#!/bin/python
# -*- coding: utf-8 -*-
from __future__ import division, print_function, absolute_import
import math
import numpy as np
import mafipy.function
# ----------------------------------------------------------------------------
# SABR model
# ----------------------------------------------------------------------------
[docs]def sabr_payers_swaption_value(
init_swap_rate,
option_strike,
swap_annuity,
option_maturity,
alpha,
beta,
rho,
nu):
"""sabr_payers_swaption_value
calculate european payer's swaption value.
See
Hagan, P. S., Kumar, D., Lesniewski, A. S., & Woodward, D. E. (2002).
Managing smile risk.
Wilmott Magazine, m, 84–108.
Retrieved from http://www.math.columbia.edu/~lrb/sabrAll.pdf
:param float init_swap_rate:
:param float option_strike:
:param float swap_annuity:
:param float option_maturity:
:param float alpha: must be greater than 0.
:param float beta: must be within :math:`[0, 1]`.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: must be positive.
:return: value.
:rtype: float.
"""
vol = sabr_implied_vol_hagan(
init_swap_rate, option_strike, option_maturity, alpha, beta, rho, nu)
return mafipy.function.black_payers_swaption_value(
init_swap_rate, option_strike, swap_annuity, option_maturity, vol)
[docs]def sabr_receivers_swaption_value(
init_swap_rate,
option_strike,
swap_annuity,
option_maturity,
alpha,
beta,
rho,
nu):
"""sabr_receivers_swaption_value
calculate european reciever's swaption value.
This value is calculated by put-call parity.
See :py:func:`sabr_payers_swaption_value`.
:param float init_swap_rate:
:param float option_strike:
:param float swap_annuity:
:param float option_maturity:
:param float alpha: must be greater than 0.
:param float beta: must be within :math:`[0, 1]`.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: must be positive.
:return: value.
:rtype: float.
"""
payers_value = sabr_payers_swaption_value(
init_swap_rate,
option_strike,
swap_annuity,
option_maturity,
alpha,
beta,
rho,
nu)
forward_value = swap_annuity * (init_swap_rate - option_strike)
return payers_value - forward_value
# ----------------------------------------------------------------------------
# SABR implied volatility
# ----------------------------------------------------------------------------
[docs]def sabr_implied_vol_hagan(
underlying, strike, maturity, alpha, beta, rho, nu):
"""sabr_implied_vol_hagan
calculate implied volatility under SABR model.
.. math::
\\begin{eqnarray}
\sigma_{B}(K, S; T)
& \\approx &
\\frac{
\\alpha
}{
(SK)^{(1-\\beta)/2}
\left(
1
+ \\frac{(1 - \\beta)^{2}}{24}\log^{2}
\\frac{S}{K}
+ \\frac{(1 - \\beta)^{4}}{1920}
\log^{4}\\frac{S}{K}
\\right)
}
\left(
\\frac{z}{x(z)}
\\right)
\\\\
& &
\left[
1
+
\left(
\\frac{(1 - \\beta)^{2}}{24}
\\frac{\\alpha^{2}}{(SK)^{1-\\beta}}
+ \\frac{1}{4}
\\frac{\\rho\\beta\\nu\\alpha}{(SK)^{(1-\\beta)/2}}
+ \\frac{2 - 3\\rho^{2}}{24}\\nu^{2}
\\right) T
\\right],
\\\\
z
& := &
\\frac{\\nu}{\\alpha}
(SK)^{(1-\\beta)/2}
\log\left( \\frac{S}{K} \\right),
\\\\
x(z)
& := &
\log
\left(
\\frac{
\sqrt{1 - 2\\rho z + z^{2}} + z - \\rho
}{
1 - \\rho
}
\\right)
\end{eqnarray}
where
:math:`S` is underlying,
:math:`K` is strike,
:math:`T` is maturity,
:math:`\\alpha` is alpha,
:math:`\\beta` is beta,
:math:`\\rho` is rho,
:math:`\\nu` is nu.
See
Hagan, P. S., Kumar, D., Lesniewski, A. S., & Woodward, D. E. (2002).
Managing smile risk. Wilmott Magazine, m, 84–108.
Retrieved from http://www.math.columbia.edu/~lrb/sabrAll.pdf
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: alpha is :math:`[0, 1]`.
:param float beta:
:param float rho: correlation of brownian motion.
value is in :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be greater than 0.
:return: implied volatility.
:rtype: float.
"""
if alpha <= 0.0:
raise ValueError("alpha({0}) must be greater than 0.".format(alpha))
if ((rho > 1.0 and not np.isclose(rho, 1.0))
or (rho < -1.0 and not np.isclose(rho, -1.0))):
raise ValueError("rho({0}) must be between -1 and 1.".format(rho))
if nu <= 0.0:
raise ValueError("nu must be greater than 0.".format(nu))
if underlying <= 0.0:
raise ValueError(
"Approximation not defined for non-positive underlying({0})."
