public void Task_2_2_3()
{
// Variance Process Values
double Kappa = 1.5768;
double Theta = 0.0398;
double Sigma = 0.5751;
double V0 = 0.0175;
double Rho = -0.5711;
// Heston Model Params
double InitialStockPrice = 100;
double RiskFreeRate = 0.025;
// Option Params
double StrikePrice = 100;
PayoffType Type = PayoffType.Call;
double Maturity = 3;
VarianceProcessParameters varParams =
new VarianceProcessParameters(Kappa, Theta, Sigma, V0, Rho);
HestonModelParameters hestonModel =
new HestonModelParameters(InitialStockPrice, RiskFreeRate, varParams);
EuropeanOption euOption =
new EuropeanOption(StrikePrice, Type, Maturity);
EuropeanOptionFormula euFormula =
new EuropeanOptionFormula(hestonModel, euOption);
Assert.AreEqual(15.4793, euFormula.Price(), 1e-4);
}
/// <summary>
/// Price a European option in the Heston model using the Heston formula. This should be accurate to 5 decimal places
/// </summary>
/// <param name="parameters">Object implementing IHestonModelParameters interface, containing model parameters.</param>
/// <param name="europeanOption">Object implementing IEuropeanOption interface, containing the option parameters.</param>
/// <returns>Option price</returns>
public static double HestonEuropeanOptionPrice(IHestonModelParameters parameters, IEuropeanOption europeanOption)
{
try
{
// Create European Option Formula object
EuropeanOptionFormula euFormula = new EuropeanOptionFormula((HestonModelParameters)parameters, (EuropeanOption)europeanOption);
return(euFormula.Price());
}
catch (Exception e)
{
throw e;
}
}
public static void Task6()
{
Console.WriteLine("********Task 6*********");
// Variance Process Values
double Kappa = 1.5768;
double Theta = 0.398;
double Sigma = 0.5751;
double V0 = 0.0175;
double Rho = -0.5711;
// Heston Model Params
double InitialStockPrice = 100;
double RiskFreeRate = 0.025;
// Callibration Settings
double accuracy = 1.0e-3;
int maxIter = 1000;
VarianceProcessParameters varParams =
new VarianceProcessParameters(Kappa, Theta, Sigma, V0, Rho);
HestonModelParameters hestonModel =
new HestonModelParameters(InitialStockPrice, RiskFreeRate, varParams);
HestonModelParameters guess =
new HestonModelParameters(InitialStockPrice, RiskFreeRate,
new VarianceProcessParameters(1.55, 0.88, 1.5999, 0.4, -0.55));
CalibrationSettings calibrationSettings = new CalibrationSettings(accuracy, maxIter);
// Market Data
LinkedList <IOptionMarketData <IEuropeanOption> > observedOptions =
new LinkedList <IOptionMarketData <IEuropeanOption> >();
EuropeanOption eu1 = new EuropeanOption(80, PayoffType.Call, 1);
EuropeanOptionFormula eu1Form = new EuropeanOptionFormula(hestonModel, eu1);
OptionMarketData <IEuropeanOption> marketData1 =
new OptionMarketData <IEuropeanOption>(eu1, eu1Form.Price());
observedOptions.AddLast(marketData1);
EuropeanOption eu2 = new EuropeanOption(90, PayoffType.Call, 1);
EuropeanOptionFormula eu2Form = new EuropeanOptionFormula(hestonModel, eu2);
OptionMarketData <IEuropeanOption> marketData2 =
new OptionMarketData <IEuropeanOption>(eu2, eu2Form.Price());
observedOptions.AddLast(marketData2);
EuropeanOption eu3 = new EuropeanOption(80, PayoffType.Call, 2);
EuropeanOptionFormula eu3Form = new EuropeanOptionFormula(hestonModel, eu3);
OptionMarketData <IEuropeanOption> marketData3 =
new OptionMarketData <IEuropeanOption>(eu3, eu3Form.Price());
observedOptions.AddLast(marketData3);
EuropeanOption eu4 = new EuropeanOption(100, PayoffType.Call, 2);
EuropeanOptionFormula eu4Form = new EuropeanOptionFormula(hestonModel, eu4);
OptionMarketData <IEuropeanOption> marketData4 =
new OptionMarketData <IEuropeanOption>(eu4, eu4Form.Price());
observedOptions.AddLast(marketData4);
EuropeanOption eu5 = new EuropeanOption(100, PayoffType.Call, 1.5);
EuropeanOptionFormula eu5Form = new EuropeanOptionFormula(hestonModel, eu5);
OptionMarketData <IEuropeanOption> marketData5 =
new OptionMarketData <IEuropeanOption>(eu5, eu5Form.Price());
observedOptions.AddLast(marketData5);
HestonCalibrationResult result;
result = (HestonCalibrationResult)
Heston.CalibrateHestonParameters(guess, observedOptions, calibrationSettings);
Console.WriteLine("Calibration outcome: {0} and error: {1}", result.MinimizerStatus, result.PricingError);
}
