public void GetCalibrationStatus(ref CalibrationOutcome calibOutcome, ref double pricingError)
{
calibOutcome = outcome;
Hestonformula m = new Hestonformula(calibratedParams);
pricingError = CalcMeanSquareErrorBetweenModelAndMarket(m);
}
//now we figure out the difference
/// <summary>
/// calculate the mean square error
/// </summary>
/// <param name="m">the array contained the parameters</param>
/// <returns></returns>
public double CalcMeanSquareErrorBetweenModelAndMarket(Hestonformula m)
{
double meanSqErr = 0;
foreach (HMCallOptionMarketData option in marketOptionsList)
{
double optionExercise = option.optionExercise;
double strike = option.strike;
double modelPrice = m.CalculateCallOptionPrice(S, strike, r, optionExercise);
double difference = modelPrice - option.marketMidPrice;
meanSqErr += difference * difference;
}
return(meanSqErr);
}
//now we figure out the difference
/// <summary>
/// calculate the mean square error
/// </summary>
/// <param name="m">the array contained the parameters</param>
/// <returns>the mean square error between Model and Market</returns>
public double CalcMeanSquareErrorBetweenModelAndMarket(Hestonformula m)
{
double meanSqErr = 0;
foreach (HMCallOptionMarketData option in marketOptionsList)
{
calibratedParams[0] = nv;
calibratedParams[1] = k;
calibratedParams[2] = theta;
calibratedParams[3] = rho;
calibratedParams[4] = sigma;
double optionExercise = option.optionExercise;
double strike = option.strike;
double modelPrice = m.CalculateCallOptionPrice(S, strike, r, optionExercise);
double difference = modelPrice - option.marketMidPrice;
meanSqErr += difference * difference;
}
return(meanSqErr);
}
/// <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)
{
Hestonformula r1 = new Hestonformula(parameters.VarianceParameters.V0,
parameters.VarianceParameters.Kappa,
parameters.VarianceParameters.Theta,
parameters.VarianceParameters.Rho,
parameters.VarianceParameters.Sigma);
if (europeanOption.Type == PayoffType.Call)
{
return(Math.Round(r1.CalculateCallOptionPrice(parameters.InitialStockPrice,
europeanOption.StrikePrice,
parameters.RiskFreeRate,
europeanOption.Maturity), 5));
}
else
{
return(Math.Round(r1.CalculatePutOptionPrice(parameters.InitialStockPrice,
europeanOption.StrikePrice,
parameters.RiskFreeRate,
europeanOption.Maturity), 5));
}
}
public void SetGuessParameters(double nv, double k, double theta, double rho, double sigma)
{
Hestonformula m = new Hestonformula(nv, k, theta, rho, sigma);
calibratedParams = m.ConvertHestonModelCalibrationParamsToArray();
}
public Hestonformula GetCalibratedModel()
{
Hestonformula m = new Hestonformula(calibratedParams);
return(m);
}
// Used by Alglib minimisation algorithm
public void CalibrationObjectiveFunction(double[] paramsArray, ref double func, object obj)
{
Hestonformula m = new Hestonformula(paramsArray);
func = CalcMeanSquareErrorBetweenModelAndMarket(m);
}
static void Main(string[] args)
{
double r = 0.10;
double theta = 0.06;
double k = 2.00;
double sigma = 0.40;
double rho = 0.5;
double nv = 0.04;
/*double r = 0.025;
* double theta = 0.0398;
* double k = 1.5768;
* double sigma = 0.5751;
* double rho = -0.5711;
* double nv = 0.0175;*/
double S = 100;
double T1 = 1.0;
double T2 = 2.0;
double T3 = 3.0;
double T4 = 4.0;
double T5 = 15.0;
double K = 100.0;
double C1, C2, C3, C4, C5, C6, C7, C8, C9, C10;
double[] parameters = new double[5];
parameters[0] = nv;
parameters[1] = k;
parameters[2] = theta;
parameters[3] = rho;
parameters[4] = sigma;
/*Hestonformula r1 = new Hestonformula(parameters);
* Console.WriteLine("These are from Heston formula call option:");
* C1 = r1.CalculateCallOptionPrice(S, K, r, T1);
* Console.WriteLine(C1);
* C2 = r1.CalculateCallOptionPrice(S, K, r, T2);
* Console.WriteLine(C2);
* C3 = r1.CalculateCallOptionPrice(S, K, r, T3);
* Console.WriteLine(C3);
* C4 = r1.CalculateCallOptionPrice(S, K, r, T4);
* Console.WriteLine(C4);
* C5 = r1.CalculateCallOptionPrice(S, K, r, T5);
* Console.WriteLine(C5);
* Console.WriteLine("These are from Heston formula put option:");
* C6 = r1.CalculatePutOptionPrice(S, K, r, T1);
* Console.WriteLine(C6);
* C7 = r1.CalculatePutOptionPrice(S, K, r, T2);
* Console.WriteLine(C7);
* C8 = r1.CalculatePutOptionPrice(S, K, r, T3);
* Console.WriteLine(C8);
* C9 = r1.CalculatePutOptionPrice(S, K, r, T4);
* Console.WriteLine(C9);
* C10 = r1.CalculatePutOptionPrice(S, K, r, T5);
* Console.WriteLine(C10);*/
int n = 100000;
int N = 365;
double tau1 = T1 / N;
double tau2 = T2 / N;
double tau3 = T3 / N;
double tau4 = T4 / N;
double tau5 = T5 / N;
double A1, A2, A3, A4, A5, A6, A7, A8, A9, A10;
/*HestonMC p1 = new HestonMC();
* Console.WriteLine("These are from Heston European call option MC:");
* A1 = p1.CalculateEuropeanCallOptionPrice(S, K, r, T1, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(A1);
