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/*
Copyright (C) 2001, 2002 Sadruddin Rejeb
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 ferdinando@ametrano.net
The license is also available online at http://quantlib.org/html/license.html
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 shortrateprocess.hpp
\brief Short rate process
\fullpath
ql/InterestRateModelling/%shortrateprocess.hpp
*/
// $Id: shortrateprocess.hpp,v 1.9 2002/03/05 01:10:37 sadrejeb Exp $
#ifndef quantlib_interest_rate_modelling_short_rate_process_h
#define quantlib_interest_rate_modelling_short_rate_process_h
#include <ql/diffusionprocess.hpp>
#include <ql/types.hpp>
#include <ql/InterestRateModelling/parameter.hpp>
namespace QuantLib {
namespace InterestRateModelling {
//describes a process followed by the short rate or a function of it
class ShortRateProcess : public DiffusionProcess {
public:
ShortRateProcess(double x0 = 0.0) : DiffusionProcess(x0) {}
virtual ~ShortRateProcess() {};
virtual double variable(Time t, Rate r) const = 0;
virtual Rate shortRate(Time t, double variable) const = 0;
};
class MeanRevertingProcess : public ShortRateProcess {
public:
MeanRevertingProcess(const Parameter& mean,
const Parameter& speed,
const Parameter& volatility)
: mean_(mean), speed_(speed), volatility_(volatility) {}
virtual double drift(Time t, double x) const {
return speed_(t)*(mean_(t) - x);
}
virtual double diffusion(Time t, double x) const {
return volatility_(t);
}
protected:
Parameter mean_, speed_, volatility_;
};
class PseudoOrnsteinUhlenbeckProcess : public MeanRevertingProcess {
public:
PseudoOrnsteinUhlenbeckProcess(const Parameter& speed,
const Parameter& volatility)
: MeanRevertingProcess(NullParameter(), speed, volatility) {}
virtual double expectation(Time t0, double x0, Time dt) const {
return x0*QL_EXP(-speed_(t0)*dt);
}
virtual double variance(Time t0, double x0, Time dt) const {
return 0.5*volatility_(t0)*volatility_(t0)/speed_(t0)*
(1.0 - QL_EXP(-2.0*speed_(t0)*dt));
}
};
}
}
#endif
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