Pricing Context

struct Context
    alias::String
    numeraire::NumeraireEntry
    rates::Dict{String, RatesEntry}
    assets::Dict{String, AssetEntry}
    forward_indices::Dict{String, ForwardIndexEntry}
    future_indices::Dict{String, FutureIndexEntry}
    fixings::Dict{String, FixingEntry}
end

A Context represents a mapping from market references (keys) to model and term structure references (aliases).

Links are represented as key/alias pairs. market references are used in the specification of payoffs and products. Model and term structure references are used to set up models and model parameters.

In simple settings there can be a one-to-one mapping between market references and model/term structure references. However, more realistic settings benefit from an additional mapping. For example, discount factors for two (or more) market reference (say EUR ESTR and EUR Euribor) can be calculated from a single model (with model reference EUR) and two (or more) yield curves (with term structure reference ESTR and Euribor).

A Context

• adds a layer of abstraction to disentangle models and products and

• links models and term structures according to business logic.

abstract type ContextEntry end

A ContextEntry represents a mapping from a context key to model aliases and term structure aliases.

We use the convention that keys are UPPERCASE strings. This aims at helping to distinguish between keys and alias.

struct NumeraireEntry <: ContextEntry
    context_key::String
    model_alias::Union{String, Nothing}
    termstructure_dict::Dict{String,String}
end

A NumeraireEntry represents a link to an interest rate model and yield curves used for numeraire calculation.

We opt to allow for different yield curves in numeraire application. This should allow e.g. AMC methods wih trade-specific discounting.

An empty model alias (nothing) represents a deterministic model.

The termstructure_dict maps term structure keys to term structure aliases.

We use the convention that keys are UPPERCASE strings. This aims at helping to distinguish between keys and alias.

numeraire_entry(
    context_key::String,
    model_alias::Union{String, Nothing} = nothing,
    termstructure_dict::Union{AbstractDict, Nothing} = nothing,
    )

Simplify NumeraireEntry setup.

numeraire_entry(
    context_key::String,
    model_alias::Union{String, Nothing},
    termstructure_alias::String,
    )

Simplify NumeraireEntry setup.

struct RatesEntry <: ContextEntry
    context_key::String
    model_alias::Union{String, Nothing}
    termstructure_dict::Dict{String,String}
end

A RatesEntry represents a link to an interest rate model and yield curves used for zero coupon bond calculation.

An empty model alias (nothing) represents a deterministic model.

The termstructure_dict maps term structure keys to term structure aliases.

We use the convention that keys are UPPERCASE strings. This aims at helping to distinguish between keys and alias.

rates_entry(
    context_key::String,
    model_alias::Union{String, Nothing} = nothing,
    termstructure_dict::Union{AbstractDict, Nothing} = nothing,
    )

Simplify RatesEntry setup.

ratesentry( contextkey::String, modelalias::Union{String, Nothing}, termstructurealias::String, )

Simplify RatesEntry setup.

struct AssetEntry <: ContextEntry
    context_key::String
    asset_model_alias::Union{String, Nothing}
    domestic_model_alias::Union{String, Nothing}
    foreign_model_alias::Union{String, Nothing}
    asset_spot_alias::String
    domestic_termstructure_dict::Dict{String,String}
    foreign_termstructure_dict::Dict{String,String}
end

An AssetEntry represents a link to an asset model, two interest rate models and yield curves. This entry is used to calculate future simulated asset values.

We use the foreign currency analogy to represent tradeable assets.

An empty model alias (nothing) represents a deterministic model.

domestic_termstructure_dict and foreign_termstructure_dict map term structure keys to term structure aliases.

