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dividendoption.cpp
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dividendoption.cpp
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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2004, 2005, 2007 StatPro Italia srl
This file is part of QuantLib, a free-software/open-source library
for financial quantitative analysts and developers - http://quantlib.org/
QuantLib is free software: you can redistribute it and/or modify it
under the terms of the QuantLib license. You should have received a
copy of the license along with this program; if not, please email
<[email protected]>. The license is also available online at
<http://quantlib.org/license.shtml>.
This program is distributed in the hope that it will be useful, but WITHOUT
ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS
FOR A PARTICULAR PURPOSE. See the license for more details.
*/
// TODO: Figure out why tests for options with both continuous and discrete
// dividends fail.
// TODO: Make the known value test work. It is slightly off from the
// answer in Hull probably due to date conventions.
#include "dividendoption.hpp"
#include "utilities.hpp"
#include <ql/time/daycounters/actual360.hpp>
#include <ql/instruments/dividendvanillaoption.hpp>
#include <ql/instruments/vanillaoption.hpp>
#include <ql/pricingengines/vanilla/fddividendeuropeanengine.hpp>
#include <ql/pricingengines/vanilla/fddividendamericanengine.hpp>
#include <ql/pricingengines/vanilla/fddividendshoutengine.hpp>
#include <ql/pricingengines/vanilla/analyticdividendeuropeanengine.hpp>
#include <ql/pricingengines/vanilla/analyticeuropeanengine.hpp>
#include <ql/termstructures/yield/flatforward.hpp>
#include <ql/termstructures/volatility/equityfx/blackconstantvol.hpp>
#include <ql/utilities/dataformatters.hpp>
#include <map>
#include <iostream>
using namespace QuantLib;
using namespace boost::unit_test_framework;
#define REPORT_FAILURE(greekName, payoff, exercise, s, q, r, today, \
v, expected, calculated, error, tolerance) \
BOOST_ERROR(exerciseTypeToString(exercise) << " " \
<< payoff->optionType() << " option with " \
<< payoffTypeToString(payoff) << " payoff:\n" \
<< " spot value: " << s << "\n" \
<< " strike: " << payoff->strike() << "\n" \
<< " dividend yield: " << io::rate(q) << "\n" \
<< " risk-free rate: " << io::rate(r) << "\n" \
<< " reference date: " << today << "\n" \
<< " maturity: " << exercise->lastDate() << "\n" \
<< " volatility: " << io::volatility(v) << "\n\n" \
<< " expected " << greekName << ": " << expected << "\n" \
<< " calculated " << greekName << ": " << calculated << "\n"\
<< " error: " << error << "\n" \
<< " tolerance: " << tolerance);
// tests
void DividendOptionTest::testEuropeanValues() {
BOOST_TEST_MESSAGE(
"Testing dividend European option values with no dividends...");
SavedSettings backup;
Real tolerance = 1.0e-5;
Option::Type types[] = { Option::Call, Option::Put };
Real strikes[] = { 50.0, 99.5, 100.0, 100.5, 150.0 };
Real underlyings[] = { 100.0 };
Rate qRates[] = { 0.00, 0.10, 0.30 };
Rate rRates[] = { 0.01, 0.05, 0.15 };
Integer lengths[] = { 1, 2 };
Volatility vols[] = { 0.05, 0.20, 0.70 };
DayCounter dc = Actual360();
Date today = Date::todaysDate();
Settings::instance().evaluationDate() = today;
ext::shared_ptr<SimpleQuote> spot(new SimpleQuote(0.0));
