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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2013 Yue Tian
Copyright (C) 2015 Thema Consulting SA
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 "preconditions.hpp"
#include "toplevelfixture.hpp"
#include "utilities.hpp"
#include <ql/experimental/barrieroption/binomialdoublebarrierengine.hpp>
#include <ql/experimental/barrieroption/mcdoublebarrierengine.hpp>
#include <ql/experimental/barrieroption/suowangdoublebarrierengine.hpp>
#include <ql/experimental/barrieroption/vannavolgadoublebarrierengine.hpp>
#include <ql/instruments/doublebarrieroption.hpp>
#include <ql/instruments/vanillaoption.hpp>
#include <ql/math/functional.hpp>
#include <ql/math/interpolations/bicubicsplineinterpolation.hpp>
#include <ql/models/equity/hestonmodel.hpp>
#include <ql/pricingengines/barrier/analyticdoublebarrierengine.hpp>
#include <ql/pricingengines/barrier/fdhestondoublebarrierengine.hpp>
#include <ql/pricingengines/blackformula.hpp>
#include <ql/pricingengines/vanilla/analyticeuropeanengine.hpp>
#include <ql/termstructures/volatility/equityfx/blackconstantvol.hpp>
#include <ql/termstructures/volatility/equityfx/blackvariancecurve.hpp>
#include <ql/termstructures/volatility/equityfx/blackvariancesurface.hpp>
#include <ql/termstructures/yield/flatforward.hpp>
#include <ql/termstructures/yield/zerocurve.hpp>
#include <ql/time/calendars/nullcalendar.hpp>
#include <ql/time/calendars/target.hpp>
#include <ql/time/daycounters/actual360.hpp>
#include <ql/utilities/dataformatters.hpp>
using namespace QuantLib;
using namespace boost::unit_test_framework;
BOOST_FIXTURE_TEST_SUITE(QuantLibTests, TopLevelFixture)
BOOST_AUTO_TEST_SUITE(DoubleBarrierOptionTests)
#undef REPORT_FAILURE
#define REPORT_FAILURE(greekName, barrierType, barrierlo, barrierhi, \
payoff, exercise, s, q, r, today, v, expected, \
calculated, error, tolerance) \
BOOST_ERROR("\n" << barrierType << " " \
<< exerciseTypeToString(exercise) << " " \
<< payoff->optionType() << " option with " \
<< payoffTypeToString(payoff) << " payoff:\n" \
<< " underlying value: " << s << "\n" \
<< " strike: " << payoff->strike() << "\n" \
<< " barrier low: " << barrierlo << "\n" \
<< " barrier high: " << barrierhi << "\n" \
<< " dividend yield: " << io::rate(q) << "\n" \
<< " risk-free rate: " << io::rate(r) << "\n" \
<< " reference date: " << today << "\n" \
<< " maturity: " << exercise->lastDate() << "\n" \
<< " volatility: " << io::volatility(v) << "\n\n" \
<< " expected " << greekName << ": " << expected << "\n" \
<< " calculated " << greekName << ": " << calculated << "\n"\
<< " error: " << error << "\n" \
<< " tolerance: " << tolerance);
#undef REPORT_FAILURE_VANNAVOLGA
#define REPORT_FAILURE_VANNAVOLGA(greekName, barrierType, \
barrier1, barrier2, rebate, payoff, \
exercise, s, q, r, today, \
vol25Put, atmVol, vol25Call, v, \
expected, calculated, error, tolerance) \
BOOST_ERROR("\n" <<"Double Barrier Option " \
<< barrierType << " " \
<< exerciseTypeToString(exercise) << " " \
<< payoff->optionType() << " option with " \
<< payoffTypeToString(payoff) << " payoff:\n" \
<< " underlying value: " << s << "\n" \
<< " strike: " << payoff->strike() << "\n" \
<< " barrier1: " << barrier1 << "\n" \
<< " barrier2: " << barrier2 << "\n" \
<< " rebate: " << rebate << "\n" \
<< " dividend yield: " << io::rate(q) << "\n" \
<< " risk-free rate: " << io::rate(r) << "\n" \
<< " reference date: " << today << "\n" \
<< " maturity: " << exercise->lastDate() << "\n" \
<< " 25PutVol: " << io::volatility(vol25Put) << "\n" \
<< " atmVol: " << io::volatility(atmVol) << "\n" \
<< " 25CallVol: " << io::volatility(vol25Call) << "\n" \
<< " volatility: " << io::volatility(v) << "\n\n" \
<< " expected " << greekName << ": " << expected << "\n" \
<< " calculated " << greekName << ": " << calculated << "\n"\
<< " error: " << error << "\n" \
<< " tolerance: " << tolerance);
