added nterest-rate term structure in g2process constructor

Signed-off-by: Hrushi20 <hrushikesh20thegreat@gmail.com>
lballabio · Mar 29, 2024 · 7a21fd8 · 7a21fd8
1 parent 9ff0542
commit 7a21fd8
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Showing 2 changed files with 18 additions and 8 deletions.
diff --git a/ql/processes/g2process.cpp b/ql/processes/g2process.cpp
@@ -22,10 +22,10 @@
 
 namespace QuantLib {
 
-    G2Process::G2Process(Real a, Real sigma, Real b, Real eta, Real rho)
+    G2Process::G2Process(const Handle<YieldTermStructure>& h, Real a, Real sigma, Real b, Real eta, Real rho)
     : a_(a), sigma_(sigma), b_(b), eta_(eta), rho_(rho),
       xProcess_(new QuantLib::OrnsteinUhlenbeckProcess(a, sigma, 0.0)),
-      yProcess_(new QuantLib::OrnsteinUhlenbeckProcess(b, eta, 0.0)) {}
+      yProcess_(new QuantLib::OrnsteinUhlenbeckProcess(b, eta, 0.0)), h_(h) {}
 
     Size G2Process::size() const {
         return 2;
@@ -36,9 +36,16 @@ namespace QuantLib {
     }
 
     Array G2Process::drift(Time t, const Array& x) const {
+        Real alpha_drift = sigma_*sigma_/(2*a_)*(1-std::exp(-2*a_*t));
+        Real shift = 0.0001;
+        Real f = h_->forwardRate(t, t, Continuous, NoFrequency);
+        Real fup = h_->forwardRate(t+shift, t+shift, Continuous, NoFrequency);
+        Real f_prime = (fup-f)/shift;
+        alpha_drift += a_*f+f_prime;
+
         return {
-            xProcess_->drift(t, x[0]),
-            yProcess_->drift(t, x[1])
+            xProcess_->drift(t, x[0]) + alpha_drift,
+            yProcess_->drift(t, x[1]) + alpha_drift
         };
     }
 
@@ -124,10 +131,10 @@ namespace QuantLib {
     }
 
 
-    G2ForwardProcess::G2ForwardProcess(Real a, Real sigma, Real b, Real eta, Real rho)
+    G2ForwardProcess::G2ForwardProcess(const Handle<YieldTermStructure>& h, Real a, Real sigma, Real b, Real eta, Real rho)
     : a_(a), sigma_(sigma), b_(b), eta_(eta), rho_(rho),
       xProcess_(new QuantLib::OrnsteinUhlenbeckProcess(a, sigma, 0.0)),
-      yProcess_(new QuantLib::OrnsteinUhlenbeckProcess(b, eta, 0.0)) {}
+      yProcess_(new QuantLib::OrnsteinUhlenbeckProcess(b, eta, 0.0)),h_(h) {}
 
     Size G2ForwardProcess::size() const {
         return 2;

diff --git a/ql/processes/g2process.hpp b/ql/processes/g2process.hpp
@@ -26,14 +26,15 @@
 
 #include <ql/processes/forwardmeasureprocess.hpp>
 #include <ql/processes/ornsteinuhlenbeckprocess.hpp>
+#include <ql/termstructures/yieldtermstructure.hpp>
 
 namespace QuantLib {
 
     //! %G2 stochastic process
     /*! \ingroup processes */
     class G2Process : public StochasticProcess {
       public:
-        G2Process(Real a, Real sigma, Real b, Real eta, Real rho);
+        G2Process(const Handle<YieldTermStructure>& h, Real a, Real sigma, Real b, Real eta, Real rho);
         //! \name StochasticProcess interface
         //@{
         Size size() const override;
@@ -55,13 +56,14 @@ namespace QuantLib {
         Real x0_ = 0.0, y0_ = 0.0, a_, sigma_, b_, eta_, rho_;
         ext::shared_ptr<QuantLib::OrnsteinUhlenbeckProcess> xProcess_;
         ext::shared_ptr<QuantLib::OrnsteinUhlenbeckProcess> yProcess_;
+        Handle<YieldTermStructure> h_;
     };
 
     //! %Forward %G2 stochastic process
     /*! \ingroup processes */
     class G2ForwardProcess : public ForwardMeasureProcess {
       public:
-        G2ForwardProcess(Real a, Real sigma, Real b, Real eta, Real rho);
+        G2ForwardProcess(const Handle<YieldTermStructure>& h, Real a, Real sigma, Real b, Real eta, Real rho);
         //! \name StochasticProcess interface
         //@{
         Size size() const override;
@@ -80,6 +82,7 @@ namespace QuantLib {
         Real yForwardDrift(Time t, Time T) const;
         Real Mx_T(Real s, Real t, Real T) const;
         Real My_T(Real s, Real t, Real T) const;
+        Handle<YieldTermStructure> h_;
     };
 
 }