ext::shared_ptr<SimpleQuote> qRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> qTS(flatRate(qRate, dc));
ext::shared_ptr<SimpleQuote> rRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> rTS(flatRate(rRate, dc));
ext::shared_ptr<SimpleQuote> vol(new SimpleQuote(0.0));
Handle<BlackVolTermStructure> volTS(flatVol(vol, dc));
for (Size i=0; i<LENGTH(types); i++) {
for (Size j=0; j<LENGTH(strikes); j++) {
for (Size k=0; k<LENGTH(lengths); k++) {
Date exDate = today + lengths[k]*Years;
ext::shared_ptr<Exercise> exercise(new EuropeanExercise(exDate));
std::vector<Date> dividendDates;
std::vector<Real> dividends;
for (Date d = today + 3*Months;
d < exercise->lastDate();
d += 6*Months) {
dividendDates.push_back(d);
dividends.push_back(0.0);
}
ext::shared_ptr<StrikedTypePayoff> payoff(
new PlainVanillaPayoff(types[i], strikes[j]));
ext::shared_ptr<BlackScholesMertonProcess> stochProcess(
new BlackScholesMertonProcess(Handle<Quote>(spot),
qTS, rTS, volTS));
ext::shared_ptr<PricingEngine> ref_engine(
new AnalyticEuropeanEngine(stochProcess));
ext::shared_ptr<PricingEngine> engine(
new AnalyticDividendEuropeanEngine(stochProcess));
DividendVanillaOption option(payoff, exercise,
dividendDates, dividends);
option.setPricingEngine(engine);
VanillaOption ref_option(payoff, exercise);
ref_option.setPricingEngine(ref_engine);
for (Size l=0; l<LENGTH(underlyings); l++) {
for (Size m=0; m<LENGTH(qRates); m++) {
for (Size n=0; n<LENGTH(rRates); n++) {
for (Size p=0; p<LENGTH(vols); p++) {
Real u = underlyings[l];
Rate q = qRates[m],
r = rRates[n];
Volatility v = vols[p];
spot->setValue(u);
qRate->setValue(q);
rRate->setValue(r);
vol->setValue(v);
Real calculated = option.NPV();
Real expected = ref_option.NPV();
Real error = std::fabs(calculated-expected);
if (error > tolerance) {
REPORT_FAILURE("value start limit",
payoff, exercise,
u, q, r, today, v,
expected, calculated,
error, tolerance);
}
}
}
}
}
}
}
}
}
// Reference pg. 253 - Hull - Options, Futures, and Other Derivatives 5th ed
// Exercise 12.8
void DividendOptionTest::testEuropeanKnownValue() {
BOOST_TEST_MESSAGE(
"Testing dividend European option values with known value...");
SavedSettings backup;
Real tolerance = 1.0e-2;
Real expected = 3.67;
DayCounter dc = Actual360();
Date today = Date::todaysDate();
Settings::instance().evaluationDate() = today;
ext::shared_ptr<SimpleQuote> spot(new SimpleQuote(0.0));
ext::shared_ptr<SimpleQuote> qRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> qTS(flatRate(qRate, dc));
ext::shared_ptr<SimpleQuote> rRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> rTS(flatRate(rRate, dc));
ext::shared_ptr<SimpleQuote> vol(new SimpleQuote(0.0));
Handle<BlackVolTermStructure> volTS(flatVol(vol, dc));
Date exDate = today + 6*Months;
ext::shared_ptr<Exercise> exercise(new EuropeanExercise(exDate));
std::vector<Date> dividendDates;
std::vector<Real> dividends;
dividendDates.push_back(today + 2*Months);
dividends.push_back(0.50);
dividendDates.push_back(today + 5*Months);
dividends.push_back(0.50);
ext::shared_ptr<StrikedTypePayoff> payoff(
new PlainVanillaPayoff(Option::Call, 40.0));
ext::shared_ptr<BlackScholesMertonProcess> stochProcess(
new BlackScholesMertonProcess(Handle<Quote>(spot),
qTS, rTS, volTS));
ext::shared_ptr<PricingEngine> engine(
new AnalyticDividendEuropeanEngine(stochProcess));
