public virtual void test_optionPrice()
{
double tol = 1.0e-12;
EuropeanVanillaOptionFunction test = EuropeanVanillaOptionFunction.of(STRIKE, TIME_TO_EXPIRY, PutCall.PUT, NUM);
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);
for (int i = 0; i < expectedSize; ++i)
{
double price = spot * Math.Pow(u, 0.5 * i) * Math.Pow(d, NUM - 0.5 * i);
double expectedPayoff = Math.Max(STRIKE - price, 0d);
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);
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), df * 0.05 * dp, 0.0);
assertTrue(DoubleArrayMath.fuzzyEquals(computedNextValues.toArray(), expectedNextValues.toArray(), tol));
}
public virtual void test_trinomialTree()
{
int nSteps = 135;
LatticeSpecification[] lattices = new LatticeSpecification[]
{
new CoxRossRubinsteinLatticeSpecification(),
new TrigeorgisLatticeSpecification()
};
double tol = 5.0e-3;
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 = EuropeanVanillaOptionFunction.of(strike, TIME, PutCall.ofPut(!isCall), nSteps);
double exact = BlackScholesFormulaRepository.price(SPOT, strike, TIME, vol, interest, interest - dividend, isCall);
foreach (LatticeSpecification lattice in lattices)
{
double computed = TRINOMIAL_TREE.optionPrice(function, lattice, SPOT, vol, interest, dividend);
assertEquals(computed, exact, Math.Max(exact, 1d) * tol);
}
}
}
}
}
}
}
public virtual void test_of()
{
EuropeanVanillaOptionFunction test = EuropeanVanillaOptionFunction.of(STRIKE, TIME_TO_EXPIRY, PutCall.PUT, NUM);
assertEquals(test.Sign, -1d);
assertEquals(test.Strike, STRIKE);
assertEquals(test.TimeToExpiry, TIME_TO_EXPIRY);
assertEquals(test.NumberOfSteps, NUM);
}
//-----------------------------------------------------------------------
public override bool Equals(object obj)
{
if (obj == this)
{
return(true);
}
if (obj != null && obj.GetType() == this.GetType())
{
EuropeanVanillaOptionFunction other = (EuropeanVanillaOptionFunction)obj;
return(JodaBeanUtils.equal(strike, other.strike) && JodaBeanUtils.equal(timeToExpiry, other.timeToExpiry) && JodaBeanUtils.equal(sign, other.sign) && (numberOfSteps == other.numberOfSteps));
}
return(false);
}
/// <summary>
/// Test consistency between price methods, and Greek via finite difference.
/// </summary>
public virtual void test_trinomialTree()
{
int nSteps = 135;
double dt = TIME / nSteps;
LatticeSpecification lattice = new CoxRossRubinsteinLatticeSpecification();
double fdEps = 1.0e-4;
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 = EuropeanVanillaOptionFunction.of(strike, TIME, PutCall.ofPut(!isCall), nSteps);
double[] @params = lattice.getParametersTrinomial(vol, interest - dividend, dt).toArray();
DoubleArray time = DoubleArray.of(nSteps + 1, i => dt * i);
DoubleArray df = DoubleArray.of(nSteps, i => Math.Exp(-interest * dt));
double[][] stateValue = new double[nSteps + 1][];
stateValue[0] = new double[] { SPOT };
IList <DoubleMatrix> prob = new List <DoubleMatrix>();
double[] probs = new double[] { @params[5], @params[4], @params[3] };
for (int i = 0; i < nSteps; ++i)
{
int index = i;
stateValue[i + 1] = DoubleArray.of(2 * i + 3, j => SPOT * Math.Pow(@params[2], index + 1 - j) * Math.Pow(@params[1], j)).toArray();
double[][] probMatrix = new double[2 * i + 1][];
Arrays.fill(probMatrix, probs);
prob.Add(DoubleMatrix.ofUnsafe(probMatrix));
}
RecombiningTrinomialTreeData treeData = RecombiningTrinomialTreeData.of(DoubleMatrix.ofUnsafe(stateValue), prob, df, time);
double priceData = TRINOMIAL_TREE.optionPrice(function, treeData);
double priceParams = TRINOMIAL_TREE.optionPrice(function, lattice, SPOT, vol, interest, dividend);
assertEquals(priceData, priceParams);
ValueDerivatives priceDeriv = TRINOMIAL_TREE.optionPriceAdjoint(function, treeData);
assertEquals(priceDeriv.Value, priceData);
double priceUp = TRINOMIAL_TREE.optionPrice(function, lattice, SPOT + fdEps, vol, interest, dividend);
double priceDw = TRINOMIAL_TREE.optionPrice(function, lattice, SPOT - fdEps, vol, interest, dividend);
double fdDelta = 0.5 * (priceUp - priceDw) / fdEps;
assertEquals(priceDeriv.getDerivative(0), fdDelta, 3.0e-2);
}
}
}
}
}
}
