public virtual void test_trinomialTree_up()
{
int nSteps = 133;
LatticeSpecification lattice = new CoxRossRubinsteinLatticeSpecification();
DoubleArray rebate = DoubleArray.of(nSteps + 1, i => REBATE_AMOUNT);
double barrierLevel = 135d;
double tol = 1.0e-2;
foreach (bool isCall in new bool[] { true, false })
{
foreach (double strike in STRIKES)
{
foreach (double interest in INTERESTS)
{
foreach (double vol in VOLS)
{
foreach (double dividend in DIVIDENDS)
{
OptionFunction function = ConstantContinuousSingleBarrierKnockoutFunction.of(strike, TIME, PutCall.ofPut(!isCall), nSteps, BarrierType.UP, barrierLevel, rebate);
SimpleConstantContinuousBarrier barrier = SimpleConstantContinuousBarrier.of(BarrierType.UP, KnockType.KNOCK_OUT, barrierLevel);
double exact = REBATE_AMOUNT * REBATE_PRICER.price(SPOT, TIME, interest - dividend, interest, vol, barrier.inverseKnockType()) + BARRIER_PRICER.price(SPOT, strike, TIME, interest - dividend, interest, vol, isCall, barrier);
double computed = TRINOMIAL_TREE.optionPrice(function, lattice, SPOT, vol, interest, dividend);
assertEquals(computed, exact, Math.Max(exact, 1d) * tol);
}
}
}
}
}
}
//-----------------------------------------------------------------------
public override bool Equals(object obj)
{
if (obj == this)
{
return(true);
}
if (obj != null && obj.GetType() == this.GetType())
{
ConstantContinuousSingleBarrierKnockoutFunction other = (ConstantContinuousSingleBarrierKnockoutFunction)obj;
return(JodaBeanUtils.equal(strike, other.strike) && JodaBeanUtils.equal(timeToExpiry, other.timeToExpiry) && JodaBeanUtils.equal(sign, other.sign) && (numberOfSteps == other.numberOfSteps) && JodaBeanUtils.equal(barrierType, other.barrierType) && JodaBeanUtils.equal(barrierLevel, other.barrierLevel) && JodaBeanUtils.equal(rebate, other.rebate));
}
return(false);
}
public virtual void test_of()
{
ConstantContinuousSingleBarrierKnockoutFunction test = ConstantContinuousSingleBarrierKnockoutFunction.of(STRIKE, TIME_TO_EXPIRY, PutCall.PUT, NUM, BarrierType.UP, BARRIER, REBATE);
assertEquals(test.Sign, -1d);
assertEquals(test.Strike, STRIKE);
assertEquals(test.TimeToExpiry, TIME_TO_EXPIRY);
assertEquals(test.NumberOfSteps, NUM);
assertEquals(test.BarrierLevel, BARRIER);
assertEquals(test.getBarrierLevel(23), BARRIER);
assertEquals(test.BarrierType, BarrierType.UP);
assertEquals(test.Rebate, REBATE);
assertEquals(test.getRebate(14), REBATE_AMOUNT);
}
public virtual void test_optionPrice_down()
{
double tol = 1.0e-12;
double barrier = 97d;
ConstantContinuousSingleBarrierKnockoutFunction test = ConstantContinuousSingleBarrierKnockoutFunction.of(STRIKE, TIME_TO_EXPIRY, PutCall.CALL, NUM, BarrierType.DOWN, barrier, REBATE);
double spot = 100d;
double u = 1.05;
double d = 0.98;
double m = Math.Sqrt(u * d);
double up = 0.29;
double dp = 0.25;
double mp = 1d - up - dp;
// test getPayoffAtExpiryTrinomial
DoubleArray computedPayoff = test.getPayoffAtExpiryTrinomial(spot, d, m);
int expectedSize = 2 * NUM + 1;
assertEquals(computedPayoff.size(), expectedSize);
