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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2002, 2003, 2004 Ferdinando Ametrano
Copyright (C) 2007 StatPro Italia srl
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.
*/
/*! \file forwardengine.hpp
\brief Forward (strike-resetting) vanilla-option engine
*/
#ifndef quantlib_forward_engine_hpp
#define quantlib_forward_engine_hpp
#include <ql/instruments/forwardvanillaoption.hpp>
#include <ql/instruments/vanillaoption.hpp>
#include <ql/processes/blackscholesprocess.hpp>
#include <ql/termstructures/volatility/equityfx/impliedvoltermstructure.hpp>
#include <ql/termstructures/yield/impliedtermstructure.hpp>
#include <ql/instruments/payoffs.hpp>
#include <ql/exercise.hpp>
namespace QuantLib {
//! %Forward engine for vanilla options
/*! \ingroup forwardengines
\test
- the correctness of the returned value is tested by
reproducing results available in literature.
- the correctness of the returned greeks is tested by
reproducing numerical derivatives.
*/
template <class Engine>
class ForwardVanillaEngine
: public GenericEngine<ForwardOptionArguments<VanillaOption::arguments>,
VanillaOption::results> {
public:
ForwardVanillaEngine(
const boost::shared_ptr<GeneralizedBlackScholesProcess>&);
void calculate() const;
protected:
void setup() const;
void getOriginalResults() const;
boost::shared_ptr<GeneralizedBlackScholesProcess> process_;
mutable boost::shared_ptr<Engine> originalEngine_;
mutable VanillaOption::arguments* originalArguments_;
mutable const VanillaOption::results* originalResults_;
};
// template definitions
template <class Engine>
ForwardVanillaEngine<Engine>::ForwardVanillaEngine(
const boost::shared_ptr<GeneralizedBlackScholesProcess>& process)
: process_(process) {
registerWith(process_);
}
template <class Engine>
void ForwardVanillaEngine<Engine>::setup() const {
boost::shared_ptr<StrikedTypePayoff> argumentsPayoff =
boost::dynamic_pointer_cast<StrikedTypePayoff>(
this->arguments_.payoff);
QL_REQUIRE(argumentsPayoff, "wrong payoff given");
boost::shared_ptr<StrikedTypePayoff> payoff(
new PlainVanillaPayoff(argumentsPayoff->optionType(),
this->arguments_.moneyness *
process_->x0()));
// maybe the forward value is "better", in some fashion
// the right level is needed in order to interpolate
// the vol
Handle<Quote> spot = process_->stateVariable();
QL_REQUIRE(spot->value() >= 0.0, "negative or null underlting given");
Handle<YieldTermStructure> dividendYield(
boost::shared_ptr<YieldTermStructure>(
new ImpliedTermStructure(process_->dividendYield(),
this->arguments_.resetDate)));
Handle<YieldTermStructure> riskFreeRate(
boost::shared_ptr<YieldTermStructure>(
new ImpliedTermStructure(process_->riskFreeRate(),
this->arguments_.resetDate)));
// The following approach is ok if the vol is at most
// time dependant. It is plain wrong if it is asset dependant.
// In the latter case the right solution would be stochastic
// volatility or at least local volatility (which unfortunately
// implies an unrealistic time-decreasing smile)
Handle<BlackVolTermStructure> blackVolatility(
boost::shared_ptr<BlackVolTermStructure>(
new ImpliedVolTermStructure(process_->blackVolatility(),
this->arguments_.resetDate)));
boost::shared_ptr<GeneralizedBlackScholesProcess> fwdProcess(
new GeneralizedBlackScholesProcess(spot, dividendYield,
riskFreeRate,
blackVolatility));
originalEngine_ = boost::shared_ptr<Engine>(new Engine(fwdProcess));
originalArguments_ =
dynamic_cast<VanillaOption::arguments*>(
originalEngine_->getArguments());
QL_REQUIRE(originalArguments_, "wrong engine type");
originalResults_ =
dynamic_cast<const VanillaOption::results*>(
originalEngine_->getResults());
QL_REQUIRE(originalResults_, "wrong engine type");
originalArguments_->payoff = payoff;
originalArguments_->exercise = this->arguments_.exercise;
originalArguments_->validate();
}
template <class Engine>
void ForwardVanillaEngine<Engine>::calculate() const {
setup();
originalEngine_->calculate();
getOriginalResults();
}
template <class Engine>
void ForwardVanillaEngine<Engine>::getOriginalResults() const {
DayCounter rfdc = process_->riskFreeRate()->dayCounter();
DayCounter divdc = process_->dividendYield()->dayCounter();
Time resetTime = rfdc.yearFraction(
process_->riskFreeRate()->referenceDate(),
this->arguments_.resetDate);
DiscountFactor discQ = process_->dividendYield()->discount(
this->arguments_.resetDate);
this->results_.value = discQ * originalResults_->value;
// I need the strike derivative here ...
this->results_.delta = discQ * (originalResults_->delta +
this->arguments_.moneyness * originalResults_->strikeSensitivity);
this->results_.gamma = 0.0;
this->results_.theta = process_->dividendYield()->
zeroRate(this->arguments_.resetDate, divdc, Continuous, NoFrequency)
* this->results_.value;
this->results_.vega = discQ * originalResults_->vega;
this->results_.rho = discQ * originalResults_->rho;
this->results_.dividendRho = - resetTime * this->results_.value
+ discQ * originalResults_->dividendRho;
}
}
#endif
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