#undef REPORT_FAILURE_DOUBLE_BARRIER_MC
#define REPORT_FAILURE_DOUBLE_BARRIER_MC(analytical, monteCarlo, diff) \
BOOST_ERROR("\n" <<"Double Barrier Option " \
<< "Threshold exceeded: " << diff << "\n" \
<< "Analytical: " << analytical << "\n" \
<< "Monte Carlo: " << monteCarlo << "\n");
struct NewBarrierOptionData {
DoubleBarrier::Type barrierType;
Real barrierlo;
Real barrierhi;
Option::Type type;
Exercise::Type exType;
Real strike;
Real s; // spot
Rate q; // dividend
Rate r; // risk-free rate
Time t; // time to maturity
Volatility v; // volatility
Real result; // result
Real tol; // tolerance
};
struct DoubleBarrierFxOptionData {
DoubleBarrier::Type barrierType;
Real barrier1;
Real barrier2;
Real rebate;
Option::Type type;
Real strike;
Real s; // spot
Rate q; // dividend
Rate r; // risk-free rate
Time t; // time to maturity
Volatility vol25Put; // 25 delta put vol
Volatility volAtm; // atm vol
Volatility vol25Call; // 25 delta call vol
Volatility v; // volatility at strike
Real result; // result
Real tol; // tolerance
};
BOOST_AUTO_TEST_CASE(testEuropeanHaugValues) {
BOOST_TEST_MESSAGE("Testing double barrier european options against Haug's values...");
Exercise::Type european = Exercise::European;
NewBarrierOptionData values[] = {
/* The data below are from
"The complete guide to option pricing formulas 2nd Ed",E.G. Haug, McGraw-Hill, p.156 and following.
Note:
The book uses b instead of q (q=r-b)
*/
// BarrierType, barr.lo, barr.hi, type, exercise,strk, s, q, r, t, v, result, tol
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 4.3515, 1.0e-4},
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 6.1644, 1.0e-4},
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 7.0373, 1.0e-4},
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 6.9853, 1.0e-4},
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 7.9336, 1.0e-4},
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 6.5088, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 4.3505, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 5.8500, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 5.7726, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 6.8082, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 6.3383, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 4.3841, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 4.3139, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 4.8293, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 3.7765, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 5.9697, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 4.0004, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 2.2563, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 3.7516, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 2.6387, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 1.4903, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 3.5805, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 1.5098, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 0.5635, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 1.2055, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 0.3098, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 0.0477, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 0.5537, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 0.0441, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 0.0011, 1.0e-4},
// BarrierType, barr.lo, barr.hi, type, exercise,strk, s, q, r, t, v, result, tol
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 1.8825, 1.0e-4},
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 3.7855, 1.0e-4},
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 5.7191, 1.0e-4},
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 2.1374, 1.0e-4},
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 4.7033, 1.0e-4},
