstructures/staticallycorrectedyieldtermstructure.hpp
 termstructures/strippedcpivolatilitystructure.hpp
+termstructures/strippedoptionlet.hpp
 termstructures/strippedoptionletadapter.hpp
 termstructures/strippedoptionletadapter2.hpp
 termstructures/strippedyoyinflationoptionletvol.hpp

QuantExt/qle/CMakeLists.txt

@@ -598,6 +598,7 @@
 #include <qle/termstructures/spreadedyoyvolsurface.hpp>
 #include <qle/termstructures/staticallycorrectedyieldtermstructure.hpp>
 #include <qle/termstructures/strippedcpivolatilitystructure.hpp>
+#include <qle/termstructures/strippedoptionlet.hpp>
 #include <qle/termstructures/strippedoptionletadapter.hpp>
 #include <qle/termstructures/strippedoptionletadapter2.hpp>
 #include <qle/termstructures/strippedyoyinflationoptionletvol.hpp>

QuantExt/qle/quantext.hpp

@@ -78,27 +78,8 @@ QuantLib::ext::shared_ptr<SmileSection> ProxyOptionletVolatility::smileSectionIm
 
     // compute the base and target forward rate levels
 
-    Real baseAtmLevel;
-    if (isOis(baseIndex_))
-        baseAtmLevel = getOisAtmLevel(QuantLib::ext::dynamic_pointer_cast<OvernightIndex>(baseIndex_),
-                                      baseIndex_->fixingCalendar().adjust(fixingDate), baseRateComputationPeriod_);
-    else if (isBMA(baseIndex_))
-        baseAtmLevel = getBMAAtmLevel(QuantLib::ext::dynamic_pointer_cast<BMAIndexWrapper>(baseIndex_)->bma(),
-                                      baseIndex_->fixingCalendar().adjust(fixingDate), baseRateComputationPeriod_);
-    else
-        baseAtmLevel = baseIndex_->fixing(baseIndex_->fixingCalendar().adjust(fixingDate));
-
-    Real targetAtmLevel;
-    if (isOis(targetIndex_))
-        targetAtmLevel =
-            getOisAtmLevel(QuantLib::ext::dynamic_pointer_cast<OvernightIndex>(targetIndex_),
-                           targetIndex_->fixingCalendar().adjust(fixingDate), targetRateComputationPeriod_);
-    else if (isBMA(targetIndex_))
-        targetAtmLevel =
-            getBMAAtmLevel(QuantLib::ext::dynamic_pointer_cast<BMAIndexWrapper>(targetIndex_)->bma(),
-                           targetIndex_->fixingCalendar().adjust(fixingDate), targetRateComputationPeriod_);
-    else
-        targetAtmLevel = targetIndex_->fixing(targetIndex_->fixingCalendar().adjust(fixingDate));
+    Real baseAtmLevel = ProxyOptionletVolatility::getAtmLevel(fixingDate, baseIndex_, baseRateComputationPeriod_);
+    Real targetAtmLevel = ProxyOptionletVolatility::getAtmLevel(fixingDate, targetIndex_, targetRateComputationPeriod_);
 
     // build the atm-adjusted smile section and return it
 
@@ -111,4 +92,18 @@ Volatility ProxyOptionletVolatility::volatilityImpl(Time optionTime, Rate strike
     return smileSection(optionTime)->volatility(strike) * scalingFactor_;
 }
 
+Real ProxyOptionletVolatility::getAtmLevel(
+    const QuantLib::Date& fixingDate,
+    const QuantLib::ext::shared_ptr<QuantLib::IborIndex>& index,
+    const QuantLib::Period& rateComputationPeriod) {
+    if (isOis(index))
+        return getOisAtmLevel(QuantLib::ext::dynamic_pointer_cast<OvernightIndex>(index),
+                              index->fixingCalendar().adjust(fixingDate), rateComputationPeriod);
+    else if (isBMA(index))
+        return getBMAAtmLevel(QuantLib::ext::dynamic_pointer_cast<BMAIndexWrapper>(index)->bma(),
+                              index->fixingCalendar().adjust(fixingDate), rateComputationPeriod);
+    else
+        return index->fixing(index->fixingCalendar().adjust(fixingDate));
+}
+
 } // namespace QuantExt