DividendVanillaOption option(payoff, exercise,
dividendDates, dividends);
option.setPricingEngine(engine);
Real u = 40.0;
Rate q = 0.0, r = 0.09;
Volatility v = 0.30;
spot->setValue(u);
qRate->setValue(q);
rRate->setValue(r);
vol->setValue(v);
Real calculated = option.NPV();
Real error = std::fabs(calculated-expected);
if (error > tolerance) {
REPORT_FAILURE("value start limit",
payoff, exercise,
u, q, r, today, v,
expected, calculated,
error, tolerance);
}
}
void DividendOptionTest::testEuropeanStartLimit() {
BOOST_TEST_MESSAGE(
"Testing dividend European option with a dividend on today's date...");
SavedSettings backup;
Real tolerance = 1.0e-5;
Real dividendValue = 10.0;
Option::Type types[] = { Option::Call, Option::Put };
Real strikes[] = { 50.0, 99.5, 100.0, 100.5, 150.0 };
Real underlyings[] = { 100.0 };
Rate qRates[] = { 0.00, 0.10, 0.30 };
Rate rRates[] = { 0.01, 0.05, 0.15 };
Integer lengths[] = { 1, 2 };
Volatility vols[] = { 0.05, 0.20, 0.70 };
DayCounter dc = Actual360();
Date today = Date::todaysDate();
Settings::instance().evaluationDate() = today;
ext::shared_ptr<SimpleQuote> spot(new SimpleQuote(0.0));
ext::shared_ptr<SimpleQuote> qRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> qTS(flatRate(qRate, dc));
ext::shared_ptr<SimpleQuote> rRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> rTS(flatRate(rRate, dc));
ext::shared_ptr<SimpleQuote> vol(new SimpleQuote(0.0));
Handle<BlackVolTermStructure> volTS(flatVol(vol, dc));
for (Size i=0; i<LENGTH(types); i++) {
for (Size j=0; j<LENGTH(strikes); j++) {
for (Size k=0; k<LENGTH(lengths); k++) {
Date exDate = today + lengths[k]*Years;
ext::shared_ptr<Exercise> exercise(new EuropeanExercise(exDate));
std::vector<Date> dividendDates;
std::vector<Real> dividends;
dividendDates.push_back(today);
dividends.push_back(dividendValue);
ext::shared_ptr<StrikedTypePayoff> payoff(
new PlainVanillaPayoff(types[i], strikes[j]));
ext::shared_ptr<BlackScholesMertonProcess> stochProcess(
new BlackScholesMertonProcess(Handle<Quote>(spot),
qTS, rTS, volTS));
ext::shared_ptr<PricingEngine> engine(
new AnalyticDividendEuropeanEngine(stochProcess));
ext::shared_ptr<PricingEngine> ref_engine(
new AnalyticEuropeanEngine(stochProcess));
DividendVanillaOption option(payoff, exercise,
dividendDates, dividends);
option.setPricingEngine(engine);
VanillaOption ref_option(payoff, exercise);
ref_option.setPricingEngine(ref_engine);
for (Size l=0; l<LENGTH(underlyings); l++) {
for (Size m=0; m<LENGTH(qRates); m++) {
for (Size n=0; n<LENGTH(rRates); n++) {
for (Size p=0; p<LENGTH(vols); p++) {
Real u = underlyings[l];
Rate q = qRates[m],
r = rRates[n];
Volatility v = vols[p];
spot->setValue(u);
qRate->setValue(q);
rRate->setValue(r);
vol->setValue(v);
Real calculated = option.NPV();
spot->setValue(u-dividendValue);
Real expected = ref_option.NPV();
Real error = std::fabs(calculated-expected);
if (error > tolerance) {
REPORT_FAILURE("value", payoff, exercise,
u, q, r, today, v,
expected, calculated,
error, tolerance);
}
}
}
}
}
}
}
}
}
void DividendOptionTest::testEuropeanEndLimit() {
BOOST_TEST_MESSAGE(
"Testing dividend European option values with end limits...");
SavedSettings backup;
Real tolerance = 1.0e-5;
Real dividendValue = 10.0;
Option::Type types[] = { Option::Call, Option::Put };
Real strikes[] = { 50.0, 99.5, 100.0, 100.5, 150.0 };