.format(underlying))
log_val = math.log(underlying / strike)
log_val2 = log_val ** 2
log_val4 = log_val ** 4
one_minus_beta = 1.0 - beta
one_minus_beta2 = one_minus_beta ** 2
one_minus_beta4 = one_minus_beta ** 4
common_factor1 = (underlying * strike) ** (one_minus_beta * 0.5)
# factor1
term11 = one_minus_beta2 * log_val2 / 24.0
term12 = one_minus_beta4 * log_val4 / 1920.0
denominator1 = common_factor1 * (1.0 + term11 + term12)
factor1 = alpha / denominator1
# factor2
z = (nu * common_factor1 * log_val / alpha)
numerator2 = math.sqrt(1.0 - 2 * rho * z + z * z) + z - rho
if numerator2 <= 0.0:
factor2 = 0.0
elif np.isclose(abs(1.0 - rho), 0.0):
x = 1.0
factor2 = 1.0 if (abs(x - z) < 1E-10) else z / x
else:
x = math.log(numerator2 / (1.0 - rho))
factor2 = 1.0 if (abs(x - z) < 1E-10) else z / x
# factor3
numerator31 = one_minus_beta2 * (alpha ** 2)
denominator31 = 24.0 * ((underlying * strike) ** one_minus_beta)
term31 = numerator31 / denominator31
numerator32 = 0.25 * rho * beta * nu * alpha
term32 = numerator32 / common_factor1
numerator33 = (2.0 - 3.0 * rho * rho) * nu * nu
term33 = numerator33 / 24.0
factor3 = 1.0 + (term31 + term32 + term33) * maturity
return factor1 * factor2 * factor3
[docs]def sabr_atm_implied_vol_hagan(
underlying, maturity, alpha, beta, rho, nu):
"""sabr_atm_implied_vol_hagan
calculate implied volatility under SABR model at the money.
.. math::
\sigma_{ATM}(S; T)
:= \sigma_{B}(S, S; T)
\\approx
\\frac{\\alpha}{S^{(1-\\beta)}}
\left[
1
+
\left(
\\frac{(1 - \\beta)^{2}}{24}
\\frac{\\alpha^{2}}{S^{2 - 2\\beta}}
+ \\frac{1}{4}
\\frac{\\rho \\beta \\alpha \\nu}{S^{1-\\beta}}
+ \\frac{2 - 3\\rho^{2}}{24} \\nu^{2}
\\right) T
\\right]
See
Hagan, P. S., Kumar, D., Lesniewski, A. S., & Woodward, D. E. (2002).
Managing smile risk. Wilmott Magazine, m, 84–108.
Retrieved from http://www.math.columbia.edu/~lrb/sabrAll.pdf
:param float underlying:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: implied volatility.
:rtype: float.
"""
oneMinusBeta = 1.0 - beta
A = underlying ** oneMinusBeta
term1 = ((oneMinusBeta * alpha) ** 2.0) / (24.0 * (A ** 2))
term2 = 0.25 * rho * beta * alpha * nu / A
term3 = (2.0 - 3.0 * rho * rho) * nu * nu / 24.0
vol = (alpha / A) * (1 + (term1 + term2 + term3) * maturity)
return vol
# ----------------------------------------------------------------------------
# SABR implied vol derivative
# ----------------------------------------------------------------------------
def _sabr_implied_vol_hagan_A11(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A11
One of factor in hagan formua.
See :py:func:`sabr_implied_vol_hagan`.
.. math::
A_{11} := (SK)^{(1-\\beta)/2}
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
return (underlying * strike) ** ((1.0 - beta) / 2.0)
def _sabr_implied_vol_hagan_A11_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A11_fprime_by_strike
See :py:func:`_sabr_implied_vol_hagan_A11`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
one_minus_beta_half = (1.0 - beta) / 2.0
one_plus_beta_half = (1.0 + beta) / 2.0
factor = (one_minus_beta_half * (underlying ** one_minus_beta_half))
return factor * (strike ** (-one_plus_beta_half))
def _sabr_implied_vol_hagan_A11_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A11_fhess_by_strike
See :py:func:`_sabr_implied_vol_hagan_A11`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
one_minus_beta_half = (1.0 - beta) / 2.0
one_plus_beta_half = (1.0 + beta) / 2.0
three_plus_beta_half = (3.0 + beta) / 2.0
factor = -(one_minus_beta_half
* (underlying ** one_minus_beta_half)
* one_plus_beta_half)
return factor * (strike ** (-three_plus_beta_half))
def _sabr_implied_vol_hagan_A11_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A11_fprime_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A11`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
return _sabr_implied_vol_hagan_A11_fprime_by_strike(
strike, underlying, maturity, alpha, beta, rho, nu)
def _sabr_implied_vol_hagan_A11_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A11_fhess_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A11`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
return _sabr_implied_vol_hagan_A11_fhess_by_strike(
strike, underlying, maturity, alpha, beta, rho, nu)
def _sabr_implied_vol_hagan_A12(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A12
See :py:func:`_sabr_implied_vol_hagan`.
