FdmDividendHandler::FdmDividendHandler(
const DividendSchedule& schedule,
const boost::shared_ptr<FdmMesher>& mesher,
const Date& referenceDate,
const DayCounter& dayCounter,
Size equityDirection)
: x_(mesher->layout()->dim()[equityDirection]),
mesher_(mesher),
equityDirection_(equityDirection) {
dividends_.reserve(schedule.size());
dividendDates_.reserve(schedule.size());
dividendTimes_.reserve(schedule.size());
for (DividendSchedule::const_iterator iter=schedule.begin();
iter!=schedule.end(); ++iter) {
dividends_.push_back((*iter)->amount());
dividendDates_.push_back((*iter)->date());
dividendTimes_.push_back(
dayCounter.yearFraction(referenceDate,(*iter)->date()));
}
Array tmp = mesher_->locations(equityDirection);
Size spacing = mesher_->layout()->spacing()[equityDirection];
for (Size i = 0; i < x_.size(); ++i) {
x_[i] = std::exp(tmp[i*spacing]);
}
}
boost::shared_ptr<FdmStepConditionComposite>
FdmStepConditionComposite::vanillaComposite(
const DividendSchedule& cashFlow,
const boost::shared_ptr<Exercise>& exercise,
const boost::shared_ptr<FdmMesher>& mesher,
const boost::shared_ptr<FdmInnerValueCalculator>& calculator,
const Date& refDate,
const DayCounter& dayCounter) {
std::list<std::vector<Time> > stoppingTimes;
std::list<boost::shared_ptr<StepCondition<Array> > > stepConditions;
if(!cashFlow.empty()) {
boost::shared_ptr<FdmDividendHandler> dividendCondition(
new FdmDividendHandler(cashFlow, mesher,
refDate, dayCounter, 0));
stepConditions.push_back(dividendCondition);
stoppingTimes.push_back(dividendCondition->dividendTimes());
}
QL_REQUIRE( exercise->type() == Exercise::American
|| exercise->type() == Exercise::European
|| exercise->type() == Exercise::Bermudan,
"exercise type is not supported");
if (exercise->type() == Exercise::American) {
stepConditions.push_back(boost::shared_ptr<StepCondition<Array> >(
new FdmAmericanStepCondition(mesher,calculator)));
}
else if (exercise->type() == Exercise::Bermudan) {
boost::shared_ptr<FdmBermudanStepCondition> bermudanCondition(
new FdmBermudanStepCondition(exercise->dates(),
refDate, dayCounter,
mesher, calculator));
stepConditions.push_back(bermudanCondition);
stoppingTimes.push_back(bermudanCondition->exerciseTimes());
}
return boost::shared_ptr<FdmStepConditionComposite>(
new FdmStepConditionComposite(stoppingTimes, stepConditions));
}
int main(int, char* []) {
try {
boost::timer timer;
std::cout << std::endl;
Option::Type type(Option::Put);
Real underlying = 36.0;
Real spreadRate = 0.005;
Spread dividendYield = 0.02;
Rate riskFreeRate = 0.06;
Volatility volatility = 0.20;
Integer settlementDays = 3;
Integer length = 5;
Real redemption = 100.0;
Real conversionRatio = redemption/underlying; // at the money
// set up dates/schedules
Calendar calendar = TARGET();
Date today = calendar.adjust(Date::todaysDate());
Settings::instance().evaluationDate() = today;
Date settlementDate = calendar.advance(today, settlementDays, Days);
Date exerciseDate = calendar.advance(settlementDate, length, Years);
Date issueDate = calendar.advance(exerciseDate, -length, Years);
BusinessDayConvention convention = ModifiedFollowing;
Frequency frequency = Annual;
Schedule schedule(issueDate, exerciseDate,
Period(frequency), calendar,
convention, convention,
DateGeneration::Backward, false);
DividendSchedule dividends;
CallabilitySchedule callability;
std::vector<Real> coupons(1, 0.05);
DayCounter bondDayCount = Thirty360();
Integer callLength[] = { 2, 4 }; // Call dates, years 2, 4.
