// Heston Price by Gauss-Legendre Integration
public OutputMD HestonPriceGaussLegendreMD(HParam param, OpSet settings, double[] xGLe, double[] wGLe, double[] A, double tol)
{
int nA = A.Length;
int nX = xGLe.Length;
double[,] int1 = new double[nA, nX];
double[,] int2 = new double[nA, nX];
double[] sum1 = new double[nA];
double[] sum2 = new double[nA];
// Numerical integration
HestonPrice HP = new HestonPrice();
int nj = 0;
for (int j = 1; j <= nA - 1; j++)
{
// Counter for the last point of A used
nj += 1;
sum1[j] = 0.0;
for (int k = 0; k <= nX - 1; k++)
{
// Lower and upper and limits of the subdomain
double a = A[j - 1];
double b = A[j];
double X = (a + b) / 2.0 + (b - a) / 2.0 * xGLe[k];
int1[j, k] = wGLe[k] * HP.HestonProb(X, param, settings, 1) * (b - a) / 2.0;
int2[j, k] = wGLe[k] * HP.HestonProb(X, param, settings, 2) * (b - a) / 2.0;
sum1[j] += int1[j, k];
sum2[j] += int2[j, k];
}
if (Math.Abs(sum1[j]) < tol && Math.Abs(sum2[j]) < tol)
{
break;
}
}
// Define P1 and P2
double pi = Math.PI;
double P1 = 0.5 + 1.0 / pi * sum1.Sum();
double P2 = 0.5 + 1.0 / pi * sum2.Sum();
// The call price
double S = settings.S;
double K = settings.K;
double T = settings.T;
double r = settings.r;
double q = settings.q;
string PutCall = settings.PutCall;
double HestonC = S * Math.Exp(-q * T) * P1 - K * Math.Exp(-r * T) * P2;
// The put price by put-call parity
double HestonP = HestonC - S * Math.Exp(-q * T) + K * Math.Exp(-r * T);
// The output structure
OutputMD output = new OutputMD();
// Output the option price
if (PutCall == "C")
{
output.Price = HestonC;
}
else
{
output.Price = HestonP;
}
// Output the integration domain;
output.lower = A[0];
output.upper = A[nj];
// Output the number of integration points
output.Npoints = (nj + 1) * nX;
return(output);
}
// Heston price by Newton Coates quadratures
public double HestonPriceNewtonCotes(HParam param, OpSet settings, int method, double a, double b, int N)
{
// Built the integration grid
// For Simpson's 3/8 rule, the code ensures that N-1 is divisible by 3
double h = (b - a) / (Convert.ToDouble(N) - 1.0);
double[] phi = new double[N];
phi[0] = a;
phi[N - 1] = b;
for (int k = 1; k <= N - 2; k++)
{
phi[k] = phi[k - 1] + h;
}
double[] int1 = new double[N];
double[] int2 = new double[N];
// Integration methods
HestonPrice HP = new HestonPrice();
if (method == 1)
{
// Mid-Point rule --------------------------------------
double[] wt = new double[N];
for (int k = 0; k <= N - 1; k++)
{
wt[k] = h;
}
for (int k = 0; k <= N - 2; k++)
{
double mid = (phi[k] + phi[k + 1]) / 2.0;
int1[k] = wt[k] * HP.HestonProb(mid, param, settings, 1);
int2[k] = wt[k] * HP.HestonProb(mid, param, settings, 2);
}
int1[N - 1] = 0.0;
int2[N - 1] = 0.0;
}
else if (method == 2)
{
// Trapezoidal rule --------------------------------------------------
double[] wt = new double[N];
wt[0] = 0.5 * h;
wt[N - 1] = 0.5 * h;
for (int k = 1; k <= N - 2; k++)
{
wt[k] = h;
}
for (int k = 0; k <= N - 1; k++)
{
int1[k] = wt[k] * HP.HestonProb(phi[k], param, settings, 1);
int2[k] = wt[k] * HP.HestonProb(phi[k], param, settings, 2);
}
}
else if (method == 3)
{
// Simpson's Rule ----------------------------------------------------
double[] wt = new double[N];
wt[0] = h / 3.0;
wt[N - 1] = h / 3.0;
for (int k = 1; k <= N - 1; k++)
{
wt[k] = (h / 3.0) * (3 + Math.Pow(-1, k + 1));
}
for (int k = 0; k <= N - 1; k++)
{
int1[k] = wt[k] * HP.HestonProb(phi[k], param, settings, 1);
int2[k] = wt[k] * HP.HestonProb(phi[k], param, settings, 2);
}
}
else if (method == 4)
{
// Simpson's 3/8 rule --------------------------------------------
// Ensure that N-1 is divisible by 3
N = N - (N % 3);
// Build the new grid
h = (b - a) / (N - 1.0);
double[] phi2 = new double[N];
phi2[0] = a;
phi2[N - 1] = b;
for (int k = 1; k <= N - 2; k++)
{
phi2[k] = phi2[k - 1] + h;
}
double[] wt = new double[N];
wt[0] = 3.0 / 8.0 * h;
wt[1] = 9.0 / 8.0 * h;
wt[2] = 9.0 / 8.0 * h;
wt[N - 1] = 3.0 / 8.0 * h;
for (int k = 3; k <= N - 1; k++)
{
if ((k % 3) == 1)
{
wt[k] = 6.0 / 8.0 * h;
}
else
{
wt[k] = 9.0 / 8.0 * h;
}
}
for (int k = 0; k <= N - 1; k++)
{
int1[k] = wt[k] * HP.HestonProb(phi2[k], param, settings, 1);
int2[k] = wt[k] * HP.HestonProb(phi2[k], param, settings, 2);
}
}
// The integrals
double I1 = int1.Sum();
double I2 = int2.Sum();
// The probabilities P1 and P2
double pi = Math.PI;
double P1 = 0.5 + 1.0 / pi * I1;
double P2 = 0.5 + 1.0 / pi * I2;
// The call price
double S = settings.S;
double K = settings.K;
double q = settings.q;
double r = settings.r;
double T = settings.T;
string PutCall = settings.PutCall;
double HestonC = S * Math.Exp(-q * T) * P1 - K * Math.Exp(-r * T) * P2;
// The put price by put-call parity
double HestonP = HestonC - S * Math.Exp(-q * T) + K * Math.Exp(-r * T);
// Output the option price
if (PutCall == "C")
{
return(HestonC);
}
else
{
return(HestonP);
}
}
