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| -rw-r--r-- | scaddins/source/pricing/black_scholes.cxx | 940 |
1 files changed, 940 insertions, 0 deletions
diff --git a/scaddins/source/pricing/black_scholes.cxx b/scaddins/source/pricing/black_scholes.cxx new file mode 100644 index 000000000..57344d85c --- /dev/null +++ b/scaddins/source/pricing/black_scholes.cxx @@ -0,0 +1,940 @@ +/* -*- Mode: C++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */ +/* + * This file is part of the LibreOffice project. + * + * This Source Code Form is subject to the terms of the Mozilla Public + * License, v. 2.0. If a copy of the MPL was not distributed with this + * file, You can obtain one at http://mozilla.org/MPL/2.0/. + * + * Copyright (C) 2012 Tino Kluge <tino.kluge@hrz.tu-chemnitz.de> + * + */ + +#include <cstdio> +#include <cstdlib> +#include <cmath> +#include <cassert> +#include <algorithm> +#include <rtl/math.hxx> +#include "black_scholes.hxx" + +// options prices and greeks in the Black-Scholes model +// also known as TV (theoretical value) + +// the code is structured as follows: + +// (1) basic assets +// - cash-or-nothing option: bincash() +// - asset-or-nothing option: binasset() + +// (2) derived basic assets, can all be priced based on (1) +// - vanilla put/call: putcall() = +/- ( binasset() - K*bincash() ) +// - truncated put/call (barriers active at maturity only) + +// (3) write a wrapper function to include all vanilla prices +// - this is so we don't duplicate code when pricing barriers +// as this is derived from vanillas + +// (4) single barrier options (knock-out), priced based on truncated vanillas +// - it follows from the reflection principle that the price W(S) of a +// single barrier option is given by +// W(S) = V(S) - (B/S)^a V(B^2/S), a = 2(rd-rf)/vol^2 - 1 +// where V(S) is the price of the corresponding truncated vanilla +// option +// - to reduce code duplication and in anticipation of double barrier +// options we write the following function +// barrier_term(S,c) = V(c*S) - (B/S)^a V(c*B^2/S) + +// (5) double barrier options (knock-out) +// - value is an infinite sum over option prices of the corresponding +// truncated vanillas (truncated at both barriers): + +// W(S)=sum (B2/B1)^(i*a) (V(S(B2/B1)^(2i)) - (B1/S)^a V(B1^2/S (B2/B1)^(2i)) + +// (6) write routines for put/call barriers and touch options which +// mainly call the general double barrier pricer +// the main routines are touch() and barrier() +// both can price in/out barriers, double/single barriers as well as +// vanillas + + +// the framework allows any barriers to be priced as long as we define +// the value/greek functions for the corresponding truncated vanilla +// and wrap them into internal::vanilla() and internal::vanilla_trunc() + +// disadvantage of that approach is that due to the rules of +// differentiations the formulas for greeks become long and possible +// simplifications in the formulas won't be made + +// other code inefficiency due to multiplication with pm (+/- 1) +// cvtsi2sd: int-->double, 6/3 cycles +// mulsd: double-double multiplication, 5/1 cycles +// with -O3, however, it compiles 2 versions with pm=1, and pm=-1 +// which are efficient +// note this is tiny anyway as compared to exp/log (100 cycles), +// pow (200 cycles), erf (70 cycles) + +// this code is not tested for numerical instability, ie overruns, +// underruns, accuracy, etc + + +namespace sca::pricing::bs { + + +// helper functions + +static double sqr(double x) { + return x*x; +} +// normal density (see also ScInterpreter::phi) +static double