{ DoubleBarrier::KnockOut, 50.0, 150.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 7.1683, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 1.8825, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 3.7845, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 5.6060, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 2.1374, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 4.6236, 1.0e-4},
{ DoubleBarrier::KnockOut, 60.0, 140.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 6.1062, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 1.8825, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 3.7014, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 4.6472, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 2.1325, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 3.8944, 1.0e-4},
{ DoubleBarrier::KnockOut, 70.0, 130.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 3.5868, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 1.8600, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 2.6866, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 2.0719, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 1.8883, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 1.7851, 1.0e-4},
{ DoubleBarrier::KnockOut, 80.0, 120.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 0.8244, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 0.9473, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 0.3449, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 0.0578, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 0.4555, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 0.0491, 1.0e-4},
{ DoubleBarrier::KnockOut, 90.0, 110.0, Option::Put, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 0.0013, 1.0e-4},
// BarrierType, barr.lo, barr.hi, type, strk, s, q, r, t, v, result, tol
{ DoubleBarrier::KnockIn, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 0.0000, 1.0e-4},
{ DoubleBarrier::KnockIn, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 0.0900, 1.0e-4},
{ DoubleBarrier::KnockIn, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 1.1537, 1.0e-4},
{ DoubleBarrier::KnockIn, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 0.0292, 1.0e-4},
{ DoubleBarrier::KnockIn, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 1.6487, 1.0e-4},
{ DoubleBarrier::KnockIn, 50.0, 150.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 5.7321, 1.0e-4},
{ DoubleBarrier::KnockIn, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 0.0010, 1.0e-4},
{ DoubleBarrier::KnockIn, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 0.4045, 1.0e-4},
{ DoubleBarrier::KnockIn, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 2.4184, 1.0e-4},
{ DoubleBarrier::KnockIn, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 0.2062, 1.0e-4},
{ DoubleBarrier::KnockIn, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 3.2439, 1.0e-4},
{ DoubleBarrier::KnockIn, 60.0, 140.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 7.8569, 1.0e-4},
{ DoubleBarrier::KnockIn, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 0.0376, 1.0e-4},
{ DoubleBarrier::KnockIn, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 1.4252, 1.0e-4},
{ DoubleBarrier::KnockIn, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 4.4145, 1.0e-4},
{ DoubleBarrier::KnockIn, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 1.0447, 1.0e-4},
{ DoubleBarrier::KnockIn, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 5.5818, 1.0e-4},
{ DoubleBarrier::KnockIn, 70.0, 130.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 9.9846, 1.0e-4},
{ DoubleBarrier::KnockIn, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 0.5999, 1.0e-4},
{ DoubleBarrier::KnockIn, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 3.6158, 1.0e-4},
{ DoubleBarrier::KnockIn, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 6.7007, 1.0e-4},