Real underlyings[] = { 100.0 };
Rate qRates[] = { 0.00, 0.10, 0.30 };
Rate rRates[] = { 0.01, 0.05, 0.15 };
Integer lengths[] = { 1, 2 };
Volatility vols[] = { 0.05, 0.20, 0.70 };
DayCounter dc = Actual360();
Date today = Date::todaysDate();
Settings::instance().evaluationDate() = today;
ext::shared_ptr<SimpleQuote> spot(new SimpleQuote(0.0));
ext::shared_ptr<SimpleQuote> qRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> qTS(flatRate(qRate, dc));
ext::shared_ptr<SimpleQuote> rRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> rTS(flatRate(rRate, dc));
ext::shared_ptr<SimpleQuote> vol(new SimpleQuote(0.0));
Handle<BlackVolTermStructure> volTS(flatVol(vol, dc));
for (Size i=0; i<LENGTH(types); i++) {
for (Size j=0; j<LENGTH(strikes); j++) {
for (Size k=0; k<LENGTH(lengths); k++) {
Date exDate = today + lengths[k]*Years;
ext::shared_ptr<Exercise> exercise(new EuropeanExercise(exDate));
std::vector<Date> dividendDates;
std::vector<Real> dividends;
dividendDates.push_back(exercise->lastDate());
dividends.push_back(dividendValue);
ext::shared_ptr<StrikedTypePayoff> payoff(
new PlainVanillaPayoff(types[i], strikes[j]));
ext::shared_ptr<StrikedTypePayoff> refPayoff(
new PlainVanillaPayoff(types[i],
strikes[j] +
dividendValue));
ext::shared_ptr<BlackScholesMertonProcess> stochProcess(
new BlackScholesMertonProcess(Handle<Quote>(spot),
qTS, rTS, volTS));
ext::shared_ptr<PricingEngine> engine(
new AnalyticDividendEuropeanEngine(stochProcess));
ext::shared_ptr<PricingEngine> ref_engine(
new AnalyticEuropeanEngine(stochProcess));
DividendVanillaOption option(payoff, exercise,
dividendDates, dividends);
option.setPricingEngine(engine);
VanillaOption ref_option(refPayoff, exercise);
ref_option.setPricingEngine(ref_engine);
for (Size l=0; l<LENGTH(underlyings); l++) {
for (Size m=0; m<LENGTH(qRates); m++) {
for (Size n=0; n<LENGTH(rRates); n++) {
for (Size p=0; p<LENGTH(vols); p++) {
Real u = underlyings[l];
Rate q = qRates[m],
r = rRates[n];
Volatility v = vols[p];
spot->setValue(u);
qRate->setValue(q);
rRate->setValue(r);
vol->setValue(v);
Real calculated = option.NPV();
Real expected = ref_option.NPV();
Real error = std::fabs(calculated-expected);
if (error > tolerance) {
REPORT_FAILURE("value", payoff, exercise,
u, q, r, today, v,
expected, calculated,
error, tolerance);
}
}
}
}
}
}
}
}
}
void DividendOptionTest::testEuropeanGreeks() {
BOOST_TEST_MESSAGE("Testing dividend European option greeks...");
SavedSettings backup;
std::map<std::string,Real> calculated, expected, tolerance;
tolerance["delta"] = 1.0e-5;
tolerance["gamma"] = 1.0e-5;
tolerance["theta"] = 1.0e-5;
tolerance["rho"] = 1.0e-5;
tolerance["vega"] = 1.0e-5;
Option::Type types[] = { Option::Call, Option::Put };
Real strikes[] = { 50.0, 99.5, 100.0, 100.5, 150.0 };
Real underlyings[] = { 100.0 };
Rate qRates[] = { 0.00, 0.10, 0.30 };
Rate rRates[] = { 0.01, 0.05, 0.15 };
Integer lengths[] = { 1, 2 };
Volatility vols[] = { 0.05, 0.20, 0.40 };
DayCounter dc = Actual360();
Date today = Date::todaysDate();
Settings::instance().evaluationDate() = today;
ext::shared_ptr<SimpleQuote> spot(new SimpleQuote(0.0));
ext::shared_ptr<SimpleQuote> qRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> qTS(flatRate(qRate, dc));
ext::shared_ptr<SimpleQuote> rRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> rTS(flatRate(rRate, dc));