Integer putLength[] = { 3 }; // Put dates year 3
Real callPrices[] = { 101.5, 100.85 };
Real putPrices[]= { 105.0 };
// Load call schedules
for (Size i=0; i<LENGTH(callLength); i++) {
callability.push_back(
boost::shared_ptr<Callability>(
new SoftCallability(Callability::Price(
callPrices[i],
Callability::Price::Clean),
schedule.date(callLength[i]),
1.20)));
}
for (Size j=0; j<LENGTH(putLength); j++) {
callability.push_back(
boost::shared_ptr<Callability>(
new Callability(Callability::Price(
putPrices[j],
Callability::Price::Clean),
Callability::Put,
schedule.date(putLength[j]))));
}
// Assume dividends are paid every 6 months.
for (Date d = today + 6*Months; d < exerciseDate; d += 6*Months) {
dividends.push_back(
boost::shared_ptr<Dividend>(new FixedDividend(1.0, d)));
}
DayCounter dayCounter = Actual365Fixed();
Time maturity = dayCounter.yearFraction(settlementDate,
exerciseDate);
std::cout << "option type = " << type << std::endl;
std::cout << "Time to maturity = " << maturity
<< std::endl;
std::cout << "Underlying price = " << underlying
<< std::endl;
std::cout << "Risk-free interest rate = " << io::rate(riskFreeRate)
<< std::endl;
std::cout << "Dividend yield = " << io::rate(dividendYield)
<< std::endl;
std::cout << "Volatility = " << io::volatility(volatility)
<< std::endl;
std::cout << std::endl;
std::string method;
std::cout << std::endl ;
// write column headings
Size widths[] = { 35, 14, 14 };
Size totalWidth = widths[0] + widths[1] + widths[2];
std::string rule(totalWidth, '-'), dblrule(totalWidth, '=');
std::cout << dblrule << std::endl;
std::cout << "Tsiveriotis-Fernandes method" << std::endl;
std::cout << dblrule << std::endl;
std::cout << std::setw(widths[0]) << std::left << "Tree type"
<< std::setw(widths[1]) << std::left << "European"
<< std::setw(widths[1]) << std::left << "American"
<< std::endl;
std::cout << rule << std::endl;
boost::shared_ptr<Exercise> exercise(
new EuropeanExercise(exerciseDate));
boost::shared_ptr<Exercise> amExercise(
new AmericanExercise(settlementDate,
exerciseDate));
Handle<Quote> underlyingH(
boost::shared_ptr<Quote>(new SimpleQuote(underlying)));
Handle<YieldTermStructure> flatTermStructure(
boost::shared_ptr<YieldTermStructure>(
new FlatForward(settlementDate, riskFreeRate, dayCounter)));
Handle<YieldTermStructure> flatDividendTS(
boost::shared_ptr<YieldTermStructure>(
new FlatForward(settlementDate, dividendYield, dayCounter)));
Handle<BlackVolTermStructure> flatVolTS(
boost::shared_ptr<BlackVolTermStructure>(
new BlackConstantVol(settlementDate, calendar,
volatility, dayCounter)));
boost::shared_ptr<BlackScholesMertonProcess> stochasticProcess(
new BlackScholesMertonProcess(underlyingH,
flatDividendTS,
flatTermStructure,
flatVolTS));
Size timeSteps = 801;
Handle<Quote> creditSpread(
boost::shared_ptr<Quote>(new SimpleQuote(spreadRate)));
boost::shared_ptr<Quote> rate(new SimpleQuote(riskFreeRate));
Handle<YieldTermStructure> discountCurve(
boost::shared_ptr<YieldTermStructure>(
new FlatForward(today, Handle<Quote>(rate), dayCounter)));
boost::shared_ptr<PricingEngine> engine(
new BinomialConvertibleEngine<JarrowRudd>(stochasticProcess,
timeSteps));
ConvertibleFixedCouponBond europeanBond(
exercise, conversionRatio, dividends, callability,
creditSpread, issueDate, settlementDays,
coupons, bondDayCount, schedule, redemption);
europeanBond.setPricingEngine(engine);
ConvertibleFixedCouponBond americanBond(
amExercise, conversionRatio, dividends, callability,
creditSpread, issueDate, settlementDays,
coupons, bondDayCount, schedule, redemption);
americanBond.setPricingEngine(engine);
method = "Jarrow-Rudd";
europeanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<JarrowRudd>(stochasticProcess,
timeSteps)));
americanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<JarrowRudd>(stochasticProcess,
timeSteps)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
<< std::setw(widths[2]) << std::left << americanBond.NPV()
<< std::endl;
method = "Cox-Ross-Rubinstein";
europeanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<CoxRossRubinstein>(stochasticProcess,
timeSteps)));
americanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<CoxRossRubinstein>(stochasticProcess,
timeSteps)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
<< std::setw(widths[2]) << std::left << americanBond.NPV()
<< std::endl;
method = "Additive equiprobabilities";
europeanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<AdditiveEQPBinomialTree>(
stochasticProcess,
timeSteps)));
americanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<AdditiveEQPBinomialTree>(
stochasticProcess,