{ DoubleBarrier::KnockIn, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 3.4340, 1.0e-4},
{ DoubleBarrier::KnockIn, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 8.0724, 1.0e-4},
{ DoubleBarrier::KnockIn, 80.0, 120.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 11.6774, 1.0e-4},
{ DoubleBarrier::KnockIn, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.15, 3.1460, 1.0e-4},
{ DoubleBarrier::KnockIn, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.25, 5.9447, 1.0e-4},
{ DoubleBarrier::KnockIn, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.25, 0.35, 8.1432, 1.0e-4},
{ DoubleBarrier::KnockIn, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.15, 6.4608, 1.0e-4},
{ DoubleBarrier::KnockIn, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.25, 9.5382, 1.0e-4},
{ DoubleBarrier::KnockIn, 90.0, 110.0, Option::Call, european, 100, 100.0, 0.0, 0.1, 0.50, 0.35, 12.2398, 1.0e-4},
};
DayCounter dc = Actual360();
Date today = Date::todaysDate();
ext::shared_ptr<SimpleQuote> spot(new SimpleQuote(0.0));
ext::shared_ptr<SimpleQuote> qRate(new SimpleQuote(0.0));
ext::shared_ptr<YieldTermStructure> qTS = flatRate(today, qRate, dc);
ext::shared_ptr<SimpleQuote> rRate(new SimpleQuote(0.0));
ext::shared_ptr<YieldTermStructure> rTS = flatRate(today, rRate, dc);
ext::shared_ptr<SimpleQuote> vol(new SimpleQuote(0.0));
ext::shared_ptr<BlackVolTermStructure> volTS = flatVol(today, vol, dc);
for (auto& value : values) {
Date exDate = today + timeToDays(value.t);
ext::shared_ptr<Exercise> exercise(new EuropeanExercise(exDate));
spot->setValue(value.s);
qRate->setValue(value.q);
rRate->setValue(value.r);
vol->setValue(value.v);
ext::shared_ptr<StrikedTypePayoff> payoff(new PlainVanillaPayoff(value.type, value.strike));
ext::shared_ptr<BlackScholesMertonProcess> stochProcess(new
BlackScholesMertonProcess(Handle<Quote>(spot),
Handle<YieldTermStructure>(qTS),
Handle<YieldTermStructure>(rTS),
Handle<BlackVolTermStructure>(volTS)));
DoubleBarrierOption opt(value.barrierType, value.barrierlo, value.barrierhi,
0, // no rebate
payoff, exercise);
// Ikeda/Kunitomo engine
ext::shared_ptr<PricingEngine> engine(
new AnalyticDoubleBarrierEngine(stochProcess));
opt.setPricingEngine(engine);
Real calculated = opt.NPV();
Real expected = value.result;
Real error = std::fabs(calculated-expected);
if (error > value.tol) {
REPORT_FAILURE("Ikeda/Kunitomo value", value.barrierType, value.barrierlo,
value.barrierhi, payoff, exercise, value.s, value.q, value.r, today,
value.v, expected, calculated, error, value.tol);
}
// Wulin Suo/Yong Wang engine
engine = ext::shared_ptr<PricingEngine>(
new SuoWangDoubleBarrierEngine(stochProcess));
opt.setPricingEngine(engine);
calculated = opt.NPV();
expected = value.result;
error = std::fabs(calculated-expected);
if (error > value.tol) {
REPORT_FAILURE("Wulin/Yong value", value.barrierType, value.barrierlo, value.barrierhi,
payoff, exercise, value.s, value.q, value.r, today, value.v, expected,
calculated, error, value.tol);
}
engine = ext::shared_ptr<PricingEngine>(
new BinomialDoubleBarrierEngine<CoxRossRubinstein,
DiscretizedDoubleBarrierOption>(stochProcess,
300));
opt.setPricingEngine(engine);
calculated = opt.NPV();
expected = value.result;
error = std::fabs(calculated-expected);
double tol = 0.28;
if (error>tol) {
REPORT_FAILURE("Binomial value", value.barrierType, value.barrierlo, value.barrierhi,
payoff, exercise, value.s, value.q, value.r, today, value.v, expected,
calculated, error, tol);
}
engine = ext::shared_ptr<PricingEngine>(
new BinomialDoubleBarrierEngine<CoxRossRubinstein,
DiscretizedDermanKaniDoubleBarrierOption>(
stochProcess, 300));
opt.setPricingEngine(engine);
calculated = opt.NPV();
expected = value.result;
error = std::fabs(calculated-expected);
tol = 0.033; // error one order of magnitude lower than plain binomial
if (error>tol) {
REPORT_FAILURE("Binomial (Derman) value", value.barrierType, value.barrierlo,