We use the convention that keys are UPPERCASE strings. This aims at helping to distinguish between keys and alias.

asset_entry(
    context_key::String,
    asset_model_alias::Union{String, Nothing} = nothing,
    domestic_model_alias::Union{String, Nothing} = nothing,
    foreign_model_alias::Union{String, Nothing} = nothing,
    asset_spot_alias::Union{String, Nothing} = nothing,
    domestic_termstructure_dict::Union{AbstractDict, Nothing} = nothing,
    foreign_termstructure_dict::Union{AbstractDict, Nothing} = nothing,
    )

Simplify AssetEntry setup.

asset_entry(
    context_key::String,
    asset_model_alias::Union{String, Nothing} = nothing,
    domestic_model_alias::Union{String, Nothing} = nothing,
    foreign_model_alias::Union{String, Nothing} = nothing,
    asset_spot_alias::Union{String, Nothing} = nothing,
    domestic_termstructure_alias::String,
    foreign_termstructure_alias::String,
    )

Simplify AssetEntry setup.

struct ForwardIndexEntry <: ContextEntry
    context_key::String
    asset_model_alias::Union{String, Nothing}
    domestic_model_alias::Union{String, Nothing}
    foreign_model_alias::Union{String, Nothing}
    forward_index_alias::String
end

A ForwardIndexEntry represents a link to an asset model, two interest rate models and a forward index curves. This entry is used to calculate future simulated forward asset prices.

We use the foreign currency analogy to represent tradeable assets.

An empty model alias (nothing) represents a deterministic model.

forward_index_alias represents the link to the forward index curve.

We use the convention that keys are UPPERCASE strings. This aims at helping to distinguish between keys and alias.

forward_index_entry(
    context_key::String,
    asset_model_alias::Union{String, Nothing} = nothing,
    domestic_model_alias::Union{String, Nothing} = nothing,
    foreign_model_alias::Union{String, Nothing} = nothing,
    forward_index_alias::Union{String, Nothing} = nothing,
    )

Simplify ForwardIndexEntry setup.

struct FutureIndexEntry <: ContextEntry
    context_key::String
    future_model_alias::Union{String, Nothing}
    future_index_alias::String
end

A FutureIndexEntry represents a link to a Futures model and a future index curve. This entry is used to calculate future simulated Future prices.

Key proposition is that the Future price is a martingale in the corresponding domestic risk-neutral measure.

An empty model alias (nothing) represents a deterministic model.

future_index_alias represents the link to the Future index curve.

We use the convention that keys are UPPERCASE strings. This aims at helping to distinguish between keys and alias.

future_index_entry(
    context_key::String,
    future_model_alias::Union{String, Nothing} = nothing,
    future_index_alias::String = nothing,
    )

Simplify FutureIndexEntry setup.

struct FixingEntry <: ContextEntry
    context_key::String
    termstructure_alias::String
end

A FixingEntry represents a link to a parameter term structure used to obtain fixings for indices etc.

fixing_entry(
    context_key::String,
    termstructure_alias::Union{String, Nothing} = nothing,
    )

Simplify FixingEntry setup.

key(ce::ContextEntry)

Return the context key of a context entry.

context(
    alias::String,
    num_entry::NumeraireEntry,
    rates_entries::Union{AbstractVector, Nothing} = nothing,
    asset_entries::Union{AbstractVector, Nothing} = nothing,
    forward_index_entries::Union{AbstractVector, Nothing} = nothing,
    future_index_entries::Union{AbstractVector, Nothing} = nothing,
    fixing_entries::Union{AbstractVector, Nothing} = nothing,
    )

Simplify Context setup.

simple_context(alias::String, alias_list::AbstractVector)

Generate a simple Context based on a list of currency aliases.

User must ensure that aliases can be referenced as normalised keys.

deterministic_model_context(alias::String, alias_list::AbstractVector)

Generate a simple Context for fully deterministic modelling based on a list of currency aliases.

User must ensure that aliases can be referenced as normalised keys.

context_keys(key::String)

Parse the context entry key and term structure keys from an input key string.

We implement a simple syntax for input key strings:

context_key:[ts_key_1][-,+][ts_key_2]

Result is a tuple of the form

(context_key, ts_key_1, ts_key_2, [-,+])

Elements that are not found are returned as emptycontextkey value.

We apply normalisation of keys to mitigate risk of key errors by the user.