ext::shared_ptr<SimpleQuote> vol(new SimpleQuote(0.0));
Handle<BlackVolTermStructure> volTS(flatVol(vol, dc));
for (Size i=0; i<LENGTH(types); i++) {
for (Size j=0; j<LENGTH(strikes); j++) {
for (Size k=0; k<LENGTH(lengths); k++) {
Date exDate = today + lengths[k]*Years;
ext::shared_ptr<Exercise> exercise(new EuropeanExercise(exDate));
std::vector<Date> dividendDates;
std::vector<Real> dividends;
for (Date d = today + 3*Months;
d < exercise->lastDate();
d += 6*Months) {
dividendDates.push_back(d);
dividends.push_back(5.0);
}
ext::shared_ptr<StrikedTypePayoff> payoff(
new PlainVanillaPayoff(types[i], strikes[j]));
ext::shared_ptr<BlackScholesMertonProcess> stochProcess(
new BlackScholesMertonProcess(Handle<Quote>(spot),
qTS, rTS, volTS));
ext::shared_ptr<PricingEngine> engine(
new AnalyticDividendEuropeanEngine(stochProcess));
DividendVanillaOption option(payoff, exercise,
dividendDates, dividends);
option.setPricingEngine(engine);
for (Size l=0; l<LENGTH(underlyings); l++) {
for (Size m=0; m<LENGTH(qRates); m++) {
for (Size n=0; n<LENGTH(rRates); n++) {
for (Size p=0; p<LENGTH(vols); p++) {
Real u = underlyings[l];
Rate q = qRates[m],
r = rRates[n];
Volatility v = vols[p];
spot->setValue(u);
qRate->setValue(q);
rRate->setValue(r);
vol->setValue(v);
Real value = option.NPV();
calculated["delta"] = option.delta();
calculated["gamma"] = option.gamma();
calculated["theta"] = option.theta();
calculated["rho"] = option.rho();
calculated["vega"] = option.vega();
if (value > spot->value()*1.0e-5) {
// perturb spot and get delta and gamma
Real du = u*1.0e-4;
spot->setValue(u+du);
Real value_p = option.NPV(),
delta_p = option.delta();
spot->setValue(u-du);
Real value_m = option.NPV(),
delta_m = option.delta();
spot->setValue(u);
expected["delta"] = (value_p - value_m)/(2*du);
expected["gamma"] = (delta_p - delta_m)/(2*du);
// perturb risk-free rate and get rho
Spread dr = r*1.0e-4;
rRate->setValue(r+dr);
value_p = option.NPV();
rRate->setValue(r-dr);
value_m = option.NPV();
rRate->setValue(r);
expected["rho"] = (value_p - value_m)/(2*dr);
// perturb volatility and get vega
Spread dv = v*1.0e-4;
vol->setValue(v+dv);
value_p = option.NPV();
vol->setValue(v-dv);
value_m = option.NPV();
vol->setValue(v);
expected["vega"] = (value_p - value_m)/(2*dv);
// perturb date and get theta
Time dT = dc.yearFraction(today-1, today+1);
Settings::instance().evaluationDate() = today-1;
value_m = option.NPV();
Settings::instance().evaluationDate() = today+1;
value_p = option.NPV();
Settings::instance().evaluationDate() = today;
expected["theta"] = (value_p - value_m)/dT;
// compare
std::map<std::string,Real>::iterator it;
for (it = calculated.begin();
it != calculated.end(); ++it) {
std::string greek = it->first;
Real expct = expected [greek],
calcl = calculated[greek],
tol = tolerance [greek];
Real error = relativeError(expct,calcl,u);
if (error>tol) {
REPORT_FAILURE(greek, payoff, exercise,
u, q, r, today, v,
expct, calcl, error, tol);
}
}
}
}
}
}
}
}
}
}
}
void DividendOptionTest::testFdEuropeanValues() {
BOOST_TEST_MESSAGE(
"Testing finite-difference dividend European option values...");
SavedSettings backup;
Real tolerance = 1.0e-2;
Size gridPoints = 300;
Size timeSteps = 40;
Option::Type types[] = { Option::Call, Option::Put };
Real strikes[] = { 50.0, 99.5, 100.0, 100.5, 150.0 };
Real underlyings[] = { 100.0 };