* A2 = p1.CalculateEuropeanCallOptionPrice(S, K, r, T2, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(A2);
* A3 = p1.CalculateEuropeanCallOptionPrice(S, K, r, T3, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(A3);
* A4 = p1.CalculateEuropeanCallOptionPrice(S, K, r, T4, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(A4);
* A5 = p1.CalculateEuropeanCallOptionPrice(S, K, r, T5, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(A5);
* Console.WriteLine("These are from Heston European put option MC:");
* A6 = p1.CalculatePutOptionPrice(S, K, r, T1, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(A6);
* A7 = p1.CalculatePutOptionPrice(S, K, r, T2, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(A7);
* A8 = p1.CalculatePutOptionPrice(S, K, r, T3, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(A8);
* A9 = p1.CalculatePutOptionPrice(S, K, r, T4, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(A9);
* A10 = p1.CalculatePutOptionPrice(S, K, r, T5, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(A10);*/
double t1 = 1.0;
double t2 = 3.0;
double t3 = 5.0;
double t4 = 7.0;
double t5 = 9.0;
double K1, K2, K3, K4, K5;
/*HestonLookbackoption w1 = new HestonLookbackoption();
* Console.WriteLine("These are from Look back option MC:");
* K1 = w1.CalculateLookbackCallOptionPrice(S, r, t1, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(K1);
* K2 = w1.CalculateLookbackCallOptionPrice(S, r, t2, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(K2);
* K3 = w1.CalculateLookbackCallOptionPrice(S, r, t3, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(K3);
* K4 = w1.CalculateLookbackCallOptionPrice(S, r, t4, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(K4);
* K5 = w1.CalculateLookbackCallOptionPrice(S, r, t5, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(K5);*/
/*double[] T11 = { 0.75, 1.00 };
* double[] T22 = { 0.25, 0.50, 0.75, 1.00, 1.25, 1.50, 1.75 };
* double[] T33 = { 1.00, 2.00, 3.00 };*/
/*IEnumerable<double> T11 = new double[] { 0.75, 1.00 };
* IEnumerable<double> T22 = new double[] { 0.25, 0.50, 0.75, 1.00, 1.25, 1.50, 1.75 };
* IEnumerable<double> T33 = new double[] { 1.00, 2.00, 3.00 };
* double O1, O2, O3, O4, O5, O6;
* HestonAsianoption v1 = new HestonAsianoption();
* Console.WriteLine("These are from Asian call option MC:");
* O1 = v1.CalculateAsianCallOptionPrice(S, K, r, T11, T1, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(O1);
* O2 = v1.CalculateAsianCallOptionPrice(S, K, r, T22, T2, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(O2);
* O3 = v1.CalculateAsianCallOptionPrice(S, K, r, T33, T3, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(O3);*/
/*Console.WriteLine("These are from Asian put option MC:");
* O4 = v1.CalculateAsianPutOptionPrice(S, K, r, T11, T1, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(O4);
* O5 = v1.CalculateAsianPutOptionPrice(S, K, r, T22, T2, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(O5);
* O6 = v1.CalculateAsianPutOptionPrice(S, K, r, T33, T3, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(O6);*/
double r0 = 0.025;
double S0 = 100;
double theta1 = 0.0398;
double k1 = 1.5768;
double sigma1 = 0.5751;
double rho1 = -0.5711;
double nv1 = 0.0175;
Hestonformula model = new Hestonformula(nv1, k1, theta1, rho1, sigma1);
double[] optionExerciseTimes = new double[] { 1, 1, 2, 2, 1.5 };
double[] optionStrikes = new double[] { 80, 90, 80, 100, 100 };
double[] prices = new double[] { 25.72, 18.93, 30.49, 19.36, 16.58 };
HestonCalibrator calibrator = new HestonCalibrator(r0, S0, 1e-3, 1000);
calibrator.SetGuessParameters(nv1, k1, theta1, rho1, sigma1);
for (int i = 0; i < optionExerciseTimes.Length; ++i)
{
calibrator.AddObservedOption(optionExerciseTimes[i], optionStrikes[i], prices[i]);
}
calibrator.Calibrate();
double error = 0;
CalibrationOutcome outcome = CalibrationOutcome.NotStarted;
calibrator.GetCalibrationStatus(ref outcome, ref error);
Console.WriteLine("Calibration outcome: {0} and error: {1}", outcome, error);
/*double U1, U2, U3, U4, U5;
* HestonRainbowoptionprice e1 = new HestonRainbowoptionprice();
* Console.WriteLine("These are from Rainbow option MC:");
* U1 = e1.CalculateRainbowOptionPrice(S, K, r, T1, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(U1);
* U2 = e1.CalculateRainbowOptionPrice(S, K, r, T2, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(U2);
* U3 = e1.CalculateRainbowOptionPrice(S, K, r, T3, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(U3);
* U4 = e1.CalculateRainbowOptionPrice(S, K, r, T4, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(U4);
* U5 = e1.CalculateRainbowOptionPrice(S, K, r, T5, nv, k, theta, rho, sigma, N, n);
* Console.WriteLine(U5);*/
Console.ReadKey();
}