.. math::
A_{12}
& := &
\left(
1
+ \\frac{(1 - \\beta)^{2}}{24}
\log^{2}\\frac{S}{K}
+ \\frac{(1 - \\beta)^{4}}{1920}
\log^{4}\\frac{S}{K}
\\right)
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
assert(underlying / strike > 0.0)
one_minus_beta = 1.0 - beta
one_minus_beta2 = one_minus_beta ** 2
one_minus_beta4 = one_minus_beta ** 4
ln_moneyness = math.log(underlying / strike)
ln_moneyness2 = ln_moneyness ** 2
ln_moneyness4 = ln_moneyness ** 4
term1 = one_minus_beta2 * ln_moneyness2 / 24.0
term2 = one_minus_beta4 * ln_moneyness4 / 1920.0
return 1.0 + term1 + term2
def _sabr_implied_vol_hagan_A12_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A12_fprime_by_strike
See :py:func:`_sabr_implied_vol_hagan_A12`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
assert(underlying / strike > 0.0)
assert(not np.isclose(strike, 0.0))
one_minus_beta = 1.0 - beta
one_minus_beta2 = one_minus_beta ** 2
one_minus_beta4 = one_minus_beta ** 4
ln_moneyness = math.log(underlying / strike)
ln_moneyness3 = ln_moneyness ** 3
term1 = -one_minus_beta2 * ln_moneyness / 12.0
term2 = -one_minus_beta4 * ln_moneyness3 / 480.0
return (term1 + term2) / strike
def _sabr_implied_vol_hagan_A12_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A12_fhess_by_strike
See :py:func:`_sabr_implied_vol_hagan_A12`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
assert(underlying / strike > 0.0)
assert(not np.isclose(strike, 0.0))
one_minus_beta = 1.0 - beta
one_minus_beta2 = one_minus_beta ** 2
one_minus_beta4 = one_minus_beta ** 4
ln_moneyness = math.log(underlying / strike)
ln_moneyness2 = ln_moneyness ** 2
ln_moneyness3 = ln_moneyness ** 3
strike2 = strike ** 2
factor1 = one_minus_beta2 / (12.0 * strike2)
term1 = factor1 * (ln_moneyness + 1.0)
# term2
factor2 = one_minus_beta4 / (160.0 * strike2)
term2 = factor2 * (ln_moneyness3 + 3.0 * ln_moneyness2)
return term1 + term2
def _sabr_implied_vol_hagan_A12_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A12_fprime_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A12`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
assert(underlying / strike > 0.0)
assert(not np.isclose(strike, 0.0))
one_minus_beta = 1.0 - beta
one_minus_beta2 = one_minus_beta ** 2
one_minus_beta4 = one_minus_beta ** 4
ln_moneyness = math.log(underlying / strike)
ln_moneyness3 = ln_moneyness ** 3
term1 = one_minus_beta2 * ln_moneyness / 12.0
term2 = one_minus_beta4 * ln_moneyness3 / 480.0
return (term1 + term2) / underlying
def _sabr_implied_vol_hagan_A12_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A12_fhess_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A12`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
assert(underlying / strike > 0.0)
assert(not np.isclose(strike, 0.0))
one_minus_beta = 1.0 - beta
one_minus_beta2 = one_minus_beta ** 2
one_minus_beta4 = one_minus_beta ** 4
ln_moneyness = math.log(underlying / strike)
ln_moneyness2 = ln_moneyness ** 2
ln_moneyness3 = ln_moneyness ** 3
underlying2 = underlying ** 2
factor1 = one_minus_beta2 / (12.0 * underlying2)
term1 = factor1 * (-ln_moneyness + 1.0)
# term2
factor2 = one_minus_beta4 / (160.0 * underlying2)
term2 = factor2 * (-ln_moneyness3 + 3.0 * ln_moneyness2)
return term1 + term2
def _sabr_implied_vol_hagan_A1(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A1
One of factor in hagan formua.
See :py:func:`sabr_implied_vol_hagan`.
.. math::
A_{1}(K, S; T)
& := &
(SK)^{(1-\\beta)/2}
\left(
1
+ \\frac{(1 - \\beta)^{2}}{24}
\log^{2}\\frac{S}{K}
+ \\frac{(1 - \\beta)^{4}}{1920}
\log^{4}\\frac{S}{K}
\\right)
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
assert(underlying / strike > 0.0)
A11 = _sabr_implied_vol_hagan_A11(
underlying, strike, maturity, alpha, beta, rho, nu)
A12 = _sabr_implied_vol_hagan_A12(
underlying, strike, maturity, alpha, beta, rho, nu)
return A11 * A12
def _sabr_implied_vol_hagan_A1_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A1_fprime_by_strike
See :py:func:`_sabr_implied_vol_hagan_A1`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A11 = _sabr_implied_vol_hagan_A11(
underlying, strike, maturity, alpha, beta, rho, nu)
A11_fprime = _sabr_implied_vol_hagan_A11_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A12 = _sabr_implied_vol_hagan_A12(
underlying, strike, maturity, alpha, beta, rho, nu)
A12_fprime = _sabr_implied_vol_hagan_A12_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
return A11 * A12_fprime + A11_fprime * A12
def _sabr_implied_vol_hagan_A1_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A1_fhess_by_strike
See :py:func:`_sabr_implied_vol_hagan_A1`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A11 = _sabr_implied_vol_hagan_A11(
underlying, strike, maturity, alpha, beta, rho, nu)
A11_fprime = _sabr_implied_vol_hagan_A11_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A11_fhess = _sabr_implied_vol_hagan_A11_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A12 = _sabr_implied_vol_hagan_A12(
underlying, strike, maturity, alpha, beta, rho, nu)
A12_fprime = _sabr_implied_vol_hagan_A12_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A12_fhess = _sabr_implied_vol_hagan_A12_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
return A11 * A12_fhess + 2.0 * A11_fprime * A12_fprime + A11_fhess * A12
def _sabr_implied_vol_hagan_A1_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A1_fprime_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A1`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A11 = _sabr_implied_vol_hagan_A11(
underlying, strike, maturity, alpha, beta, rho, nu)
A11_fprime = _sabr_implied_vol_hagan_A11_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A12 = _sabr_implied_vol_hagan_A12(
underlying, strike, maturity, alpha, beta, rho, nu)
A12_fprime = _sabr_implied_vol_hagan_A12_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
return A11 * A12_fprime + A11_fprime * A12
def _sabr_implied_vol_hagan_A1_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A1_fhess_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A1`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within :math:`[0, 1]`.