value.barrierhi, payoff, exercise, value.s, value.q, value.r, today,
value.v, expected, calculated, error, tol);
}
if (value.barrierType == DoubleBarrier::KnockOut) {
engine = ext::make_shared<FdHestonDoubleBarrierEngine>(
ext::make_shared<HestonModel>(
ext::make_shared<HestonProcess>(
Handle<YieldTermStructure>(rTS),
Handle<YieldTermStructure>(qTS),
Handle<Quote>(spot),
squared(vol->value()), 1.0,
squared(vol->value()), 0.001, 0.0)), 251, 76, 3);
opt.setPricingEngine(engine);
calculated = opt.NPV();
expected = value.result;
error = std::fabs(calculated-expected);
tol = 0.025; // error one order of magnitude lower than plain binomial
if (error>tol) {
REPORT_FAILURE("Heston value", value.barrierType, value.barrierlo, value.barrierhi,
payoff, exercise, value.s, value.q, value.r, today, value.v,
expected, calculated, error, tol);
}
}
}
}
BOOST_AUTO_TEST_CASE(testVannaVolgaDoubleBarrierValues) {
BOOST_TEST_MESSAGE(
"Testing double-barrier FX options against Vanna/Volga values...");
DoubleBarrierFxOptionData values[] = {
// BarrierType, barr.1, barr.2, rebate, type, strike, s, q, r, t, vol25Put, volAtm,vol25Call, vol, result, tol
{ DoubleBarrier::KnockOut, 1.1, 1.5, 0.0, Option::Call, 1.13321, 1.30265, 0.0003541, 0.0033871, 1.0, 0.10087, 0.08925, 0.08463, 0.11638, 0.14413, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.1, 1.5, 0.0, Option::Call, 1.22687, 1.30265, 0.0003541, 0.0033871, 1.0, 0.10087, 0.08925, 0.08463, 0.10088, 0.07456, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.1, 1.5, 0.0, Option::Call, 1.31179, 1.30265, 0.0003541, 0.0033871, 1.0, 0.10087, 0.08925, 0.08463, 0.08925, 0.02710, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.1, 1.5, 0.0, Option::Call, 1.38843, 1.30265, 0.0003541, 0.0033871, 1.0, 0.10087, 0.08925, 0.08463, 0.08463, 0.00569, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.1, 1.5, 0.0, Option::Call, 1.46047, 1.30265, 0.0003541, 0.0033871, 1.0, 0.10087, 0.08925, 0.08463, 0.08412, 0.00013, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.1, 1.5, 0.0, Option::Put, 1.13321, 1.30265, 0.0003541, 0.0033871, 1.0, 0.10087, 0.08925, 0.08463, 0.11638, 0.00017, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.1, 1.5, 0.0, Option::Put, 1.22687, 1.30265, 0.0003541, 0.0033871, 1.0, 0.10087, 0.08925, 0.08463, 0.10088, 0.00353, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.1, 1.5, 0.0, Option::Put, 1.31179, 1.30265, 0.0003541, 0.0033871, 1.0, 0.10087, 0.08925, 0.08463, 0.08925, 0.02221, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.1, 1.5, 0.0, Option::Put, 1.38843, 1.30265, 0.0003541, 0.0033871, 1.0, 0.10087, 0.08925, 0.08463, 0.08463, 0.06049, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.1, 1.5, 0.0, Option::Put, 1.46047, 1.30265, 0.0003541, 0.0033871, 1.0, 0.10087, 0.08925, 0.08463, 0.08412, 0.11103, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.0, 1.6, 0.0, Option::Call, 1.06145, 1.30265, 0.0009418, 0.0039788, 2.0, 0.10891, 0.09525, 0.09197, 0.12511, 0.19981, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.0, 1.6, 0.0, Option::Call, 1.19545, 1.30265, 0.0009418, 0.0039788, 2.0, 0.10891, 0.09525, 0.09197, 0.10890, 0.10389, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.0, 1.6, 0.0, Option::Call, 1.32238, 1.30265, 0.0009418, 0.0039788, 2.0, 0.10891, 0.09525, 0.09197, 0.09444, 0.03555, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.0, 1.6, 0.0, Option::Call, 1.44298, 1.30265, 0.0009418, 0.0039788, 2.0, 0.10891, 0.09525, 0.09197, 0.09197, 0.00634, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.0, 1.6, 0.0, Option::Call, 1.56345, 1.30265, 0.0009418, 0.0039788, 2.0, 0.10891, 0.09525, 0.09197, 0.09261, 0.00000, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.0, 1.6, 0.0, Option::Put, 1.06145, 1.30265, 0.0009418, 0.0039788, 2.0, 0.10891, 0.09525, 0.09197, 0.12511, 0.00000, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.0, 1.6, 0.0, Option::Put, 1.19545, 1.30265, 0.0009418, 0.0039788, 2.0, 0.10891, 0.09525, 0.09197, 0.10890, 0.00436, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.0, 1.6, 0.0, Option::Put, 1.32238, 1.30265, 0.0009418, 0.0039788, 2.0, 0.10891, 0.09525, 0.09197, 0.09444, 0.03173, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.0, 1.6, 0.0, Option::Put, 1.44298, 1.30265, 0.0009418, 0.0039788, 2.0, 0.10891, 0.09525, 0.09197, 0.09197, 0.09346, 1.0e-4},
