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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2008 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
<https://www.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/varianceoption/varianceoption.hpp>
#include <ql/experimental/varianceoption/integralhestonvarianceoptionengine.hpp>
#include <ql/time/daycounters/actual360.hpp>
#include <ql/quotes/simplequote.hpp>
using namespace QuantLib;
using namespace boost::unit_test_framework;
BOOST_FIXTURE_TEST_SUITE(QuantLibTests, TopLevelFixture)
BOOST_AUTO_TEST_SUITE(VarianceOptionTests)
BOOST_AUTO_TEST_CASE(testIntegralHeston) {
BOOST_TEST_MESSAGE("Testing variance option with integral Heston engine...");
DayCounter dc = Actual360();
Date today = Settings::instance().evaluationDate();
Handle<Quote> s0(ext::make_shared<SimpleQuote>(1.0));
Handle<YieldTermStructure> qTS;
ext::shared_ptr<SimpleQuote> rRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> rTS(flatRate(today, rRate, dc));
Real v0 = 2.0;
Real kappa = 2.0;
Real theta = 0.01;
Real sigma = 0.1;
Real rho = -0.5;
ext::shared_ptr<HestonProcess> process(new HestonProcess(rTS, qTS, s0,
v0, kappa, theta,
sigma, rho));
ext::shared_ptr<PricingEngine> engine(
new IntegralHestonVarianceOptionEngine(process));
Real strike = 0.05;
Real nominal = 1.0;
Time T = 1.5;
Date exDate = today + int(360*T);
ext::shared_ptr<Payoff> payoff(new PlainVanillaPayoff(Option::Call,
strike));
VarianceOption varianceOption1(payoff, nominal, today, exDate);
varianceOption1.setPricingEngine(engine);
Real calculated = varianceOption1.NPV();
Real expected = 0.9104619;
Real error = std::fabs(calculated-expected);
if (error>1.0e-7) {
BOOST_ERROR(
"Failed to reproduce variance-option price:"
<< "\n expected: " << std::setprecision(7) << expected
<< "\n calculated: " << std::setprecision(7) << calculated
<< "\n error: " << error);
}
v0 = 1.5;
kappa = 2.0;
theta = 0.01;
sigma = 0.1;
rho = -0.5;
process = ext::make_shared<HestonProcess>(
rTS, qTS, s0, v0, kappa, theta, sigma, rho);
engine = ext::shared_ptr<PricingEngine>(
new IntegralHestonVarianceOptionEngine(process));
strike = 0.7;
nominal = 1.0;
T = 1.0;
exDate = today + int(360*T);
payoff = ext::shared_ptr<Payoff>(new PlainVanillaPayoff(Option::Put,
strike));
VarianceOption varianceOption2(payoff, nominal, today, exDate);
varianceOption2.setPricingEngine(engine);
calculated = varianceOption2.NPV();
expected = 0.0466796;
error = std::fabs(calculated-expected);
if (error>1.0e-7) {
BOOST_ERROR(
"Failed to reproduce variance-option price:"
<< "\n expected: " << std::setprecision(7) << expected
<< "\n calculated: " << std::setprecision(7) << calculated
<< "\n error: " << error);
}
}
BOOST_AUTO_TEST_SUITE_END()
BOOST_AUTO_TEST_SUITE_END()
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