:param float beta: must be greater than 0.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A11 = _sabr_implied_vol_hagan_A11(
underlying, strike, maturity, alpha, beta, rho, nu)
A11_fprime = _sabr_implied_vol_hagan_A11_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A11_fhess = _sabr_implied_vol_hagan_A11_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A12 = _sabr_implied_vol_hagan_A12(
underlying, strike, maturity, alpha, beta, rho, nu)
A12_fprime = _sabr_implied_vol_hagan_A12_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A12_fhess = _sabr_implied_vol_hagan_A12_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
return A11 * A12_fhess + 2.0 * A11_fprime * A12_fprime + A11_fhess * A12
def _sabr_implied_vol_hagan_A2(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A2
One of factor in hagan formua.
See :py:func:`sabr_implied_vol_hagan`.
.. math::
A_{2}(K, S; T)
& := &
z
\\nonumber
\\\\
& = &
\\frac{\\nu}{\alpha}
(SK)^{(1-\\beta)/2}
\log\left( \\frac{S}{K} \\right),
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
assert(underlying / strike > 0.0)
one_minus_beta_half = (1.0 - beta) / 2.0
ln_moneyness = math.log(underlying / strike)
factor1 = nu / alpha
factor2 = (underlying * strike) ** one_minus_beta_half
return factor1 * factor2 * ln_moneyness
def _sabr_implied_vol_hagan_A2_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A2_fprime_by_strike
See :py:func:`_sabr_implied_vol_hagan_A2`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
assert(alpha > 0.0)
assert(underlying / strike > 0.0)
one_minus_beta_half = (1.0 - beta) / 2.0
one_plus_beta_half = (1.0 + beta) / 2.0
ln_moneyness = math.log(underlying / strike)
factor1 = (underlying ** one_minus_beta_half) * nu / alpha
factor2 = strike ** (-one_plus_beta_half)
factor3 = one_minus_beta_half * ln_moneyness - 1.0
return factor1 * factor2 * factor3
def _sabr_implied_vol_hagan_A2_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A2_fhess_by_strike
See :py:func:`_sabr_implied_vol_hagan_A2`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
assert(alpha > 0.0)
assert(underlying / strike > 0.0)
one_minus_beta_half = (1.0 - beta) / 2.0
three_plus_beta_half = (3.0 + beta) / 2.0
ln_moneyness = math.log(underlying / strike)
factor1 = (underlying ** one_minus_beta_half) * nu / alpha
factor2 = strike ** (-three_plus_beta_half)
term1 = (beta ** 2 - 1.0) * ln_moneyness / 4.0
return factor1 * factor2 * (term1 + beta)
def _sabr_implied_vol_hagan_A2_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A2_fprime_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A2`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
assert(alpha > 0.0)
assert(underlying / strike > 0.0)
one_minus_beta_half = (1.0 - beta) / 2.0
one_plus_beta_half = (1.0 + beta) / 2.0
ln_moneyness = math.log(underlying / strike)
factor1 = (strike ** one_minus_beta_half) * nu / alpha
factor2 = underlying ** (-one_plus_beta_half)
factor3 = one_minus_beta_half * ln_moneyness + 1.0
return factor1 * factor2 * factor3
def _sabr_implied_vol_hagan_A2_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A2_fhess_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A2`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
assert(alpha > 0.0)
assert(underlying / strike > 0.0)
one_minus_beta_half = (1.0 - beta) / 2.0
three_plus_beta_half = (3.0 + beta) / 2.0
ln_moneyness = math.log(underlying / strike)
factor1 = (strike ** one_minus_beta_half) * nu / alpha
factor2 = underlying ** (-three_plus_beta_half)
term1 = (beta ** 2 - 1.0) * ln_moneyness / 4.0
return factor1 * factor2 * (term1 - beta)
def _sabr_implied_vol_hagan_A31(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A31
.. math::
A_{31}
& := &
\sqrt{1 - 2\\rho z + z^{2}} + z - \\rho
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A2 = _sabr_implied_vol_hagan_A2(
underlying, strike, maturity, alpha, beta, rho, nu)
assert(1.0 - 2.0 * rho * A2 + A2 * A2 >= 0.0)
return math.sqrt(1.0 - 2.0 * rho * A2 + A2 * A2) + A2 - rho
def _sabr_implied_vol_hagan_A31_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A31_fprime_by_strike
See :py:func:`_sabr_implied_vol_hagan_A31`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A2 = _sabr_implied_vol_hagan_A2(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fprime = _sabr_implied_vol_hagan_A2_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
assert(1.0 - 2.0 * rho * A2 + A2 * A2 > 0.0)
numerator = (-rho + A2) * A2_fprime
denominator = math.sqrt(1.0 - 2.0 * rho * A2 + A2 * A2)
return numerator / denominator + A2_fprime
def _sabr_implied_vol_hagan_A31_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A31_fhess_by_strike
See :py:func:`_sabr_implied_vol_hagan_A31`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A2 = _sabr_implied_vol_hagan_A2(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fprime = _sabr_implied_vol_hagan_A2_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fhess = _sabr_implied_vol_hagan_A2_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
sqrt_inner = 1.0 - 2.0 * rho * A2 + A2 * A2
assert(sqrt_inner > 0.0)
factor1 = -rho * A2_fhess + A2_fprime ** 2 + A2 * A2_fhess
term1 = factor1 * sqrt_inner
term2 = (-rho * A2_fprime + A2 * A2_fprime) ** 2
numerator = term1 - term2
denominator = (sqrt_inner) ** 1.5
return numerator / denominator + A2_fhess
def _sabr_implied_vol_hagan_A31_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A31_fprime_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A31`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A2 = _sabr_implied_vol_hagan_A2(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fprime = _sabr_implied_vol_hagan_A2_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
assert(1.0 - 2.0 * rho * A2 + A2 * A2 > 0.0)
numerator = (-rho + A2) * A2_fprime
denominator = math.sqrt(1.0 - 2.0 * rho * A2 + A2 * A2)
return numerator / denominator + A2_fprime
def _sabr_implied_vol_hagan_A31_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A31_fhess_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A31`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A2 = _sabr_implied_vol_hagan_A2(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fprime = _sabr_implied_vol_hagan_A2_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fhess = _sabr_implied_vol_hagan_A2_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
sqrt_inner = 1.0 - 2.0 * rho * A2 + A2 * A2
assert(sqrt_inner > 0.0)
factor1 = -rho * A2_fhess + A2_fprime ** 2 + A2 * A2_fhess
term1 = factor1 * sqrt_inner
term2 = (-rho * A2_fprime + A2 * A2_fprime) ** 2
numerator = term1 - term2
denominator = (sqrt_inner) ** 1.5
return numerator / denominator + A2_fhess
def _sabr_implied_vol_hagan_A3(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A3
One of factor in hagan formua.