timeSteps)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
<< std::setw(widths[2]) << std::left << americanBond.NPV()
<< std::endl;
method = "Trigeorgis";
europeanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Trigeorgis>(stochasticProcess,
timeSteps)));
americanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Trigeorgis>(stochasticProcess,
timeSteps)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
<< std::setw(widths[2]) << std::left << americanBond.NPV()
<< std::endl;
method = "Tian";
europeanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Tian>(stochasticProcess,
timeSteps)));
americanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Tian>(stochasticProcess,
timeSteps)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
<< std::setw(widths[2]) << std::left << americanBond.NPV()
<< std::endl;
method = "Leisen-Reimer";
europeanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<LeisenReimer>(stochasticProcess,
timeSteps)));
americanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<LeisenReimer>(stochasticProcess,
timeSteps)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
<< std::setw(widths[2]) << std::left << americanBond.NPV()
<< std::endl;
method = "Joshi";
europeanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Joshi4>(stochasticProcess,
timeSteps)));
americanBond.setPricingEngine(boost::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Joshi4>(stochasticProcess,
timeSteps)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
<< std::setw(widths[2]) << std::left << americanBond.NPV()
<< std::endl;
std::cout << dblrule << std::endl;
Real seconds = timer.elapsed();
Integer hours = int(seconds/3600);
seconds -= hours * 3600;
Integer minutes = int(seconds/60);
seconds -= minutes * 60;
std::cout << " \nRun completed in ";
if (hours > 0)
std::cout << hours << " h ";
if (hours > 0 || minutes > 0)
std::cout << minutes << " m ";
std::cout << std::fixed << std::setprecision(0)
<< seconds << " s\n" << std::endl;
return 0;
} catch (std::exception& e) {
std::cerr << e.what() << std::endl;
return 1;
} catch (...) {
std::cerr << "unknown error" << std::endl;
return 1;
}
}
FdmBlackScholesMesher::FdmBlackScholesMesher(
Size size,
const ext::shared_ptr<GeneralizedBlackScholesProcess>& process,
Time maturity, Real strike,
Real xMinConstraint, Real xMaxConstraint,
Real eps, Real scaleFactor,
const std::pair<Real, Real>& cPoint,
const DividendSchedule& dividendSchedule)
: Fdm1dMesher(size) {
const Real S = process->x0();
QL_REQUIRE(S > 0.0, "negative or null underlying given");
std::vector<std::pair<Time, Real> > intermediateSteps;
for (Size i=0; i < dividendSchedule.size()
&& process->time(dividendSchedule[i]->date()) <= maturity; ++i)
intermediateSteps.push_back(
std::make_pair(
process->time(dividendSchedule[i]->date()),
dividendSchedule[i]->amount()
) );
const Size intermediateTimeSteps = std::max<Size>(2, Size(24.0*maturity));
for (Size i=0; i < intermediateTimeSteps; ++i)
intermediateSteps.push_back(
std::make_pair((i+1)*(maturity/intermediateTimeSteps), 0.0));
std::sort(intermediateSteps.begin(), intermediateSteps.end());
const Handle<YieldTermStructure> rTS = process->riskFreeRate();
const Handle<YieldTermStructure> qTS = process->dividendYield();
Time lastDivTime = 0.0;
Real fwd = S, mi = S, ma = S;
for (Size i=0; i < intermediateSteps.size(); ++i) {
const Time divTime = intermediateSteps[i].first;
const Real divAmount = intermediateSteps[i].second;
fwd = fwd / rTS->discount(divTime) * rTS->discount(lastDivTime)
* qTS->discount(divTime) / qTS->discount(lastDivTime);
mi = std::min(mi, fwd); ma = std::max(ma, fwd);
fwd-= divAmount;
mi = std::min(mi, fwd); ma = std::max(ma, fwd);
lastDivTime = divTime;
}
// Set the grid boundaries
const Real normInvEps = InverseCumulativeNormal()(1-eps);
const Real sigmaSqrtT
= process->blackVolatility()->blackVol(maturity, strike)
*std::sqrt(maturity);
Real xMin = std::log(mi) - sigmaSqrtT*normInvEps*scaleFactor;
Real xMax = std::log(ma) + sigmaSqrtT*normInvEps*scaleFactor;
if (xMinConstraint != Null<Real>()) {
xMin = xMinConstraint;
}
if (xMaxConstraint != Null<Real>()) {
xMax = xMaxConstraint;
}
ext::shared_ptr<Fdm1dMesher> helper;
if ( cPoint.first != Null<Real>()
&& std::log(cPoint.first) >=xMin && std::log(cPoint.first) <=xMax) {
helper = ext::shared_ptr<Fdm1dMesher>(
new Concentrating1dMesher(xMin, xMax, size,
std::pair<Real,Real>(std::log(cPoint.first),
cPoint.second)));
}
else {
helper = ext::shared_ptr<Fdm1dMesher>(
new Uniform1dMesher(xMin, xMax, size));
}
locations_ = helper->locations();
for (Size i=0; i < locations_.size(); ++i) {
dplus_[i] = helper->dplus(i);
dminus_[i] = helper->dminus(i);
}
}