// Rate qRates[] = { 0.00, 0.10, 0.30 };
// Analytic dividend may not be handling q correctly
Rate qRates[] = { 0.00 };
Rate rRates[] = { 0.01, 0.05, 0.15 };
Integer lengths[] = { 1, 2 };
Volatility vols[] = { 0.05, 0.20, 0.40 };
DayCounter dc = Actual360();
Date today = Date::todaysDate();
Settings::instance().evaluationDate() = today;
ext::shared_ptr<SimpleQuote> spot(new SimpleQuote(0.0));
ext::shared_ptr<SimpleQuote> qRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> qTS(flatRate(qRate, dc));
ext::shared_ptr<SimpleQuote> rRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> rTS(flatRate(rRate, dc));
ext::shared_ptr<SimpleQuote> vol(new SimpleQuote(0.0));
Handle<BlackVolTermStructure> volTS(flatVol(vol, dc));
for (Size i=0; i<LENGTH(types); i++) {
for (Size j=0; j<LENGTH(strikes); j++) {
for (Size k=0; k<LENGTH(lengths); k++) {
Date exDate = today + lengths[k]*Years;
ext::shared_ptr<Exercise> exercise(new EuropeanExercise(exDate));
std::vector<Date> dividendDates;
std::vector<Real> dividends;
for (Date d = today + 3*Months;
d < exercise->lastDate();
d += 6*Months) {
dividendDates.push_back(d);
dividends.push_back(5.0);
}
ext::shared_ptr<StrikedTypePayoff> payoff(
new PlainVanillaPayoff(types[i], strikes[j]));
ext::shared_ptr<BlackScholesMertonProcess> stochProcess(
new BlackScholesMertonProcess(Handle<Quote>(spot),
qTS, rTS, volTS));
ext::shared_ptr<PricingEngine> engine(
new FDDividendEuropeanEngine<CrankNicolson>(stochProcess,
timeSteps,
gridPoints));
ext::shared_ptr<PricingEngine> ref_engine(
new AnalyticDividendEuropeanEngine(stochProcess));
DividendVanillaOption option(payoff, exercise,
dividendDates, dividends);
option.setPricingEngine(engine);
DividendVanillaOption ref_option(payoff, exercise,
dividendDates, dividends);
ref_option.setPricingEngine(ref_engine);
for (Size l=0; l<LENGTH(underlyings); l++) {
for (Size m=0; m<LENGTH(qRates); m++) {
for (Size n=0; n<LENGTH(rRates); n++) {
for (Size p=0; p<LENGTH(vols); p++) {
Real u = underlyings[l];
Rate q = qRates[m],
r = rRates[n];
Volatility v = vols[p];
spot->setValue(u);
qRate->setValue(q);
rRate->setValue(r);
vol->setValue(v);
// FLOATING_POINT_EXCEPTION
Real calculated = option.NPV();
if (calculated > spot->value()*1.0e-5) {
Real expected = ref_option.NPV();
Real error = std::fabs(calculated-expected);
if (error > tolerance) {
REPORT_FAILURE("value", payoff, exercise,
u, q, r, today, v,
expected, calculated,
error, tolerance);
}
}
}
}
}
}
}
}
}
}
namespace {
template <class Engine>
void testFdGreeks(const Date& today,
const ext::shared_ptr<Exercise>& exercise) {
std::map<std::string,Real> calculated, expected, tolerance;
tolerance["delta"] = 5.0e-3;
tolerance["gamma"] = 7.0e-3;
// tolerance["theta"] = 1.0e-2;
Option::Type types[] = { Option::Call, Option::Put };
Real strikes[] = { 50.0, 99.5, 100.0, 100.5, 150.0 };
Real underlyings[] = { 100.0 };
Rate qRates[] = { 0.00, 0.10, 0.20 };
Rate rRates[] = { 0.01, 0.05, 0.15 };
Volatility vols[] = { 0.05, 0.20, 0.50 };
DayCounter dc = Actual360();
ext::shared_ptr<SimpleQuote> spot(new SimpleQuote(0.0));
ext::shared_ptr<SimpleQuote> qRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> qTS(flatRate(qRate, dc));
ext::shared_ptr<SimpleQuote> rRate(new SimpleQuote(0.0));
Handle<YieldTermStructure> rTS(flatRate(rRate, dc));
ext::shared_ptr<SimpleQuote> vol(new SimpleQuote(0.0));
