public void Task_2_8_5()
{
// Variance Process Values
double Kappa = 2;
double Theta = 0.06;
double Sigma = 0.4;
double V0 = 0.04;
double Rho = 0.5;
// Heston Model Params
double InitialStockPrice = 100;
double RiskFreeRate = 0.1;
// Option Params
double Maturity = 9;
// MC Simulation Params
int NumberOfTrials = (int)1e5;
int NumberOfTimeSteps = (int)Math.Ceiling(365 * Maturity);
VarianceProcessParameters varParams =
new VarianceProcessParameters(Kappa, Theta, Sigma, V0, Rho);
HestonModelParameters hestonModel =
new HestonModelParameters(InitialStockPrice, RiskFreeRate, varParams);
MonteCarloSettings monteCarloSettings =
new MonteCarloSettings(NumberOfTrials, NumberOfTimeSteps);
LookbackOptionMC lookbackOptionMC =
new LookbackOptionMC(hestonModel, monteCarloSettings, Maturity);
Assert.AreEqual(13.6299, lookbackOptionMC.Price(1), 1e-1);
}
/// <summary>
/// Price a lookback option in the Heston model using the
/// a Monte-Carlo method. Accuracy will depend on number of time steps and samples </summary>
/// <param name="parameters">Object implementing IHestonModelParameters interface, containing model parameters.</param>
/// <param name="maturity">An object implementing IOption interface and containing option's maturity</param>
/// <param name="monteCarloSimulationSettings">An object implementing IMonteCarloSettings object and containing simulation settings.</param>
/// <returns>Option price</returns>
public static double HestonLookbackOptionPriceMC(IHestonModelParameters parameters, IOption maturity, IMonteCarloSettings monteCarloSimulationSettings)
{
try
{
// Typecast maturity
Option tempOption = (Option)maturity;
// Create Monte Carlo Lookback option object
LookbackOptionMC lookbackOptionMC =
new LookbackOptionMC((HestonModelParameters)parameters,
(MonteCarloSettings)monteCarloSimulationSettings, maturity.Maturity);
return(lookbackOptionMC.Price(Environment.ProcessorCount));
}
catch (Exception ex)
{
throw ex;
}
}