public static double BinomialTreePricing(AmericanOptionProb prob)
{
double s = prob.SpotPrice;
double k = prob.StrikePrice;
double t = prob.Maturity;
double r = prob.InterestRate;
double sigma = prob.Volatility;
OptionTypeEnum optionType = prob.OptionType;
int n = prob.StepsNum;
double dt = t / n;
double u = Math.Exp(sigma * Math.Sqrt(dt));
double d = Math.Exp(-sigma * Math.Sqrt(dt));
double p = (Math.Exp(r * dt) - d) / (u - d);
double[,] stockTree = new double[n + 1, n + 1];
for (int i = 0; i <= n; i++)
{
for (int j = 0; j <= i; j++)
{
stockTree[i, j] = s * Math.Pow(u, j) * Math.Pow(d, i - j);
}
}
double[,] valueTree = new double[n + 1, n + 1];
for (int j = 0; j <= n; j++)
{
valueTree[n, j] = BinomialTreePayoff(stockTree[n, j], k, optionType);
}
for (int i = n - 1; i >= 0; i--)
{
for (int j = 0; j <= i; j++)
{
valueTree[i, j] = Math.Exp(-r * dt)
* (p * valueTree[i + 1, j + 1] + (1 - p) * valueTree[i + 1, j]);
if (optionType == OptionTypeEnum.Call)
{
valueTree[i, j] = Math.Max(stockTree[i, j] - k, valueTree[i, j]);
}
else
{
valueTree[i, j] = Math.Max(k - stockTree[i, j], valueTree[i, j]);
}
}
}
return(valueTree[0, 0]);
}
private void DoCalculation()
{
IsCalculateEnabled = false;
RaisePropertyChanged("IsCalculateEnabled");
ErrorCode errcode = FirstValidation();
if (errcode != ErrorCode.OK)
{
Result = Utility.getErrorMsg(errcode);
}
else
{
var prob = new AmericanOptionProb(
_spotPrice,
_volatility,
_interestRate,
_maturity,
_strikePrice,
_stepsNum,
_optionType
);
errcode = prob.validate();
if (errcode != ErrorCode.OK)
{
Result = Utility.getErrorMsg(errcode);
}
else
{
Result = Math.Round(prob.calculate(), 4).ToString();
}
}
RaisePropertyChanged("Result");
IsCalculateEnabled = true;
RaisePropertyChanged("IsCalculateEnabled");
}
