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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2010 Klaus Spanderen
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
<quantlib-dev@lists.sf.net>. 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.
*/
#include <ql/pricingengines/basket/kirkengine.hpp>
#include <ql/pricingengines/blackcalculator.hpp>
#include <ql/pricingengines/blackformula.hpp>
#include <ql/math/functional.hpp>
#include <ql/exercise.hpp>
namespace QuantLib {
KirkEngine::KirkEngine(
const boost::shared_ptr<BlackProcess>& process1,
const boost::shared_ptr<BlackProcess>& process2,
Real correlation)
: process1_(process1), process2_(process2), rho_(correlation) {
registerWith(process1_);
registerWith(process2_);
}
void KirkEngine::calculate() const {
QL_REQUIRE(arguments_.exercise->type() == Exercise::European,
"not an European Option");
boost::shared_ptr<EuropeanExercise> exercise =
boost::dynamic_pointer_cast<EuropeanExercise>(arguments_.exercise);
QL_REQUIRE(exercise, "not an European Option");
boost::shared_ptr<SpreadBasketPayoff> spreadPayoff =
boost::dynamic_pointer_cast<SpreadBasketPayoff>(arguments_.payoff);
QL_REQUIRE(spreadPayoff," spread payoff expected");
boost::shared_ptr<PlainVanillaPayoff> payoff =
boost::dynamic_pointer_cast<PlainVanillaPayoff>(
spreadPayoff->basePayoff());
QL_REQUIRE(payoff, "non-plain payoff given");
const Real strike = payoff->strike();
const Real f1 = process1_->stateVariable()->value();
const Real f2 = process2_->stateVariable()->value();
// use atm vols
const Real variance1 = process1_->blackVolatility()->blackVariance(
exercise->lastDate(), f1);
const Real variance2 = process2_->blackVolatility()->blackVariance(
exercise->lastDate(), f2);
const DiscountFactor riskFreeDiscount =
process1_->riskFreeRate()->discount(exercise->lastDate());
const Real f = f1/(f2 + strike);
const Real v
= std::sqrt(variance1
+ variance2*square<Real>()(f2/(f2+strike))
- 2*rho_*std::sqrt(variance1*variance2)
*(f2/(f2+strike)));
BlackCalculator black(
boost::shared_ptr<PlainVanillaPayoff>(
new PlainVanillaPayoff(payoff->optionType(),1.0)),
f, v, riskFreeDiscount);
results_.value = (f2 + strike)*black.value();
}
}
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