{ DoubleBarrier::KnockOut, 1.0, 1.6, 0.0, Option::Put, 1.56345, 1.30265, 0.0009418, 0.0039788, 2.0, 0.10891, 0.09525, 0.09197, 0.09261, 0.17704, 1.0e-4}
};
DayCounter dc = Actual360();
Date today(05, Mar, 2013);
Settings::instance().evaluationDate() = today;
ext::shared_ptr<SimpleQuote> spot = ext::make_shared<SimpleQuote>(0.0);
ext::shared_ptr<SimpleQuote> qRate = ext::make_shared<SimpleQuote>(0.0);
ext::shared_ptr<YieldTermStructure> qTS = flatRate(today, qRate, dc);
ext::shared_ptr<SimpleQuote> rRate = ext::make_shared<SimpleQuote>(0.0);
ext::shared_ptr<YieldTermStructure> rTS = flatRate(today, rRate, dc);
ext::shared_ptr<SimpleQuote> vol25Put = ext::make_shared<SimpleQuote>(0.0);
ext::shared_ptr<SimpleQuote> volAtm = ext::make_shared<SimpleQuote>(0.0);
ext::shared_ptr<SimpleQuote> vol25Call = ext::make_shared<SimpleQuote>(0.0);
for (auto& value : values) {
for (Size j=0; j<=1; j++) {
auto barrierType = static_cast<DoubleBarrier::Type>(j);
spot->setValue(value.s);
qRate->setValue(value.q);
rRate->setValue(value.r);
vol25Put->setValue(value.vol25Put);
volAtm->setValue(value.volAtm);
vol25Call->setValue(value.vol25Call);
ext::shared_ptr<StrikedTypePayoff> payoff =
ext::make_shared<PlainVanillaPayoff>(value.type, value.strike);
Date exDate = today + timeToDays(value.t, 365);
ext::shared_ptr<Exercise> exercise =
ext::make_shared<EuropeanExercise>(exDate);
Handle<DeltaVolQuote> volAtmQuote = Handle<DeltaVolQuote>(
ext::make_shared<DeltaVolQuote>(Handle<Quote>(volAtm), DeltaVolQuote::Fwd, value.t,
DeltaVolQuote::AtmDeltaNeutral));
// always delta neutral atm
Handle<DeltaVolQuote> vol25PutQuote(
Handle<DeltaVolQuote>(ext::make_shared<DeltaVolQuote>(
-0.25, Handle<Quote>(vol25Put), value.t, DeltaVolQuote::Fwd)));
Handle<DeltaVolQuote> vol25CallQuote(
Handle<DeltaVolQuote>(ext::make_shared<DeltaVolQuote>(
0.25, Handle<Quote>(vol25Call), value.t, DeltaVolQuote::Fwd)));
DoubleBarrierOption doubleBarrierOption(barrierType, value.barrier1, value.barrier2,
value.rebate, payoff, exercise);
Real bsVanillaPrice =
blackFormula(value.type, value.strike,
spot->value() * qTS->discount(value.t) / rTS->discount(value.t),
value.v * sqrt(value.t), rTS->discount(value.t));
ext::shared_ptr<PricingEngine> vannaVolgaEngine =
ext::make_shared<VannaVolgaDoubleBarrierEngine<SuoWangDoubleBarrierEngine> >(
volAtmQuote,
vol25PutQuote,
vol25CallQuote,
Handle<Quote> (spot),
Handle<YieldTermStructure> (rTS),
Handle<YieldTermStructure> (qTS),
true,
bsVanillaPrice);
doubleBarrierOption.setPricingEngine(vannaVolgaEngine);
// Expected result for KO is given in array, for KI is evaluated as vanilla - KO
Real expected = 0;
if (barrierType == DoubleBarrier::KnockOut)
expected = value.result;
else if (barrierType == DoubleBarrier::KnockIn)
expected = (bsVanillaPrice - value.result);
Real calculated = doubleBarrierOption.NPV();
Real error = std::fabs(calculated-expected);
if (error > value.tol) {
REPORT_FAILURE_VANNAVOLGA("value", barrierType, value.barrier1, value.barrier2,
value.rebate, payoff, exercise, value.s, value.q, value.r,
today, value.vol25Put, value.volAtm, value.vol25Call,
value.v, expected, calculated, error, value.tol);
}
vannaVolgaEngine =
ext::make_shared<VannaVolgaDoubleBarrierEngine<AnalyticDoubleBarrierEngine> >(
volAtmQuote,
vol25PutQuote,
vol25CallQuote,
Handle<Quote> (spot),
Handle<YieldTermStructure> (rTS),
Handle<YieldTermStructure> (qTS),
true,
bsVanillaPrice);