Handle<BlackVolTermStructure> volTS(flatVol(vol, dc));
for (Size i=0; i<LENGTH(types); i++) {
for (Size j=0; j<LENGTH(strikes); j++) {
std::vector<Date> dividendDates;
std::vector<Real> dividends;
for (Date d = today + 3*Months;
d < exercise->lastDate();
d += 6*Months) {
dividendDates.push_back(d);
dividends.push_back(5.0);
}
ext::shared_ptr<StrikedTypePayoff> payoff(
new PlainVanillaPayoff(types[i], strikes[j]));
ext::shared_ptr<BlackScholesMertonProcess> stochProcess(
new BlackScholesMertonProcess(Handle<Quote>(spot),
qTS, rTS, volTS));
ext::shared_ptr<PricingEngine> engine(
new Engine(stochProcess));
DividendVanillaOption option(payoff, exercise,
dividendDates, dividends);
option.setPricingEngine(engine);
for (Size l=0; l<LENGTH(underlyings); l++) {
for (Size m=0; m<LENGTH(qRates); m++) {
for (Size n=0; n<LENGTH(rRates); n++) {
for (Size p=0; p<LENGTH(vols); p++) {
Real u = underlyings[l];
Rate q = qRates[m],
r = rRates[n];
Volatility v = vols[p];
spot->setValue(u);
qRate->setValue(q);
rRate->setValue(r);
vol->setValue(v);
// FLOATING_POINT_EXCEPTION
Real value = option.NPV();
calculated["delta"] = option.delta();
calculated["gamma"] = option.gamma();
// calculated["theta"] = option.theta();
if (value > spot->value()*1.0e-5) {
// perturb spot and get delta and gamma
Real du = u*1.0e-4;
spot->setValue(u+du);
Real value_p = option.NPV(),
delta_p = option.delta();
spot->setValue(u-du);
Real value_m = option.NPV(),
delta_m = option.delta();
spot->setValue(u);
expected["delta"] = (value_p - value_m)/(2*du);
expected["gamma"] = (delta_p - delta_m)/(2*du);
// perturb date and get theta
/*
Time dT = dc.yearFraction(today-1, today+1);
Settings::instance().evaluationDate() = today-1;
value_m = option.NPV();
Settings::instance().evaluationDate() = today+1;
value_p = option.NPV();
Settings::instance().evaluationDate() = today;
expected["theta"] = (value_p - value_m)/dT;
*/
// compare
std::map<std::string,Real>::iterator it;
for (it = calculated.begin();
it != calculated.end(); ++it) {
std::string greek = it->first;
Real expct = expected [greek],
calcl = calculated[greek],
tol = tolerance [greek];
Real error = relativeError(expct,calcl,u);
if (error>tol) {
REPORT_FAILURE(greek, payoff, exercise,
u, q, r, today, v,
expct, calcl, error, tol);
}
}
}
}
}
}
}
}
}
}
}
void DividendOptionTest::testFdEuropeanGreeks() {
BOOST_TEST_MESSAGE(
"Testing finite-differences dividend European option greeks...");
SavedSettings backup;
Date today = Date::todaysDate();
Settings::instance().evaluationDate() = today;
Integer lengths[] = { 1, 2 };
for (Size i=0; i<LENGTH(lengths); i++) {
Date exDate = today + lengths[i]*Years;
ext::shared_ptr<Exercise> exercise(new EuropeanExercise(exDate));
testFdGreeks<FDDividendEuropeanEngine<CrankNicolson> >(today,exercise);
}
}
void DividendOptionTest::testFdAmericanGreeks() {
BOOST_TEST_MESSAGE(
"Testing finite-differences dividend American option greeks...");
SavedSettings backup;
Date today = Date::todaysDate();
Settings::instance().evaluationDate() = today;
Integer lengths[] = { 1, 2 };
for (Size i=0; i<LENGTH(lengths); i++) {
Date exDate = today + lengths[i]*Years;
ext::shared_ptr<Exercise> exercise(
new AmericanExercise(today,exDate));
testFdGreeks<FDDividendAmericanEngine<CrankNicolson> >(today,exercise);
}
}
namespace {
template <class Engine>