dnorm(double x) { + //return (1.0/sqrt(2.0*M_PI))*exp(-0.5*x*x); // windows may not have M_PI + return 0.39894228040143268*exp(-0.5*x*x); +} +// cumulative normal distribution (see also ScInterpreter::integralPhi) +static double pnorm(double x) { + //return 0.5*(erf(sqrt(0.5)*x)+1.0); // windows may not have erf + return 0.5 * ::rtl::math::erfc(-x * 0.7071067811865475); +} + +// binary option cash (domestic) +// call - pays 1 if S_T is above strike K +// put - pays 1 if S_T is below strike K +double bincash(double S, double vol, double rd, double rf, + double tau, double K, + types::PutCall pc, types::Greeks greeks) { + assert(tau>=0.0); + assert(S>0.0); + assert(vol>0.0); + assert(K>=0.0); + + double val=0.0; + + if(tau<=0.0) { + // special case tau=0 (expiry) + switch(greeks) { + case types::Value: + if( (pc==types::Call && S>=K) || (pc==types::Put && S<=K) ) { + val = 1.0; + } else { + val = 0.0; + } + break; + default: + val = 0.0; + } + } else if(K==0.0) { + // special case with zero strike + if(pc==types::Put) { + // up-and-out (put) with K=0 + val=0.0; + } else { + // down-and-out (call) with K=0 (zero coupon bond) + switch(greeks) { + case types::Value: + val = 1.0; + break; + case types::Theta: + val = rd; + break; + case types::Rho_d: + val = -tau; + break; + default: + val = 0.0; + } + } + } else { + // standard case with K>0, tau>0 + double d1 = ( log(S/K)+(rd-rf+0.5*vol*vol)*tau ) / (vol*sqrt(tau)); + double d2 = d1 - vol*sqrt(tau); + int pm = (pc==types::Call) ? 1 : -1; + + switch(greeks) { + case types::Value: + val = pnorm(pm*d2); + break; + case types::Delta: + val = pm*dnorm(d2)/(S*vol*sqrt(tau)); + break; + case types::Gamma: + val = -pm*dnorm(d2)*d1/(sqr(S*vol)*tau); + break; + case types::Theta: + val = rd*pnorm(pm*d2) + + pm*dnorm(d2)*(log(S/K)/(vol*sqrt(tau))-0.5*d2)/tau; + break; + case types::Vega: + val = -pm*dnorm(d2)*d1/vol; + break; + case types::Volga: + val = pm*dnorm(d2)/(vol*vol)*(-d1*d1*d2+d1+d2); + break; + case types::Vanna: + val = pm*dnorm(d2)/(S*vol*vol*sqrt(tau))*(d1*d2-1.0); + break; + case types::Rho_d: + val = -tau*pnorm(pm*d2) + pm*dnorm(d2)*sqrt(tau)/vol; + break; + case types::Rho_f: + val = -pm*dnorm(d2)*sqrt(tau)/vol; + break; + default: + printf("bincash: greek %d not implemented\n", greeks ); + abort(); + } + } + return exp(-rd*tau)*val; +} + +// binary option asset (foreign) +// call - pays S_T if S_T is above strike K +// put - pays S_T if S_T is below strike K +double binasset(double S, double vol, double rd, double rf, + double tau, double K, + types::PutCall pc, types::Greeks greeks) { + assert(tau>=0.0); + assert(S>0.0); + assert(vol>0.0); + assert(K>=0.0); + + double val=0.0; + if(tau<=0.0) { + // special case tau=0 (expiry) + switch(greeks) { + case types::Value: + if( (pc==types::Call && S>=K) || (pc==types::Put && S<=K) ) { + val = S; + } else { + val = 0.0; + } + break; + case types::Delta: + if( (pc==types::Call && S>=K) || (pc==types::Put && S<=K) ) { + val = 1.0; + } else { + val = 0.0; + } + break; + default: + val = 0.0; + } + } else if(K==0.0) { + // special case with zero strike (forward with zero strike) + if(pc==types::Put) { + // up-and-out (put) with K=0 + val = 0.0; + } else { + // down-and-out (call) with K=0 (type of forward) + switch(greeks) { + case types::Value: + val = S; + break; + case types::Delta: + val = 1.0; + break; + case types::Theta: + val = rf*S; + break; + case types::Rho_f: + val = -tau*S; + break; + default: + val = 0.0; + } + } + } else { + // normal case + double d1 = ( log(S/K)+(rd-rf+0.5*vol*vol)*tau ) / (vol*sqrt(tau)); + double d2 = d1 - vol*sqrt(tau); + int pm = (pc==types::Call) ? 