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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2011 Master IMAFA - Polytech'Nice Sophia - Université de Nice Sophia Antipolis
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 "toplevelfixture.hpp"
#include "utilities.hpp"
#include <ql/experimental/exoticoptions/kirkspreadoptionengine.hpp>
#include <ql/exercise.hpp>
#include <ql/quotes/simplequote.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(SpreadOptionTests)
#undef REPORT_FAILURE
#define REPORT_FAILURE( \
greekName, \
payoff, exercise, \
expected, calculated, tolerance) \
BOOST_ERROR( \
exerciseTypeToString(exercise) \
<< " Spread option with " \
<< payoffTypeToString(payoff) << " payoff:\n" \
<< " strike: " << payoff->strike() << "\n" \
<< " reference date: " << today << "\n" \
<< " maturity: " << exercise->lastDate() << "\n" \
<< " expected " << greekName << ": " << expected << "\n" \
<< " calculated " << greekName << ": " << calculated << "\n" \
<< " error: " << std::fabs(expected-calculated) \
<< "\n" \
<< " tolerance: " << tolerance);
struct Case {
Real F1;
Real F2;
Real X;
Rate r;
Volatility sigma1;
Volatility sigma2;
Real rho;
Natural length;
Real value;
Real theta;
};
BOOST_AUTO_TEST_CASE(testKirkEngine) {
BOOST_TEST_MESSAGE("Testing Kirk approximation for spread options...");
QL_DEPRECATED_DISABLE_WARNING
/* The example data below are from "complete guide to option
pricing formulas", Espen Gaarder Haug, p 60
Expected values of option theta were calculated using automatic
differentiation of the pricing function. The engine uses closed-form
formula */
Case cases[] = {
{ 28.0, 20.0, 7.0, 0.05, 0.29, 0.36, 0.42, 90, 2.1670, -3.0431 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.20, -0.5, 36, 4.7530, -25.5905 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.20, 0.0, 36, 3.7970, -20.8841 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.20, 0.5, 36, 2.5537, -14.7260 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.20, -0.5, 180, 10.7517, -10.0847 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.20, 0.0, 180, 8.7020, -8.2619 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.20, 0.5, 180, 6.0257, -5.8661 },
{ 122.0, 120.0, 3.0, 0.10, 0.25, 0.20, -0.5, 36, 5.4275, -28.9013 },
{ 122.0, 120.0, 3.0, 0.10, 0.25, 0.20, 0.0, 36, 4.3712, -23.7133 },
{ 122.0, 120.0, 3.0, 0.10, 0.25, 0.20, 0.5, 36, 3.0086, -16.9864 },
{ 122.0, 120.0, 3.0, 0.10, 0.25, 0.20, -0.5, 180, 12.1941, -11.3603 },
{ 122.0, 120.0, 3.0, 0.10, 0.25, 0.20, 0.0, 180, 9.9340, -9.3589 },
{ 122.0, 120.0, 3.0, 0.10, 0.25, 0.20, 0.5, 180, 7.0067, -6.7463 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.25, -0.5, 36, 5.4061, -28.7963 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.25, 0.0, 36, 4.3451, -23.5848 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.25, 0.5, 36, 2.9723, -16.8060 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.25, -0.5, 180, 12.1483, -11.3200 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.25, 0.0, 180, 9.8780, -9.3091 },
{ 122.0, 120.0, 3.0, 0.10, 0.20, 0.25, 0.5, 180, 6.9284, -6.6761 }
};
for (auto& i : cases) {
// First step: preparing the test values
// Useful dates
DayCounter dc = Actual360();
Date today = Date::todaysDate();
Date exerciseDate = today + i.length;
// Futures values
ext::shared_ptr<SimpleQuote> F1(new SimpleQuote(i.F1));
ext::shared_ptr<SimpleQuote> F2(new SimpleQuote(i.F2));
// Risk-free interest rate
Rate riskFreeRate = i.r;
ext::shared_ptr<YieldTermStructure> forwardRate =
flatRate(today,riskFreeRate,dc);
// Correlation
ext::shared_ptr<Quote> rho(new SimpleQuote(i.rho));
// Volatilities
Volatility vol1 = i.sigma1;
Volatility vol2 = i.sigma2;
ext::shared_ptr<BlackVolTermStructure> volTS1 =
flatVol(today,vol1,dc);
ext::shared_ptr<BlackVolTermStructure> volTS2 =
flatVol(today,vol2,dc);
// Black-Scholes Processes
// The BlackProcess is the relevant class for futures contracts
ext::shared_ptr<BlackProcess> stochProcess1(
new BlackProcess(Handle<Quote>(F1),
Handle<YieldTermStructure>(forwardRate),
Handle<BlackVolTermStructure>(volTS1)));
ext::shared_ptr<BlackProcess> stochProcess2(
new BlackProcess(Handle<Quote>(F2),
Handle<YieldTermStructure>(forwardRate),
Handle<BlackVolTermStructure>(volTS2)));
// Creating the pricing engine
ext::shared_ptr<PricingEngine> engine(
new KirkSpreadOptionEngine(stochProcess1, stochProcess2,
Handle<Quote>(rho)));
// Finally, create the option:
Option::Type type = Option::Call;
Real strike = i.X;
ext::shared_ptr<PlainVanillaPayoff> payoff(
new PlainVanillaPayoff(type, strike));
ext::shared_ptr<Exercise> exercise(
new EuropeanExercise(exerciseDate));
SpreadOption option(payoff, exercise);
option.setPricingEngine(engine);
// And test the data
Real value = option.NPV();
Real theta = option.theta();
Real tolerance = 1e-4;
if (std::fabs(value - i.value) > tolerance) {
REPORT_FAILURE("value", payoff, exercise, i.value, value, tolerance);
}
if (std::fabs(theta - i.theta) > tolerance) {
REPORT_FAILURE("theta", payoff, exercise, i.theta, theta, tolerance);
}
}
QL_DEPRECATED_ENABLE_WARNING
}
BOOST_AUTO_TEST_SUITE_END()
BOOST_AUTO_TEST_SUITE_END()
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