doubleBarrierOption.setPricingEngine(vannaVolgaEngine);
calculated = doubleBarrierOption.NPV();
error = std::fabs(calculated-expected);
Real maxtol = 5.0e-3; // different engines have somewhat different results
if (error>maxtol) {
REPORT_FAILURE_VANNAVOLGA("value", barrierType, value.barrier1, value.barrier2,
value.rebate, payoff, exercise, value.s, value.q, value.r,
today, value.vol25Put, value.volAtm, value.vol25Call,
value.v, expected, calculated, error, value.tol);
}
}
}
}
BOOST_AUTO_TEST_CASE(testMonteCarloDoubleBarrierWithAnalytical, *precondition(if_speed(Fast))) {
BOOST_TEST_MESSAGE("Testing MC double-barrier options against analytical values...");
Real tolerance = 0.01; //percentage difference between analytical and monte carlo values to be tolerated
// set up dates
Calendar calendar = TARGET();
Date todaysDate(15, May, 1998);
Date settlementDate(17, May, 1998);
Settings::instance().evaluationDate() = todaysDate;
// our options
Option::Type type(Option::Put);
Real underlying = 36;
Real strike = 40;
Spread dividendYield = 0.00;
Rate riskFreeRate = 0.06;
Volatility volatility = 0.20;
Date maturity(17, May, 1999);
DayCounter dayCounter = Actual365Fixed();
std::vector<Date> exerciseDates;
for (Integer i=1; i<=4; i++)
exerciseDates.push_back(settlementDate + 3*i*Months);
ext::shared_ptr<Exercise> europeanExercise(
new EuropeanExercise(maturity));
Handle<Quote> underlyingH(
ext::shared_ptr<Quote>(new SimpleQuote(underlying)));
// bootstrap the yield/dividend/vol curves
Handle<YieldTermStructure> flatTermStructure(
ext::shared_ptr<YieldTermStructure>(
new FlatForward(settlementDate, riskFreeRate, dayCounter)));
Handle<YieldTermStructure> flatDividendTS(
ext::shared_ptr<YieldTermStructure>(
new FlatForward(settlementDate, dividendYield, dayCounter)));
Handle<BlackVolTermStructure> flatVolTS(
ext::shared_ptr<BlackVolTermStructure>(
new BlackConstantVol(settlementDate, calendar, volatility,
dayCounter)));
ext::shared_ptr<StrikedTypePayoff> payoff(
new PlainVanillaPayoff(type, strike));
ext::shared_ptr<BlackScholesMertonProcess> bsmProcess(
new BlackScholesMertonProcess(underlyingH, flatDividendTS,
flatTermStructure, flatVolTS));
Real barrierLow = underlying * 0.9;
Real barrierHigh = underlying * 1.1;
DoubleBarrierOption knockIndoubleBarrierOption(DoubleBarrier::KnockIn,
barrierLow,
barrierHigh,
0,
payoff,
europeanExercise);
ext::shared_ptr<PricingEngine> analyticdoublebarrierengine(new AnalyticDoubleBarrierEngine(bsmProcess));
knockIndoubleBarrierOption.setPricingEngine(analyticdoublebarrierengine);
Real analytical = knockIndoubleBarrierOption.NPV();
ext::shared_ptr<PricingEngine> mcdoublebarrierengine;
mcdoublebarrierengine = MakeMCDoubleBarrierEngine<PseudoRandom>(bsmProcess)
.withSteps(5000)
.withAntitheticVariate()
.withAbsoluteTolerance(0.5)
.withSeed(1);
knockIndoubleBarrierOption.setPricingEngine(mcdoublebarrierengine);
Real monteCarlo = knockIndoubleBarrierOption.NPV();
Real percentageDiff = std::abs(analytical - monteCarlo) / analytical;
if (percentageDiff > tolerance){
REPORT_FAILURE_DOUBLE_BARRIER_MC(analytical, monteCarlo, percentageDiff);
}
DoubleBarrierOption knockOutDoubleBarrierOption(DoubleBarrier::KnockOut,
barrierLow,
barrierHigh,
0,
payoff,
europeanExercise);
knockOutDoubleBarrierOption.setPricingEngine(analyticdoublebarrierengine);
analytical = knockOutDoubleBarrierOption.NPV();
tolerance = 0.01;
mcdoublebarrierengine = MakeMCDoubleBarrierEngine<PseudoRandom>(bsmProcess)
.withSteps(5000)
.withAntitheticVariate()
.withAbsoluteTolerance(tolerance)
.withSeed(10);
knockOutDoubleBarrierOption.setPricingEngine(mcdoublebarrierengine);
monteCarlo = knockOutDoubleBarrierOption.NPV();
Real diff = std::abs(analytical - monteCarlo);
if (diff > tolerance){
REPORT_FAILURE_DOUBLE_BARRIER_MC(analytical, monteCarlo, diff);
}
}
BOOST_AUTO_TEST_SUITE_END()
BOOST_AUTO_TEST_SUITE_END()
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