1 : -1; + + switch(greeks) { + case types::Value: + val = S*pnorm(pm*d1); + break; + case types::Delta: + val = pnorm(pm*d1) + pm*dnorm(d1)/(vol*sqrt(tau)); + break; + case types::Gamma: + val = -pm*dnorm(d1)*d2/(S*sqr(vol)*tau); + break; + case types::Theta: + val = rf*S*pnorm(pm*d1) + + pm*S*dnorm(d1)*(log(S/K)/(vol*sqrt(tau))-0.5*d1)/tau; + break; + case types::Vega: + val = -pm*S*dnorm(d1)*d2/vol; + break; + case types::Volga: + val = pm*S*dnorm(d1)/(vol*vol)*(-d1*d2*d2+d1+d2); + break; + case types::Vanna: + val = pm*dnorm(d1)/(vol*vol*sqrt(tau))*(d2*d2-1.0); + break; + case types::Rho_d: + val = pm*S*dnorm(d1)*sqrt(tau)/vol; + break; + case types::Rho_f: + val = -tau*S*pnorm(pm*d1) - pm*S*dnorm(d1)*sqrt(tau)/vol; + break; + default: + printf("binasset: greek %d not implemented\n", greeks ); + abort(); + } + } + return exp(-rf*tau)*val; +} + +// just for convenience we can combine bincash and binasset into +// one function binary +// using bincash() if fd==types::Domestic +// using binasset() if fd==types::Foreign +static double binary(double S, double vol, double rd, double rf, + double tau, double K, + types::PutCall pc, types::ForDom fd, + types::Greeks greek) { + double val=0.0; + switch(fd) { + case types::Domestic: + val = bincash(S,vol,rd,rf,tau,K,pc,greek); + break; + case types::Foreign: + val = binasset(S,vol,rd,rf,tau,K,pc,greek); + break; + default: + // never get here + assert(false); + } + return val; +} + +// further wrapper to combine single/double barrier binary options +// into one function +// B1<=0 - it is assumed lower barrier not set +// B2<=0 - it is assumed upper barrier not set +static double binary(double S, double vol, double rd, double rf, + double tau, double B1, double B2, + types::ForDom fd, types::Greeks greek) { + assert(tau>=0.0); + assert(S>0.0); + assert(vol>0.0); + + double val=0.0; + + if(B1<=0.0 && B2<=0.0) { + // no barriers set, payoff 1.0 (domestic) or S_T (foreign) + val = binary(S,vol,rd,rf,tau,0.0,types::Call,fd,greek); + } else if(B1<=0.0 && B2>0.0) { + // upper barrier (put) + val = binary(S,vol,rd,rf,tau,B2,types::Put,fd,greek); + } else if(B1>0.0 && B2<=0.0) { + // lower barrier (call) + val = binary(S,vol,rd,rf,tau,B1,types::Call,fd,greek); + } else if(B1>0.0 && B2>0.0) { + // double barrier + if(B2<=B1) { + val = 0.0; + } else { + val = binary(S,vol,rd,rf,tau,B2,types::Put,fd,greek) + - binary(S,vol,rd,rf,tau,B1,types::Put,fd,greek); + } + } else { + // never get here + assert(false); + } + + return val; +} + +// vanilla put/call option +// call pays (S_T-K)^+ +// put pays (K-S_T)^+ +// this is the same as: +/- (binasset - K*bincash) +double putcall(double S, double vol, double rd, double rf, + double tau, double K, + types::PutCall putcall, types::Greeks greeks) { + + assert(tau>=0.0); + assert(S>0.0); + assert(vol>0.0); + assert(K>=0.0); + + double val = 0.0; + int pm = (putcall==types::Call) ? 1 : -1; + + if(K==0 || tau==0.0) { + // special cases, simply refer to binasset() and bincash() + val = pm * ( binasset(S,vol,rd,rf,tau,K,putcall,greeks) + - K*bincash(S,vol,rd,rf,tau,K,putcall,greeks) ); + } else { + // general case + // we could just use pm*(binasset-K*bincash), however + // since the formula for delta and gamma simplify we write them + // down here + double d1 = ( log(S/K)+(rd-rf+0.5*vol*vol)*tau ) / (vol*sqrt(tau)); + double d2 = d1 - vol*sqrt(tau); + + switch(greeks) { + case types::Value: + val = pm * ( exp(-rf*tau)*S*pnorm(pm*d1)-exp(-rd*tau)*K*pnorm(pm*d2) ); + break; + case types::Delta: + val = pm*exp(-rf*tau)*pnorm(pm*d1); + break; + case types::Gamma: + val = exp(-rf*tau)*dnorm(d1)/(S*vol*sqrt(tau)); + break; + default: + // too lazy for the other greeks, so simply refer to binasset/bincash + val = pm * ( binasset(S,vol,rd,rf,tau,K,putcall,greeks) + - K*bincash(S,vol,rd,rf,tau,K,putcall,greeks) ); + } + } + return val; +} + +// truncated put/call option, single barrier +// need to specify whether it's down-and-out or up-and-out +// regular (keeps monotonicity): down-and-out for call, up-and-out for put +// reverse (destroys monoton): up-and-out for call, down-and-out for put +// call pays (S_T-K)^+ +// put pays (K-S_T)^+ +double putcalltrunc(double S, double vol, double rd, double rf, + double tau, double K, double B, + types::PutCall pc, types::KOType kotype, + types::Greeks greeks) { + + assert(tau>=0.0); + assert(S>0.0); + assert(vol>0.0); + assert(K>=0.0); + assert(B>=0.0); + + int pm = (pc==types::Call) ? 1 : -1; + double val = 0.0; + + switch(kotype) { + case types::Regular: + if( (pc==types::Call && B<=K) || (pc==types::Put && B>=K) ) { + // option degenerates to standard plain vanilla call/put + val = putcall(S,vol,rd,rf,tau,K,pc,greeks); + } else { + // normal case with truncation + val = pm * ( binasset(S,vol,rd,rf,tau,B,pc,greeks) + - K*bincash(S,vol,rd,rf,tau,B,pc,greeks) ); + } + break; + case types::Reverse: + if( (pc==types::Call && B<=K) || (pc==types::Put && B>=K) ) { + // option degenerates to zero payoff + val = 0.0; + } else { + // normal case with truncation + val = binasset(S,vol,rd,rf,tau,K,types::Call,greeks) + - binasset(S,vol,rd,rf,tau,B,types::Call,greeks) + - K * ( bincash(S,vol,rd,rf,tau,K,types::Call,greeks) + - bincash(S,vol,rd,rf,tau,B,types::Call,greeks) ); + } + break; + default: + assert(false); + } + return val; +} + +// wrapper function for put/call option which combines +// double/single/no truncation barrier +// B1<=0 - assume no lower barrier +// B2<=0 - assume no upper barrier +double putcalltrunc(double S, double vol, double rd, double rf, + double tau, double K, double B1, double B2, + types::PutCall pc, types::Greeks greek) { + + assert(tau>=0.0); + assert(S>0.0); + assert(vol>0.0); + assert(K>=0.0); + + double val=0.0; + + if(B1<=0.0 && B2<=0.0) { + // no barriers set, plain vanilla + val = putcall(S,vol,rd,rf,tau,K,pc,greek); + } else if(B1<=0.0 && B2>0.0) { + // upper barrier: reverse barrier for call, regular barrier for put + if(pc==types::Call) { + val = putcalltrunc(S,vol,rd,rf,tau,K,B2,pc,types::Reverse,greek); + } else { + val = putcalltrunc(S,vol,rd,rf,tau,K,B2,pc,types::Regular,greek); + } + } else if(B1>0.0 && B2<=0.0) { + // lower barrier: regular barrier for call, reverse barrier for put + if(pc==types::Call) { + val = putcalltrunc(S,vol,rd,rf,tau,K,B1,pc,types::Regular,greek); + } else { + val = putcalltrunc(S,vol,rd,rf,tau,K,B1,pc,types::Reverse,greek); + } + } else if(B1>0.0 && B2>0.0) { + // double barrier + if(B2<=B1) { + val = 0.0; + } else { + int pm = (pc==types::Call) ? 1 : -1; + val = pm * ( + putcalltrunc(S,vol,rd,rf,tau,K,B1,pc,types::Regular,greek) + - putcalltrunc(S,vol,rd,rf,tau,K,B2,pc,types::Regular,greek) + ); + } + } else { + // never get here + assert(false); + } + return val; +} + +namespace internal { + +// wrapper function for all non-path dependent options +// this is only an internal function, used to avoid code duplication when +// going to path-dependent barrier options, +// K<0 - assume binary option +// K>=0 - assume put/call option +static double vanilla(double S, double vol, double rd, double rf, + double tau, double K, double B1, double