void testFdDegenerate(const Date& today,
const ext::shared_ptr<Exercise>& exercise) {
DayCounter dc = Actual360();
ext::shared_ptr<SimpleQuote> spot(new SimpleQuote(54.625));
Handle<YieldTermStructure> rTS(flatRate(0.052706, dc));
Handle<YieldTermStructure> qTS(flatRate(0.0, dc));
Handle<BlackVolTermStructure> volTS(flatVol(0.282922, dc));
ext::shared_ptr<BlackScholesMertonProcess> process(
new BlackScholesMertonProcess(Handle<Quote>(spot),
qTS, rTS, volTS));
Size timeSteps = 300;
Size gridPoints = 300;
ext::shared_ptr<PricingEngine> engine(
new Engine(process,timeSteps,gridPoints));
ext::shared_ptr<StrikedTypePayoff> payoff(
new PlainVanillaPayoff(Option::Call, 55.0));
Real tolerance = 3.0e-3;
std::vector<Rate> dividends;
std::vector<Date> dividendDates;
DividendVanillaOption option1(payoff, exercise,
dividendDates, dividends);
option1.setPricingEngine(engine);
// FLOATING_POINT_EXCEPTION
Real refValue = option1.NPV();
for (Size i=0; i<=6; i++) {
dividends.push_back(0.0);
dividendDates.push_back(today+i);
DividendVanillaOption option(payoff, exercise,
dividendDates, dividends);
option.setPricingEngine(engine);
Real value = option.NPV();
if (std::fabs(refValue-value) > tolerance)
BOOST_FAIL("NPV changed by null dividend :\n"
<< " previous value: " << value << "\n"
<< " current value: " << refValue << "\n"
<< " change: " << value-refValue);
}
}
}
void DividendOptionTest::testFdEuropeanDegenerate() {
BOOST_TEST_MESSAGE(
"Testing degenerate finite-differences dividend European option...");
SavedSettings backup;
Date today = Date(27,February,2005);
Settings::instance().evaluationDate() = today;
Date exDate(13,April,2005);
ext::shared_ptr<Exercise> exercise(new EuropeanExercise(exDate));
testFdDegenerate<FDDividendEuropeanEngine<CrankNicolson> >(today,exercise);
}
void DividendOptionTest::testFdAmericanDegenerate() {
BOOST_TEST_MESSAGE(
"Testing degenerate finite-differences dividend American option...");
SavedSettings backup;
Date today = Date(27,February,2005);
Settings::instance().evaluationDate() = today;
Date exDate(13,April,2005);
ext::shared_ptr<Exercise> exercise(new AmericanExercise(today,exDate));
testFdDegenerate<FDDividendAmericanEngine<CrankNicolson> >(today,exercise);
}
test_suite* DividendOptionTest::suite() {
test_suite* suite = BOOST_TEST_SUITE("Dividend European option tests");
suite->add(QUANTLIB_TEST_CASE(&DividendOptionTest::testEuropeanValues));
// Doesn't quite work. Need to deal with date conventions
// suite->add(QUANTLIB_TEST_CASE(&DividendOptionTest::testEuropeanKnownValue));
suite->add(QUANTLIB_TEST_CASE(&DividendOptionTest::testEuropeanStartLimit));
// Doesn't quite work. Need to use discounted values
// suite->add(QUANTLIB_TEST_CASE(&DividendOptionTest::testEuropeanEndLimit));
suite->add(QUANTLIB_TEST_CASE(&DividendOptionTest::testEuropeanGreeks));
// FLOATING_POINT_EXCEPTION
suite->add(QUANTLIB_TEST_CASE(&DividendOptionTest::testFdEuropeanValues));
// FLOATING_POINT_EXCEPTION
suite->add(QUANTLIB_TEST_CASE(&DividendOptionTest::testFdEuropeanGreeks));
// FLOATING_POINT_EXCEPTION
suite->add(QUANTLIB_TEST_CASE(&DividendOptionTest::testFdAmericanGreeks));
// FLOATING_POINT_EXCEPTION
suite->add(QUANTLIB_TEST_CASE(
&DividendOptionTest::testFdEuropeanDegenerate));
// FLOATING_POINT_EXCEPTION
suite->add(QUANTLIB_TEST_CASE(
&DividendOptionTest::testFdAmericanDegenerate));
return suite;
}