See :py:func:`sabr_implied_vol_hagan`.
.. math::
A_{3}(K, S; T)
& := &
x(z)
\\nonumber
\\\\
& = &
\log
\left(
\\frac{
\sqrt{1 - 2\\rho z + z^{2}} + z - \\rho
}{
1 - \\rho
}
\\right)
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A31 = _sabr_implied_vol_hagan_A31(
underlying, strike, maturity, alpha, beta, rho, nu)
assert(A31 / (1.0 - rho) > 0.0)
return math.log(A31 / (1.0 - rho))
def _sabr_implied_vol_hagan_A3_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A3_fprime_by_strike
See :py:func:`_sabr_implied_vol_hagan_A3`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A31 = _sabr_implied_vol_hagan_A31(
underlying, strike, maturity, alpha, beta, rho, nu)
A31_fprime = _sabr_implied_vol_hagan_A31_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
assert(not np.isclose(A31, 0.0))
return A31_fprime / A31
def _sabr_implied_vol_hagan_A3_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A3_fhess_by_strike
See :py:func:`_sabr_implied_vol_hagan_A3`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A31 = _sabr_implied_vol_hagan_A31(
underlying, strike, maturity, alpha, beta, rho, nu)
A31_fprime = _sabr_implied_vol_hagan_A31_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A31_fhess = _sabr_implied_vol_hagan_A31_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
term1 = -((A31_fprime / A31) ** 2)
term2 = A31_fhess / A31
return term1 + term2
def _sabr_implied_vol_hagan_A3_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A3_fprime_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A3`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A31 = _sabr_implied_vol_hagan_A31(
underlying, strike, maturity, alpha, beta, rho, nu)
A31_fprime = _sabr_implied_vol_hagan_A31_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
assert(not np.isclose(A31, 0.0))
return A31_fprime / A31
def _sabr_implied_vol_hagan_A3_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A3_fhess_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A3`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
A31 = _sabr_implied_vol_hagan_A31(
underlying, strike, maturity, alpha, beta, rho, nu)
A31_fprime = _sabr_implied_vol_hagan_A31_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A31_fhess = _sabr_implied_vol_hagan_A31_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
term1 = -((A31_fprime / A31) ** 2)
term2 = A31_fhess / A31
return term1 + term2
def _sabr_implied_vol_hagan_A4(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A4
One of factor in hagan formua.
See :py:func:`sabr_implied_vol_hagan`.
A_{4}(K, S; T)
& := &
1
+
\left(
\\frac{(1 - \\beta)^{2}}{24}
\\frac{\alpha^{2}}{(SK)^{1-\\beta}}
+ \\frac{1}{4}
\\frac{\\rho\\beta\nu\alpha}{(SK)^{(1-\\beta)/2}}
+ \\frac{2 - 3\\rho^{2}}{24}\nu^{2}
\\right) T
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha:
:param float beta:
:param float rho:
:param float nu:
:return: value of factor.
:rtype: float.
"""
one_minus_beta = 1.0 - beta
one_minus_beta_half = one_minus_beta / 2.0
one_minus_beta2 = one_minus_beta ** 2
numerator1 = one_minus_beta2 * alpha * alpha
denominator1 = 24.0 * ((underlying * strike) ** one_minus_beta)
term1 = numerator1 / denominator1
numerator2 = rho * beta * nu * alpha
denominator2 = 4.0 * ((underlying * strike) ** one_minus_beta_half)
term2 = numerator2 / denominator2
term3 = (2.0 - 3.0 * rho * rho) * nu * nu / 24.0
return 1.0 + (term1 + term2 + term3) * maturity
def _sabr_implied_vol_hagan_A4_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A4_fprime_by_strike
See :py:func:`_sabr_implied_vol_hagan_A4`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
one_minus_beta = 1.0 - beta
one_minus_beta_half = one_minus_beta / 2.0
one_minus_beta2 = one_minus_beta ** 2
two_minus_beta = 2.0 - beta
three_minus_beta_half = (3.0 - beta) / 2.0
numerator1 = one_minus_beta2 * (alpha ** 2) * (strike ** (-two_minus_beta))
denominator1 = 24.0 * (underlying ** one_minus_beta)
term1 = numerator1 / denominator1
numerator2 = rho * beta * nu * alpha * (strike ** (-three_minus_beta_half))
denominator2 = 8.0 * (underlying ** one_minus_beta_half)
term2 = numerator2 / denominator2
return -(term1 + term2) * maturity * one_minus_beta
def _sabr_implied_vol_hagan_A4_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A4_fhess_by_strike
See :py:func:`_sabr_implied_vol_hagan_A4`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
one_minus_beta = 1.0 - beta
one_minus_beta_half = one_minus_beta / 2.0
one_minus_beta2 = one_minus_beta ** 2
two_minus_beta = 2.0 - beta
three_minus_beta = 3.0 - beta
five_minus_beta_half = (5.0 - beta) / 2.0
factor1 = strike ** (-three_minus_beta)
numerator1 = one_minus_beta2 * (alpha ** 2) * (-two_minus_beta)
denominator1 = 24.0 * (underlying ** one_minus_beta)
term1 = numerator1 * factor1 / denominator1
factor2 = strike ** (-five_minus_beta_half)
numerator2 = rho * beta * nu * alpha * (-three_minus_beta)
denominator2 = 16.0 * (underlying ** one_minus_beta_half)
term2 = numerator2 * factor2 / denominator2
return -(term1 + term2) * maturity * one_minus_beta
def _sabr_implied_vol_hagan_A4_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A4_fprime_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A4`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
one_minus_beta = 1.0 - beta
one_minus_beta_half = one_minus_beta / 2.0
one_minus_beta2 = one_minus_beta ** 2
two_minus_beta = 2.0 - beta
three_minus_beta_half = (3.0 - beta) / 2.0
alpha2 = alpha ** 2
numerator1 = one_minus_beta2 * alpha2 * (underlying ** (-two_minus_beta))
denominator1 = 24.0 * (strike ** one_minus_beta)
term1 = numerator1 / denominator1
numerator2 = (rho * beta * nu * alpha
* (underlying ** (-three_minus_beta_half)))
denominator2 = 8.0 * (strike ** one_minus_beta_half)
term2 = numerator2 / denominator2
return -(term1 + term2) * maturity * one_minus_beta
def _sabr_implied_vol_hagan_A4_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""_sabr_implied_vol_hagan_A4_fhess_by_underlying
See :py:func:`_sabr_implied_vol_hagan_A4`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be within [0, 1].
:param float beta: must be greater than 0.
:param float rho: must be within [-1, 1].
:param float nu: volatility of volatility. This must be positive.
:return: value of factor.
:rtype: float.
"""
one_minus_beta = 1.0 - beta
one_minus_beta_half = one_minus_beta / 2.0
one_minus_beta2 = one_minus_beta ** 2
two_minus_beta = 2.0 - beta
three_minus_beta = 3.0 - beta
five_minus_beta_half = (5.0 - beta) / 2.0
factor1 = underlying ** (-three_minus_beta)
numerator1 = one_minus_beta2 * (alpha ** 2) * (-two_minus_beta)
denominator1 = 24.0 * (strike ** one_minus_beta)
term1 = numerator1 * factor1 / denominator1
factor2 = underlying ** (-five_minus_beta_half)
numerator2 = rho * beta * nu * alpha * (-three_minus_beta)
denominator2 = 16.0 * (strike ** one_minus_beta_half)
term2 = numerator2 * factor2 / denominator2
return -(term1 + term2) * maturity * one_minus_beta
[docs]def sabr_implied_vol_hagan_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""sabr_implied_vol_hagan_fprime_by_strike
first derivative of Hagan's SABR implied volatility formula
with respect to strike.
See :py:func:`sabr_implied_vol_hagan`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be positve.
:param float beta: must be within [0, 1].
:param float rho: must be within [-1, 1].
:param float nu: must be positive.
:return: first derivative of hagan implied volatility formula
with respect to strike.
:rtype: float
"""
assert(alpha > 0)
assert(0 <= beta <= 1.0)
assert(-1.0 <= rho <= 1.0)
assert(nu > 0.0)
A1 = _sabr_implied_vol_hagan_A1(
underlying, strike, maturity, alpha, beta, rho, nu)
A1_fprime = _sabr_implied_vol_hagan_A1_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A2 = _sabr_implied_vol_hagan_A2(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fprime = _sabr_implied_vol_hagan_A2_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A3 = _sabr_implied_vol_hagan_A3(
underlying, strike, maturity, alpha, beta, rho, nu)
A3_fprime = _sabr_implied_vol_hagan_A3_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A4 = _sabr_implied_vol_hagan_A4(
underlying, strike, maturity, alpha, beta, rho, nu)
A4_fprime = _sabr_implied_vol_hagan_A4_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
factor1 = alpha / A1
factor2 = A2 / A3
factor3 = A4
factor11 = -alpha * A1_fprime / (A1 ** 2)
term1 = factor11 * factor2 * factor3
factor22 = A2_fprime / A3 - A2 * A3_fprime / (A3 ** 2)
term2 = factor1 * factor22 * factor3
factor33 = A4_fprime
term3 = factor1 * factor2 * factor33
return term1 + term2 + term3
[docs]def sabr_implied_vol_hagan_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu):
"""sabr_implied_vol_hagan_fhess_by_strike
second derivative of Hagan's SABR implied volatility formula
with respect to strike.
