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AlessandroGnoattoAlessandroGnoatto
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Merge pull request #103 from AlessandroGnoatto/main
EuropeanOption
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‎src/main/java/net/finmath/finitedifference/products/EuropeanOption.java‎

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package net.finmath.finitedifference.products;
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import net.finmath.finitedifference.models.FiniteDifference1DBoundary;
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import net.finmath.finitedifference.models.FiniteDifference1DModel;
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import net.finmath.modelling.products.CallOrPut;
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/**
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* Implements valuation of a European option on a single asset.
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*
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* Given a model for an asset <i>S</i>, the European option with strike <i>K</i>, maturity <i>T</i>
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* pays
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* <br>
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* <i>max((S(T) - K) * CallOrPut , 0)</i> in <i>T</i>
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* <br>
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*
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* The class implements the characteristic function of the call option
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* payoff, i.e., its Fourier transform.
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*
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* @author Christian Fries
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* @author Ralph Rudd
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* @author Alessandro Gnoatto
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* @version 1.0
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*/
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public class EuropeanOption implements FiniteDifference1DProduct, FiniteDifference1DBoundary{
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private final String underlyingName;
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private final double maturity;
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private final double strike;
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private final CallOrPut callOrPutSign;
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/**
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* Construct a product representing an European option on an asset S (where S the asset with index <code>underlyingIndex</code> from the model - single asset case).
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* @param underlyingName Name of the underlying
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* @param maturity The maturity T in the option payoff max(sign * (S(T)-K),0).
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* @param strike The strike K in the option payoff max(sign * (S(T)-K),0).
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* @param callOrPutSign The sign in the payoff.
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*/
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public EuropeanOption(final String underlyingName, final double maturity, final double strike, final double callOrPutSign) {
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super();
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this.underlyingName = underlyingName;
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this.maturity = maturity;
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this.strike = strike;
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if(callOrPutSign == 1.0) {
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this.callOrPutSign = CallOrPut.CALL;
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}else if(callOrPutSign == - 1.0) {
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this.callOrPutSign = CallOrPut.PUT;
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}else {
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throw new IllegalArgumentException("Unknown option type");
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}
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}
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/**
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* Construct a product representing an European option on an asset S (where S the asset with index <code>underlyingIndex</code> from the model - single asset case).
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* @param underlyingName Name of the underlying
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* @param maturity The maturity T in the option payoff max(sign * (S(T)-K),0).
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* @param strike The strike K in the option payoff max(sign * (S(T)-K),0).
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* @param callOrPutSign The sign in the payoff.
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*/
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public EuropeanOption(final String underlyingName, final double maturity, final double strike, final CallOrPut callOrPutSign) {
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super();
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this.underlyingName = underlyingName;
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this.maturity = maturity;
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this.strike = strike;
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this.callOrPutSign = callOrPutSign;
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}
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/**
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* Construct a product representing an European option on an asset S (where S the asset with index 0 from the model - single asset case).
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* @param maturity The maturity T in the option payoff max(S(T)-K,0)
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* @param strike The strike K in the option payoff max(S(T)-K,0).
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* @param callOrPutSign The sign in the payoff.
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* @param underlyingIndex The index of the underlying to be fetched from the model.
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*/
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public EuropeanOption(final double maturity, final double strike, final double callOrPutSign) {
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super();
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this.maturity = maturity;
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this.strike = strike;
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if(callOrPutSign == 1.0) {
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this.callOrPutSign = CallOrPut.CALL;
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}else if(callOrPutSign == - 1.0) {
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this.callOrPutSign = CallOrPut.PUT;
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}else {
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throw new IllegalArgumentException("Unknown option type");
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}
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this.underlyingName = null; // Use underlyingIndex
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}
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/**
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* Construct a product representing an European option on an asset S (where S the asset with index 0 from the model - single asset case).
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* @param maturity The maturity T in the option payoff max(S(T)-K,0)
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* @param strike The strike K in the option payoff max(S(T)-K,0).
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* @param callOrPutSign The sign in the payoff.
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* @param underlyingIndex The index of the underlying to be fetched from the model.
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*/
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public EuropeanOption(final double maturity, final double strike, final CallOrPut callOrPutSign) {
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super();
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this.maturity = maturity;
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this.strike = strike;
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this.callOrPutSign = callOrPutSign;
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this.underlyingName = null; // Use underlyingIndex
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}
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/**
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* Construct a product representing an European option on an asset S (where S the asset with index <code>underlyingIndex</code> from the model - single asset case).
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* @param underlyingName Name of the underlying
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* @param maturity The maturity T in the option payoff max(S(T)-K,0)
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* @param strike The strike K in the option payoff max(S(T)-K,0).
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*/
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public EuropeanOption(final String underlyingName, final double maturity, final double strike) {
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this(underlyingName, maturity, strike, 1.0);
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}
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/**
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* Construct a product representing an European option on an asset S (where S the asset with index 0 from the model - single asset case).
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* @param maturity The maturity T in the option payoff max(S(T)-K,0)
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* @param strike The strike K in the option payoff max(S(T)-K,0).
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*/
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public EuropeanOption(final double maturity, final double strike) {
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this(maturity, strike, 1.0);
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}
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@Override
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public double[][] getValue(final double evaluationTime, final FiniteDifference1DModel model) {
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/*
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* The FDM algorithm requires the boundary conditions of the product.
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* This product implements the boundary interface
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*/
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final FiniteDifference1DBoundary boundary = this;
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if(callOrPutSign == CallOrPut.CALL) {
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return model.getValue(evaluationTime, maturity, assetValue -> Math.max(assetValue - strike, 0), boundary);
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}else {
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return model.getValue(evaluationTime, maturity, assetValue -> Math.max(strike - assetValue, 0), boundary);
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}
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}
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/*
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* Implementation of the interface:
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* @see net.finmath.finitedifference.products.FiniteDifference1DBoundary#getValueAtLowerBoundary(net.finmath.finitedifference.models.FDMBlackScholesModel, double, double)
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*/
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@Override
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public double getValueAtLowerBoundary(final FiniteDifference1DModel model, final double currentTime, final double stockPrice) {
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if(callOrPutSign == CallOrPut.CALL) {
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return 0;
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}else {
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return strike * Math.exp(-model.getRiskFreeRate()*(maturity - currentTime));
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}
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}
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@Override
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public double getValueAtUpperBoundary(final FiniteDifference1DModel model, final double currentTime, final double stockPrice) {
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if(callOrPutSign == CallOrPut.CALL) {
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return stockPrice - strike * Math.exp(-model.getRiskFreeRate()*(maturity - currentTime));
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}else {
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return 0.0;
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}
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}
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public String getUnderlyingName() {
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return underlyingName;
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}
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public double getMaturity() {
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return maturity;
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}
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public double getStrike() {
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return strike;
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}
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public CallOrPut getCallOrPutSign() {
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return callOrPutSign;
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}
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}

‎src/main/java/net/finmath/finitedifference/products/FDMEuropeanCallOption.java‎

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/**
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* Implementation of a European option to be valued by a the finite difference method.
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*
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* WARNING!! This class is scheduled for deletion in a future release. Use EuropeanOption.
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*
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* @author Christian Fries
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* @author Ralph Rudd
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* @version 1.0
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*/
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@Deprecated
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public class FDMEuropeanCallOption implements FiniteDifference1DProduct, FiniteDifference1DBoundary {
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private final double maturity;
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private final double strike;

‎src/main/java/net/finmath/finitedifference/products/FDMEuropeanPutOption.java‎

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/**
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* