QL-ORE ON coupons alignment

LICENSE.TXT

@@ -127,7 +127,7 @@ Copyright (C) 2016 Nicholas Bertocchi
 Copyright (C) 2016 Stefano Fondi
 Copyright (C) 2016, 2017 Fabrice Lecuyer
 Copyright (C) 2016, 2019, 2020 Eisuke Tani
-Copyright (C) 2016, 2022 Quaternion Risk Management Ltd
+Copyright (C) 2016, 2020, 2022 Quaternion Risk Management Ltd
 
 Copyright (C) 2017 BN Algorithms Ltd
 Copyright (C) 2017 Joseph Jeisman

QuantLib.vcxproj

@@ -510,6 +510,7 @@
   <ItemGroup>
     <ClInclude Include="ql\cashflows\all.hpp" />
     <ClInclude Include="ql\cashflows\averagebmacoupon.hpp" />
+    <ClInclude Include="ql\cashflows\blackovernightindexedcouponpricer.hpp" />
     <ClInclude Include="ql\cashflows\capflooredcoupon.hpp" />
     <ClInclude Include="ql\cashflows\capflooredinflationcoupon.hpp" />
     <ClInclude Include="ql\cashflows\cashflows.hpp" />
@@ -1924,6 +1925,7 @@
   </ItemGroup>
   <ItemGroup>
     <ClCompile Include="ql\cashflows\averagebmacoupon.cpp" />
+    <ClCompile Include="ql\cashflows\blackovernightindexedcouponpricer.cpp" />
     <ClCompile Include="ql\cashflows\capflooredcoupon.cpp" />
     <ClCompile Include="ql\cashflows\capflooredinflationcoupon.cpp" />
     <ClCompile Include="ql\cashflows\cashflows.cpp" />

QuantLib.vcxproj.filters

@@ -495,6 +495,9 @@
     <ClInclude Include="ql\cashflows\averagebmacoupon.hpp">
       <Filter>cashflows</Filter>
     </ClInclude>
+    <ClInclude Include="ql\cashflows\blackovernightindexedcouponpricer.hpp">
+      <Filter>cashflows</Filter>
+    </ClInclude>
     <ClInclude Include="ql\cashflows\capflooredcoupon.hpp">
       <Filter>cashflows</Filter>
     </ClInclude>
@@ -4529,6 +4532,9 @@
     <ClCompile Include="ql\cashflows\averagebmacoupon.cpp">
       <Filter>cashflows</Filter>
     </ClCompile>
+    <ClCompile Include="ql\cashflows\blackovernightindexedcouponpricer.cpp">
+      <Filter>cashflows</Filter>
+    </ClCompile>
     <ClCompile Include="ql\cashflows\capflooredcoupon.cpp">
       <Filter>cashflows</Filter>
     </ClCompile>

ql/CMakeLists.txt

@@ -1,6 +1,7 @@
 set(QL_SOURCES
     cashflow.cpp
     cashflows/averagebmacoupon.cpp
+    cashflows/blackovernightindexedcouponpricer.cpp
     cashflows/capflooredcoupon.cpp
     cashflows/capflooredinflationcoupon.cpp
     cashflows/cashflows.cpp
@@ -951,6 +952,7 @@ set(QL_HEADERS
     auto_link.hpp
     cashflow.hpp
     cashflows/averagebmacoupon.hpp
+    cashflows/blackovernightindexedcouponpricer.hpp
     cashflows/capflooredcoupon.hpp
     cashflows/capflooredinflationcoupon.hpp
     cashflows/cashflows.hpp

ql/cashflows/Makefile.am

@@ -5,6 +5,7 @@ this_includedir=${includedir}/${subdir}
 this_include_HEADERS = \
     all.hpp \
     averagebmacoupon.hpp \
+    blackovernightindexedcouponpricer.hpp \
     capflooredcoupon.hpp \
     capflooredinflationcoupon.hpp \
     cashflows.hpp \
@@ -42,6 +43,7 @@ this_include_HEADERS = \
 
 cpp_files = \
     averagebmacoupon.cpp \
+    blackovernightindexedcouponpricer.cpp \
     capflooredcoupon.cpp \
     capflooredinflationcoupon.cpp \
     cashflows.cpp \

ql/cashflows/all.hpp

@@ -2,6 +2,7 @@
 /* Add the files to be included into Makefile.am instead. */
 
 #include <ql/cashflows/averagebmacoupon.hpp>
+#include <ql/cashflows/blackovernightindexedcouponpricer.hpp>
 #include <ql/cashflows/capflooredcoupon.hpp>
 #include <ql/cashflows/capflooredinflationcoupon.hpp>
 #include <ql/cashflows/cashflows.hpp>

ql/cashflows/blackovernightindexedcouponpricer.hpp

@@ -0,0 +1,93 @@
+/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
+
+/*
+ Copyright (C) 2020 Quaternion Risk Management Ltd
+
+ This file is part of QuantLib, a free-software/open-source library
+ for financial quantitative analysts and developers - http://quantlib.org/
+
+ QuantLib is free software: you can redistribute it and/or modify it
+ under the terms of the QuantLib license.  You should have received a
+ copy of the license along with this program; if not, please email
+ <[email protected]>. The license is also available online at
+ <http://quantlib.org/license.shtml>.
+
+
+ This program is distributed in the hope that it will be useful, but
+ WITHOUT ANY WARRANTY; without even the implied warranty of MERCHANTABILITY
+ or FITNESS FOR A PARTICULAR PURPOSE. See the license for more details.
+*/
+
+/*! \file blackovernightindexedcouponpricer.hpp
+    \brief black coupon pricer for capped / floored ON indexed coupons
+*/
+
+#ifndef quantlib_black_overnight_indexed_coupon_pricer_hpp
+#define quantlib_black_overnight_indexed_coupon_pricer_hpp
+
+#include <ql/cashflows/overnightindexedcoupon.hpp>
+#include <ql/cashflows/overnightindexedcouponpricer.hpp>
+
+#include <ql/termstructures/volatility/optionlet/optionletvolatilitystructure.hpp>
+
+namespace QuantLib {
+
+    //! Black compounded overnight coupon pricer
+    /* The methods that are implemented here to price capped / floored compounded ON coupons are
+    highly experimental and ad-hoc. As soon as a market best practice has evolved, the pricer
+    should be revised. */
+    class BlackOvernightIndexedCouponPricer : public CappedFlooredOvernightIndexedCouponPricer {
+    public:
+        using CappedFlooredOvernightIndexedCouponPricer::CappedFlooredOvernightIndexedCouponPricer;
+        //! \name FloatingRateCoupon interface
+        //@{
+        void initialize(const FloatingRateCoupon& coupon) override;
+        Real swapletPrice() const override;
+        Rate swapletRate() const override;
+        Real capletPrice(Rate effectiveCap) const override;
+        Rate capletRate(Rate effectiveCap) const override;
+        Real floorletPrice(Rate effectiveFloor) const override;
+        Rate floorletRate(Rate effectiveFloor) const override;
+        //@}
+    private:
+        Real optionletRateGlobal(Option::Type optionType, Real effStrike) const;
+        Real optionletRateLocal(Option::Type optionType, Real effStrike) const;
+
+        Real gearing_;
+        ext::shared_ptr<IborIndex> index_;
+        Real effectiveIndexFixing_, swapletRate_;
+
+        const CappedFlooredOvernightIndexedCoupon* coupon_;
+    };
+
+    //! Black averaged overnight coupon pricer
+    /* The methods that are implemented here to price capped / floored average ON coupons are
+    highly experimental and ad-hoc. As soon as a market best practice has evolved, the pricer
+    should be revised. */
+    class BlackAverageONIndexedCouponPricer : public CappedFlooredOvernightIndexedCouponPricer {
+    public:
+        using CappedFlooredOvernightIndexedCouponPricer::CappedFlooredOvernightIndexedCouponPricer;
+        //! \name FloatingRateCoupon interface
+        //@{
+        void initialize(const FloatingRateCoupon& coupon) override;
+        Real swapletPrice() const override;
+        Rate swapletRate() const override;
+        Real capletPrice(Rate effectiveCap) const override;
+        Rate capletRate(Rate effectiveCap) const override;
+        Real floorletPrice(Rate effectiveFloor) const override;
+        Rate floorletRate(Rate effectiveFloor) const override;
+        //@}
+    private:
+        Real optionletRateGlobal(Option::Type optionType, Real effStrike) const;
+        Real optionletRateLocal(Option::Type optionType, Real effStrike) const;
+
+        Real gearing_;
+        ext::shared_ptr<IborIndex> index_;
+        Real swapletRate_, forwardRate_;
+
+        const CappedFlooredOvernightIndexedCoupon* coupon_;
+    };
+
+}
+
+#endif

ql/cashflows/couponpricer.cpp

@@ -27,6 +27,9 @@
 #include <ql/cashflows/digitaliborcoupon.hpp>
 #include <ql/cashflows/rangeaccrual.hpp>
 #include <ql/cashflows/multipleresetscoupon.hpp>
+#include <ql/cashflows/overnightindexedcoupon.hpp>
+#include <ql/cashflows/overnightindexedcouponpricer.hpp>
+#include <ql/cashflows/blackovernightindexedcouponpricer.hpp>
 #include <ql/experimental/coupons/cmsspreadcoupon.hpp>        /* internal */
 #include <ql/experimental/coupons/digitalcmsspreadcoupon.hpp> /* internal */
 #include <ql/pricingengines/blackformula.hpp>
@@ -249,6 +252,8 @@ namespace QuantLib {
                              public Visitor<CappedFlooredIborCoupon>,
                              public Visitor<CappedFlooredCmsCoupon>,
                              public Visitor<CappedFlooredCmsSpreadCoupon>,
+                             public Visitor<OvernightIndexedCoupon>,
+                             public Visitor<CappedFlooredOvernightIndexedCoupon>,
                              public Visitor<DigitalIborCoupon>,
                              public Visitor<DigitalCmsCoupon>,
                              public Visitor<DigitalCmsSpreadCoupon>,
@@ -266,6 +271,8 @@ namespace QuantLib {
             void visit(CappedFlooredCoupon& c) override;
             void visit(IborCoupon& c) override;
             void visit(CappedFlooredIborCoupon& c) override;
+            void visit(OvernightIndexedCoupon& c) override;
+            void visit(CappedFlooredOvernightIndexedCoupon& c) override;
             void visit(DigitalIborCoupon& c) override;
             void visit(CmsCoupon& c) override;
             void visit(CmsSpreadCoupon& c) override;
@@ -330,6 +337,32 @@ namespace QuantLib {
             c.setPricer(iborCouponPricer);
         }
 
+        void PricerSetter::visit(OvernightIndexedCoupon& c) {
+            if (c.averagingMethod() == RateAveraging::Compound) {
+                const ext::shared_ptr<CompoundingOvernightIndexedCouponPricer> overnightCouponPricer =
+                    ext::dynamic_pointer_cast<CompoundingOvernightIndexedCouponPricer>(pricer_);
+                QL_REQUIRE(overnightCouponPricer,
+                       "pricer not compatible with overnight indexed coupon");
+                c.setPricer(overnightCouponPricer);
+            } else {
+                const ext::shared_ptr<ArithmeticAveragedOvernightIndexedCouponPricer> overnightCouponPricer =
+                    ext::dynamic_pointer_cast<ArithmeticAveragedOvernightIndexedCouponPricer>(pricer_);
+                QL_REQUIRE(overnightCouponPricer,
+                       "pricer not compatible with arithmetic averaged overnight indexed coupon");
+                c.setPricer(overnightCouponPricer);
+            }
+        }
+
+        void PricerSetter::visit(CappedFlooredOvernightIndexedCoupon& c) {
+            const ext::shared_ptr<CappedFlooredOvernightIndexedCouponPricer> p =
+                ext::dynamic_pointer_cast<CappedFlooredOvernightIndexedCouponPricer>(pricer_);
+            // we can set a pricer for the capped floored on coupon or the underlying on coupon
+            if (p)
+                c.setPricer(p);
+            else
+                c.underlying()->accept(*this);
+        }
+
         void PricerSetter::visit(CmsCoupon& c) {
             const ext::shared_ptr<CmsCouponPricer> cmsCouponPricer =
                 ext::dynamic_pointer_cast<CmsCouponPricer>(pricer_);