See :py:func:`sabr_implied_vol_hagan`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be positve.
:param float beta: must be within [0, 1].
:param float rho: must be within [-1, 1].
:param float nu: must be positive.
:return: second derivative of hagan implied volatility formula
with respect to strike.
:rtype: float
"""
assert(alpha > 0)
assert(0 <= beta <= 1.0)
assert(-1.0 <= rho <= 1.0)
assert(nu > 0.0)
A1 = _sabr_implied_vol_hagan_A1(
underlying, strike, maturity, alpha, beta, rho, nu)
A1_fprime = _sabr_implied_vol_hagan_A1_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A1_fhess = _sabr_implied_vol_hagan_A1_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A2 = _sabr_implied_vol_hagan_A2(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fprime = _sabr_implied_vol_hagan_A2_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fhess = _sabr_implied_vol_hagan_A2_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A3 = _sabr_implied_vol_hagan_A3(
underlying, strike, maturity, alpha, beta, rho, nu)
A3_fprime = _sabr_implied_vol_hagan_A3_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A3_fhess = _sabr_implied_vol_hagan_A3_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A4 = _sabr_implied_vol_hagan_A4(
underlying, strike, maturity, alpha, beta, rho, nu)
A4_fprime = _sabr_implied_vol_hagan_A4_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
A4_fhess = _sabr_implied_vol_hagan_A4_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
factor1 = alpha / A1
A1_2 = A1 ** 2
fprime1 = -alpha * A1_fprime / A1_2
fhess1 = -alpha * (-2.0 * (A1_fprime ** 2) / (A1 ** 3) + A1_fhess / A1_2)
factor2 = A2 / A3
A3_2 = A3 ** 2
fprime2 = A2_fprime / A3 - A2 * A3_fprime / A3_2
fhess2 = (A2_fhess / A3
- 2.0 * A2_fprime * A3_fprime / A3_2
- A2 * A3_fhess / A3_2
+ 2.0 * A2 * (A3_fprime ** 2) / (A3 ** 3))
factor3 = A4
fprime3 = A4_fprime
fhess3 = A4_fhess
term1 = fhess1 * factor2 * factor3
term2 = factor1 * fhess2 * factor3
term3 = factor1 * factor2 * fhess3
term4 = 2.0 * fprime1 * fprime2 * factor3
term5 = 2.0 * fprime1 * factor2 * fprime3
term6 = 2.0 * factor1 * fprime2 * fprime3
return term1 + term2 + term3 + term4 + term5 + term6
[docs]def sabr_implied_vol_hagan_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""sabr_implied_vol_hagan_fprime_by_underlying
first derivative of Hagan's SABR implied volatility formula
with respect to underlying.
See :py:func:`sabr_implied_vol_hagan`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be positve.
:param float beta: must be within [0, 1].
:param float rho: must be within [-1, 1].
:param float nu: must be positive.
:return: first derivative of hagan implied volatility formula
with respect to underlying.
:rtype: float
"""
assert(alpha > 0)
assert(0 <= beta <= 1.0)
assert(-1.0 <= rho <= 1.0)
assert(nu > 0.0)
A1 = _sabr_implied_vol_hagan_A1(
underlying, strike, maturity, alpha, beta, rho, nu)
A1_fprime = _sabr_implied_vol_hagan_A1_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A2 = _sabr_implied_vol_hagan_A2(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fprime = _sabr_implied_vol_hagan_A2_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A3 = _sabr_implied_vol_hagan_A3(
underlying, strike, maturity, alpha, beta, rho, nu)
A3_fprime = _sabr_implied_vol_hagan_A3_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A4 = _sabr_implied_vol_hagan_A4(
underlying, strike, maturity, alpha, beta, rho, nu)
A4_fprime = _sabr_implied_vol_hagan_A4_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
factor1 = alpha / A1
factor2 = A2 / A3
factor3 = A4
factor11 = -alpha * A1_fprime / (A1 ** 2)
term1 = factor11 * factor2 * factor3
factor22 = A2_fprime / A3 - A2 * A3_fprime / (A3 ** 2)
term2 = factor1 * factor22 * factor3
factor33 = A4_fprime
term3 = factor1 * factor2 * factor33
return term1 + term2 + term3
[docs]def sabr_implied_vol_hagan_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu):
"""sabr_implied_vol_hagan_fhess_by_underlying
second derivative of Hagan's SABR implied volatility formula
with respect to underlying.
See :py:func:`sabr_implied_vol_hagan`.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha: must be positve.
:param float beta: must be within [0, 1].
:param float rho: must be within [-1, 1].
:param float nu: must be positive.
:return: second derivative of hagan implied volatility formula
with respect to underlying.