QuantExt/qle/termstructures/proxyoptionletvolatility.cpp

@@ -23,6 +23,7 @@
 
 #pragma once
 
+#include <ql/indexes/iborindex.hpp>
 #include <ql/termstructures/volatility/optionlet/optionletvolatilitystructure.hpp>
 
 namespace QuantExt {
@@ -40,9 +41,20 @@ class ProxyOptionletVolatility : public QuantLib::OptionletVolatilityStructure {
     QuantLib::Rate maxStrike() const override { return baseVol_->maxStrike(); }
     QuantLib::Date maxDate() const override { return baseVol_->maxDate(); }
     const QuantLib::Date& referenceDate() const override { return baseVol_->referenceDate(); }
-    VolatilityType volatilityType() const override { return baseVol_->volatilityType(); }
-    Real displacement() const override { return baseVol_->displacement(); }
-    Calendar calendar() const override { return baseVol_->calendar(); }
+    QuantLib::VolatilityType volatilityType() const override { return baseVol_->volatilityType(); }
+    QuantLib::Real displacement() const override { return baseVol_->displacement(); }
+    QuantLib::Calendar calendar() const override { return baseVol_->calendar(); }
+
+    const QuantLib::Handle<QuantLib::OptionletVolatilityStructure>& baseVol() const { return baseVol_; }
+    const QuantLib::ext::shared_ptr<QuantLib::IborIndex>& baseIndex() const { return baseIndex_; }
+    const QuantLib::ext::shared_ptr<QuantLib::IborIndex>& targetIndex() const { return targetIndex_; }
+    const QuantLib::Period& baseRateComputationPeriod() const { return baseRateComputationPeriod_; }
+    const QuantLib::Period& targetRateComputationPeriod() const { return targetRateComputationPeriod_; }
+    double scalingFactor() const { return scalingFactor_; }
+
+    static QuantLib::Real getAtmLevel(const QuantLib::Date& fixingDate,
+                                      const QuantLib::ext::shared_ptr<QuantLib::IborIndex>& index,
+                                      const QuantLib::Period& rateComputationPeriod);
 
 private:
     QuantLib::ext::shared_ptr<QuantLib::SmileSection> smileSectionImpl(const QuantLib::Date& optionDate) const override;

QuantExt/qle/termstructures/proxyoptionletvolatility.hpp

@@ -32,6 +32,11 @@ ProxySwaptionVolatility::ProxySwaptionVolatility(const QuantLib::Handle<Swaption
     : SwaptionVolatilityStructure(baseVol->businessDayConvention(), baseVol->dayCounter()), baseVol_(baseVol),
       baseSwapIndexBase_(baseSwapIndexBase), baseShortSwapIndexBase_(baseShortSwapIndexBase),
       targetSwapIndexBase_(targetSwapIndexBase), targetShortSwapIndexBase_(targetShortSwapIndexBase) {
+    registerWith(baseVol_);
+    registerWith(baseSwapIndexBase_);
+    registerWith(baseShortSwapIndexBase_);
+    registerWith(targetSwapIndexBase_);
+    registerWith(targetShortSwapIndexBase_);
     enableExtrapolation(baseVol->allowsExtrapolation());
 }
 

QuantExt/qle/termstructures/proxyswaptionvolatility.cpp

@@ -45,6 +45,10 @@ class ProxySwaptionVolatility : public QuantLib::SwaptionVolatilityStructure {
 
     const QuantLib::Period& maxSwapTenor() const override { return baseVol_->maxSwapTenor(); }
 
+    QuantLib::Handle<QuantLib::SwaptionVolatilityStructure> baseVol() const { return baseVol_; }
+    QuantLib::ext::shared_ptr<QuantLib::SwapIndex> baseSwapIndexBase() const { return baseSwapIndexBase_; }
+    QuantLib::ext::shared_ptr<QuantLib::SwapIndex> baseShortSwapIndexBase() const { return baseShortSwapIndexBase_; }
+
 private:
     QuantLib::ext::shared_ptr<QuantLib::SmileSection> smileSectionImpl(const QuantLib::Date& optionDate,
                                                                const QuantLib::Period& swapTenor) const override;