B2, + types::PutCall pc, types::ForDom fd, + types::Greeks greek) { + double val = 0.0; + if(K<0.0) { + // binary option if K<0 + val = binary(S,vol,rd,rf,tau,B1,B2,fd,greek); + } else { + val = putcall(S,vol,rd,rf,tau,K,pc,greek); + } + return val; +} +static double vanilla_trunc(double S, double vol, double rd, double rf, + double tau, double K, double B1, double B2, + types::PutCall pc, types::ForDom fd, + types::Greeks greek) { + double val = 0.0; + if(K<0.0) { + // binary option if K<0 + // truncated is actually the same as the vanilla binary + val = binary(S,vol,rd,rf,tau,B1,B2,fd,greek); + } else { + val = putcalltrunc(S,vol,rd,rf,tau,K,B1,B2,pc,greek); + } + return val; +} + +} // namespace internal + +// path dependent options + + +namespace internal { + +// helper term for any type of options with continuously monitored barriers, +// internal, should not be called from outside +// calculates value and greeks based on +// V(S) = V1(sc*S) - (B/S)^a V1(sc*B^2/S) +// (a=2 mu/vol^2, mu drift in logspace, ie. mu=(rd-rf-1/2vol^2)) +// with sc=1 and V1() being the price of the respective truncated +// vanilla option, V() would be the price of the respective barrier +// option if only one barrier is present +static double barrier_term(double S, double vol, double rd, double rf, + double tau, double K, double B1, double B2, double sc, + types::PutCall pc, types::ForDom fd, + types::Greeks greek) { + + assert(tau>=0.0); + assert(S>0.0); + assert(vol>0.0); + + // V(S) = V1(sc*S) - (B/S)^a V1(sc*B^2/S) + double val = 0.0; + double B = (B1>0.0) ? B1 : B2; + double a = 2.0*(rd-rf)/(vol*vol)-1.0; // helper variable + double b = 4.0*(rd-rf)/(vol*vol*vol); // helper variable -da/dvol + double c = 12.0*(rd-rf)/(vol*vol*vol*vol); // helper -db/dvol + switch(greek) { + case types::Value: + val = vanilla_trunc(sc*S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + - pow(B/S,a)* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); + break; + case types::Delta: + val = sc*vanilla_trunc(sc*S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + + pow(B/S,a) * ( + a/S* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Value) + + sqr(B/S)*sc* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + ); + break; + case types::Gamma: + val = sc*sc*vanilla_trunc(sc*S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + - pow(B/S,a) * ( + a*(a+1.0)/(S*S)* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Value) + + (2.0*a+2.0)*B*B/(S*S*S)*sc* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Delta) + + sqr(sqr(B/S))*sc*sc* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Gamma) + ); + break; + case types::Theta: + val = vanilla_trunc(sc*S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + - pow(B/S,a)* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); + break; + case types::Vega: + val = vanilla_trunc(sc*S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + - pow(B/S,a) * ( + - b*log(B/S)* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Value) + + 1.0* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + ); + break; + case types::Volga: + val = vanilla_trunc(sc*S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + - pow(B/S,a) * ( + log(B/S)*(b*b*log(B/S)+c)* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Value) + - 2.0*b*log(B/S)* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Vega) + + 1.0* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Volga) + ); + break; + case types::Vanna: + val = sc*vanilla_trunc(sc*S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + - pow(B/S,a) * ( + b/S*(log(B/S)*a+1.0)* + vanilla_trunc(B*B/S*sc,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Value) + + b*log(B/S)*sqr(B/S)*sc* + vanilla_trunc(B*B/S*sc,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Delta) + - a/S* + vanilla_trunc(B*B/S*sc,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Vega) + - sqr(B/S)*sc* + vanilla_trunc(B*B/S*sc,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Vanna) + ); + break; + case types::Rho_d: + val = vanilla_trunc(sc*S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + - pow(B/S,a) * ( + 2.0*log(B/S)/(vol*vol)* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Value) + + 1.0* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + ); + break; + case types::Rho_f: + val = vanilla_trunc(sc*S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + - pow(B/S,a) * ( + - 2.0*log(B/S)/(vol*vol)* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,types::Value) + + 1.0* + vanilla_trunc(sc*B*B/S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + ); + break; + default: + printf("barrier_term: greek %d not implemented\n", greek ); + abort(); + } + return val; +} + +// one term of the infinite sum for the valuation of double barriers +static double barrier_double_term( double S, double vol, double rd, double rf, + double tau, double K, double B1, double B2, + double fac, double sc, int i, + types::PutCall pc, types::ForDom fd, types::Greeks greek) { + + double val = 0.0; + double b = 4.0*i*(rd-rf)/(vol*vol*vol); // helper variable -da/dvol + double c = 12.0*i*(rd-rf)/(vol*vol*vol*vol); // helper -db/dvol + switch(greek) { + case types::Value: + val = fac*barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,greek); + break; + case types::Delta: + val = fac*barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,greek); + break; + case types::Gamma: + val = fac*barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,greek); + break; + case types::Theta: + val = fac*barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,greek); + break; + case types::Vega: + val = fac*barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,greek) + - b*log(B2/B1)*fac * + barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,types::Value); + break; + case types::Volga: + val = fac*barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,greek) + - 2.0*b*log(B2/B1)*fac * + barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,types::Vega) + + log(B2/B1)*fac*(c+b*b*log(B2/B1)) * + barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,types::Value); + break; + case types::Vanna: + val = fac*barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,greek) + - b*log(B2/B1)*fac * + barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,types::Delta); + break; + case types::Rho_d: + val = fac*barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,greek) + + 2.0*i/(vol*vol)*log(B2/B1)*fac * + barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,types::Value); + break; + case types::Rho_f: + val = fac*barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,greek) + - 2.0*i/(vol*vol)*log(B2/B1)*fac * + barrier_term(S,vol,rd,rf,tau,K,B1,B2,sc,pc,fd,types::Value); + break; + default: + printf("barrier_double_term: greek %d not implemented\n", greek ); + abort(); + } + return val; +} + +// general pricer for any type of options with continuously monitored barriers +// allows two, one or zero barriers, only knock-out style +// payoff profiles allowed based on vanilla_trunc() +static double barrier_ko(double S, double vol, double rd, double rf, + double tau, double K, double B1, double B2, + types::PutCall