:rtype: float
"""
assert(alpha > 0)
assert(0 <= beta <= 1.0)
assert(-1.0 <= rho <= 1.0)
assert(nu > 0.0)
A1 = _sabr_implied_vol_hagan_A1(
underlying, strike, maturity, alpha, beta, rho, nu)
A1_fprime = _sabr_implied_vol_hagan_A1_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A1_fhess = _sabr_implied_vol_hagan_A1_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A2 = _sabr_implied_vol_hagan_A2(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fprime = _sabr_implied_vol_hagan_A2_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A2_fhess = _sabr_implied_vol_hagan_A2_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A3 = _sabr_implied_vol_hagan_A3(
underlying, strike, maturity, alpha, beta, rho, nu)
A3_fprime = _sabr_implied_vol_hagan_A3_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A3_fhess = _sabr_implied_vol_hagan_A3_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A4 = _sabr_implied_vol_hagan_A4(
underlying, strike, maturity, alpha, beta, rho, nu)
A4_fprime = _sabr_implied_vol_hagan_A4_fprime_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
A4_fhess = _sabr_implied_vol_hagan_A4_fhess_by_underlying(
underlying, strike, maturity, alpha, beta, rho, nu)
factor1 = alpha / A1
A1_2 = A1 ** 2
fprime1 = -alpha * A1_fprime / A1_2
fhess1 = -alpha * (-2.0 * (A1_fprime ** 2) / (A1 ** 3) + A1_fhess / A1_2)
factor2 = A2 / A3
A3_2 = A3 ** 2
fprime2 = A2_fprime / A3 - A2 * A3_fprime / A3_2
fhess2 = (A2_fhess / A3
- 2.0 * A2_fprime * A3_fprime / A3_2
- A2 * A3_fhess / A3_2
+ 2.0 * A2 * (A3_fprime ** 2) / (A3 ** 3))
factor3 = A4
fprime3 = A4_fprime
fhess3 = A4_fhess
term1 = fhess1 * factor2 * factor3
term2 = factor1 * fhess2 * factor3
term3 = factor1 * factor2 * fhess3
term4 = 2.0 * fprime1 * fprime2 * factor3
term5 = 2.0 * fprime1 * factor2 * fprime3
term6 = 2.0 * factor1 * fprime2 * fprime3
return term1 + term2 + term3 + term4 + term5 + term6
# ----------------------------------------------------------------------------
# SABR greeks
# ----------------------------------------------------------------------------
[docs]def sabr_payers_swaption_delta(
init_swap_rate, option_strike, swap_annuity, option_maturity,
alpha, beta, rho, nu):
"""sabr_payers_swaption_delta
calculate payer's swaption delta under SABR model.
See :py:func:`sabr_payers_swaption_value`.
:param float init_swap_rate:
:param float option_strike:
:param float swap_annuity:
:param float option_maturity:
:param float alpha: must be greater than 0.
:param float beta: must be within :math:`[0, 1]`.
:param float rho: must be within :math:`[-1, 1]`.
:param float nu: must be positive.
:return: payer's swaption delta.
:rtype: float.
"""
assert(alpha > 0)
assert(0 <= beta <= 1.0)
assert(-1.0 <= rho <= 1.0)
assert(nu > 0.0)
if option_maturity <= 0.0:
return 0.0
vol = mafipy.function.sabr_implied_vol_hagan(
init_swap_rate, option_strike, swap_annuity, alpha, beta, rho, nu)
bs_delta = mafipy.function.black_payers_swaption_delta(
init_swap_rate, option_strike, swap_annuity, option_maturity, vol)
bs_vega = mafipy.function.black_payers_swaption_vega(
init_swap_rate, option_strike, swap_annuity, option_maturity, vol)
backbone = mafipy.function.sabr_implied_vol_hagan_fprime_by_underlying(
init_swap_rate, option_strike, option_maturity,
alpha, beta, rho, nu)
return bs_delta + bs_vega * backbone
# ----------------------------------------------------------------------------
# SABR distribution
# ----------------------------------------------------------------------------
[docs]def sabr_cdf(underlying, strike, maturity, alpha, beta, rho, nu):
"""sabr_cdf
calculates value of c.d.f. when underlying follows SABR model.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha:
:param float beta:
:param float rho:
:param float nu:
:return: value of c.d.f. under SABR model.
:rtype: float.
"""
vol = sabr_implied_vol_hagan(
underlying, strike, maturity, alpha, beta, rho, nu)
bs_cdf = mafipy.function.black_swaption_cdf(
underlying, strike, 1.0, maturity, vol)
bs_vega = mafipy.function.black_payers_swaption_vega(
underlying, strike, 1.0, maturity, vol)
vol_fprime = sabr_implied_vol_hagan_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
return bs_cdf + bs_vega * vol_fprime
[docs]def sabr_pdf(underlying, strike, maturity, alpha, beta, rho, nu):
"""sabr_pdf
calculates value of p.d.f. when underlying follows SABR model.
:param float underlying:
:param float strike:
:param float maturity:
:param float alpha:
:param float beta:
:param float rho:
:param float nu:
:return: value of c.d.f. under SABR model.
:rtype: float.
"""
mf = mafipy.function
vol = sabr_implied_vol_hagan(
underlying, strike, maturity, alpha, beta, rho, nu)
bs_pdf = mf.black_swaption_pdf(
underlying, strike, 1.0, maturity, vol)
bs_vega = mf.black_payers_swaption_vega(
underlying, strike, 1.0, maturity, vol)
bs_volga = mf.black_payers_swaption_volga(
underlying, strike, 1.0, maturity, vol)
bs_vega_fprime = mf.black_payers_swaption_vega_fprime_by_strike(
underlying, strike, 1.0, maturity, vol)
vol_fprime = sabr_implied_vol_hagan_fprime_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
vol_fhess = sabr_implied_vol_hagan_fhess_by_strike(
underlying, strike, maturity, alpha, beta, rho, nu)
return (bs_pdf
+ 2.0 * bs_vega_fprime * vol_fprime
+ bs_volga * vol_fprime * vol_fprime
+ bs_vega * vol_fhess)