//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));
}
}