pc, types::ForDom fd, + types::Greeks greek) { + + assert(tau>=0.0); + assert(S>0.0); + assert(vol>0.0); + + double val = 0.0; + + if(B1<=0.0 && B2<=0.0) { + // no barriers --> vanilla case + val = vanilla(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); + } else if(B1>0.0 && B2<=0.0) { + // lower barrier + if(S<=B1) { + val = 0.0; // knocked out + } else { + val = barrier_term(S,vol,rd,rf,tau,K,B1,B2,1.0,pc,fd,greek); + } + } else if(B1<=0.0 && B2>0.0) { + // upper barrier + if(S>=B2) { + val = 0.0; // knocked out + } else { + val = barrier_term(S,vol,rd,rf,tau,K,B1,B2,1.0,pc,fd,greek); + } + } else if(B1>0.0 && B2>0.0) { + // double barrier + if(S<=B1 || S>=B2) { + val = 0.0; // knocked out (always true if wrong input B1>B2) + } else { + // more complex calculation as we have to evaluate an infinite + // sum + // to reduce very costly pow() calls we define some variables + double a = 2.0*(rd-rf)/(vol*vol)-1.0; // 2 (mu-1/2vol^2)/sigma^2 + double BB2=sqr(B2/B1); + double BBa=pow(B2/B1,a); + double BB2inv=1.0/BB2; + double BBainv=1.0/BBa; + double fac=1.0; + double facinv=1.0; + double sc=1.0; + double scinv=1.0; + + // initial term i=0 + val=barrier_double_term(S,vol,rd,rf,tau,K,B1,B2,fac,sc,0,pc,fd,greek); + // infinite loop, 10 should be plenty, normal would be 2 + for(int i=1; i<10; i++) { + fac*=BBa; + facinv*=BBainv; + sc*=BB2; + scinv*=BB2inv; + double add = + barrier_double_term(S,vol,rd,rf,tau,K,B1,B2,fac,sc,i,pc,fd,greek) + + barrier_double_term(S,vol,rd,rf,tau,K,B1,B2,facinv,scinv,-i,pc,fd,greek); + val += add; + //printf("%i: val=%e (add=%e)\n",i,val,add); + if(fabs(add) <= 1e-12*fabs(val)) { + break; + } + } + // not knocked-out double barrier end + } + // double barrier end + } else { + // no such barrier combination exists + assert(false); + } + + return val; +} + +// knock-in style barrier +static double barrier_ki(double S, double vol, double rd, double rf, + double tau, double K, double B1, double B2, + types::PutCall pc, types::ForDom fd, + types::Greeks greek) { + return vanilla(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + -barrier_ko(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); +} + +// general barrier +static double barrier(double S, double vol, double rd, double rf, + double tau, double K, double B1, double B2, + types::PutCall pc, types::ForDom fd, + types::BarrierKIO kio, types::BarrierActive bcont, + types::Greeks greek) { + + double val = 0.0; + if( kio==types::KnockOut && bcont==types::Maturity ) { + // truncated vanilla option + val = vanilla_trunc(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); + } else if ( kio==types::KnockOut && bcont==types::Continuous ) { + // standard knock-out barrier + val = barrier_ko(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); + } else if ( kio==types::KnockIn && bcont==types::Maturity ) { + // inverse truncated vanilla + val = vanilla(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek) + - vanilla_trunc(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); + } else if ( kio==types::KnockIn && bcont==types::Continuous ) { + // standard knock-in barrier + val = barrier_ki(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); + } else { + // never get here + assert(false); + } + return val; +} + +} // namespace internal + + +// touch/no-touch options (cash/asset or nothing payoff profile) +double touch(double S, double vol, double rd, double rf, + double tau, double B1, double B2, types::ForDom fd, + types::BarrierKIO kio, types::BarrierActive bcont, + types::Greeks greek) { + + double K=-1.0; // dummy + types::PutCall pc = types::Call; // dummy + double val = 0.0; + if( kio==types::KnockOut && bcont==types::Maturity ) { + // truncated vanilla option + val = internal::vanilla_trunc(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); + } else if ( kio==types::KnockOut && bcont==types::Continuous ) { + // standard knock-out barrier + val = internal::barrier_ko(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); + } else if ( kio==types::KnockIn && bcont==types::Maturity ) { + // inverse truncated vanilla + val = internal::vanilla(S,vol,rd,rf,tau,K,-1.0,-1.0,pc,fd,greek) + - internal::vanilla_trunc(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); + } else if ( kio==types::KnockIn && bcont==types::Continuous ) { + // standard knock-in barrier + val = internal::vanilla(S,vol,rd,rf,tau,K,-1.0,-1.0,pc,fd,greek) + - internal::barrier_ko(S,vol,rd,rf,tau,K,B1,B2,pc,fd,greek); + } else { + // never get here + assert(false); + } + return val; +} + +// barrier option (put/call payoff profile) +double barrier(double S, double vol, double rd, double rf, + double tau, double K, double B1, double B2, + double rebate, + types::PutCall pc, types::BarrierKIO kio, + types::BarrierActive bcont, + types::Greeks greek) { + assert(tau>=0.0); + assert(S>0.0); + assert(vol>0.0); + assert(K>=0.0); + types::ForDom fd = types::Domestic; + double val=internal::barrier(S,vol,rd,rf,tau,K,B1,B2,pc,fd,kio,bcont,greek); + if(rebate!=0.0) { + // opposite of barrier knock-in/out type + types::BarrierKIO kio2 = (kio==types::KnockIn) ? types::KnockOut + : types::KnockIn; + val += rebate*touch(S,vol,rd,rf,tau,B1,B2,fd,kio2,bcont,greek); + } + return val; +} + +// probability of hitting a barrier +// this is almost the same as the price of a touch option (domestic) +// as it pays one if a barrier is hit; we only have to offset the +// discounting and we get the probability +double prob_hit(double S, double vol, double mu, + double tau, double B1, double B2) { + double const rd=0.0; + double rf=-mu; + return 1.0 - touch(S,vol,rd,rf,tau,B1,B2,types::Domestic,types::KnockOut, + types::Continuous, types::Value); +} + +// probability of being in-the-money, ie payoff is greater zero, +// assuming payoff(S_T) > 0 iff S_T in [B1, B2] +// this the same as the price of a cash or nothing option +// with no discounting +double prob_in_money(double S, double vol, double mu, + double tau, double B1, double B2) { + assert(S>0.0); + assert(vol>0.0); + assert(tau>=0.0); + double val = 0.0; + if( B1<B2 || B1<=0.0 || B2<=0.0 ) { + val = binary(S,vol,0.0,-mu,tau,B1,B2,types::Domestic,types::Value); + } + return val; +} +double prob_in_money(double S, double vol, double mu, + double tau, double K, double B1, double B2, + types::PutCall pc) { + assert(S>0.0); + assert(vol>0.0); + assert(tau>=0.0); + + // if K<0 we assume a binary option is given + if(K<0.0) { + return prob_in_money(S,vol,mu,tau,B1,B2); + } + + double val = 0.0; + double BM1, BM2; // range of in the money [BM1, BM2] + // non-sense parameters with no positive payoff + if( (B1>B2 && B1>0.0 && B2>0.0) || + (K>=B2 && B2>0.0 && pc==types::Call) || + (K<=B1 && pc==types::Put) ) { + val = 0.0; + // need to figure out between what barriers payoff is greater 0 + } else if(pc==types::Call) { + BM1=std::max(B1, K); + BM2=B2; + val = prob_in_money(S,vol,mu,tau,BM1,BM2); + } else if (pc==types::Put) { + BM1=B1; + BM2= (B2>0.0) ? std::min(B2,K) : K; + val = prob_in_money(S,vol,mu,tau,BM1,BM2); + } else { + // don't get here + assert(false); + } + return val; +} + +} // namespace sca + + +/* vim:set shiftwidth=4 softtabstop=4 expandtab: */ |