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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2020 Lew Wei Hao
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/processes/coxingersollrossprocess.hpp>
namespace QuantLib {
CoxIngersollRossProcess::CoxIngersollRossProcess(Real speed,
Volatility vol,
Real x0,
Real level)
: x0_(x0), speed_(speed), level_(level), volatility_(vol) {
QL_REQUIRE(volatility_ >= 0.0, "negative volatility given");
}
Real CoxIngersollRossProcess::variance(Time, Real, Time dt) const {
Real exponent1 = std::exp(-speed_ * dt);
Real exponent2 = std::exp(-2 * speed_ * dt);
Real fraction = (volatility_ * volatility_) / speed_;
return x0_ * fraction * (exponent1 - exponent2) + level_ * fraction * (1 - exponent1) * (1 - exponent1);
}
}
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