double[] price = new double[expectedSize];
for (int i = 0; i < expectedSize; ++i)
{
price[i] = spot * Math.Pow(u, 0.5 * i) * Math.Pow(d, NUM - 0.5 * i);
}
for (int i = 0; i < expectedSize; ++i)
{
double expectedPayoff = price[i] > barrier?Math.Max(price[i] - STRIKE, 0d) : REBATE_AMOUNT;
if (i != 0 && price[i - 1] < barrier && price[i] > barrier)
{
expectedPayoff = 0.5 * (expectedPayoff * (price[i] - barrier) + REBATE_AMOUNT * (barrier - price[i - 1])) / (price[i] - price[i - 1]) + 0.5 * expectedPayoff;
}
assertEquals(computedPayoff.get(i), expectedPayoff, tol);
}
// test getNextOptionValues
double df = 0.92;
int n = 2;
DoubleArray values = DoubleArray.of(1.4, 0.9, 0.1, 0.05, 0.0, 0.0, 0.0);
DoubleArray computedNextValues = test.getNextOptionValues(df, up, mp, dp, values, spot, d, m, n);
double tmp = df * (0.9 * dp + 0.1 * mp + 0.05 * up);
DoubleArray expectedNextValues = DoubleArray.of(REBATE_AMOUNT, 0.5 * (tmp * (m * d - barrier / spot) + REBATE_AMOUNT * (barrier / spot - d * d)) / (m * d - d * d) + 0.5 * tmp, df * (0.1 * dp + 0.05 * mp), df * 0.05 * dp, 0.0);
assertTrue(DoubleArrayMath.fuzzyEquals(computedNextValues.toArray(), expectedNextValues.toArray(), tol));
}
public virtual void test_optionPrice_up()
{
double tol = 1.0e-12;
ConstantContinuousSingleBarrierKnockoutFunction test = ConstantContinuousSingleBarrierKnockoutFunction.of(STRIKE, TIME_TO_EXPIRY, PutCall.PUT, NUM, BarrierType.UP, BARRIER, REBATE);
double spot = 130d;
double u = 1.05;
double d = 0.98;
double m = Math.Sqrt(u * d);
double up = 0.29;
double dp = 0.25;
double mp = 1d - up - dp;
// test getPayoffAtExpiryTrinomial
DoubleArray computedPayoff = test.getPayoffAtExpiryTrinomial(spot, d, m);
int expectedSize = 2 * NUM + 1;
assertEquals(computedPayoff.size(), expectedSize);
double[] price = new double[expectedSize];
for (int i = 0; i < expectedSize; ++i)
{
price[i] = spot * Math.Pow(u, 0.5 * i) * Math.Pow(d, NUM - 0.5 * i);
}
for (int i = 0; i < expectedSize; ++i)
{
double expectedPayoff = price[i] < BARRIER?Math.Max(STRIKE - price[i], 0d) : REBATE_AMOUNT;
if (i != expectedSize - 1 && price[i] < BARRIER && price[i + 1] > BARRIER)
{
expectedPayoff = 0.5 * ((BARRIER - price[i]) * expectedPayoff + (price[i + 1] - BARRIER) * REBATE_AMOUNT) / (price[i + 1] - price[i]) + 0.5 * expectedPayoff;
}
assertEquals(computedPayoff.get(i), expectedPayoff, tol);
}
// test getNextOptionValues
double df = 0.92;
int n = 2;
DoubleArray values = DoubleArray.of(1.4, 0.9, 0.1, 0.05, 0.0, 0.0, 0.0);
DoubleArray computedNextValues = test.getNextOptionValues(df, up, mp, dp, values, spot, d, m, n);
double tmp = df * 0.05 * dp;
DoubleArray expectedNextValues = DoubleArray.of(df * (1.4 * dp + 0.9 * mp + 0.1 * up), df * (0.9 * dp + 0.1 * mp + 0.05 * up), df * (0.1 * dp + 0.05 * mp), 0.5 * ((BARRIER / spot - u * m) * tmp + (u * u - BARRIER / spot) * REBATE_AMOUNT) / (u * u - u * m) + 0.5 * tmp, REBATE_AMOUNT);
assertTrue(DoubleArrayMath.fuzzyEquals(computedNextValues.toArray(), expectedNextValues.toArray(), tol));
}
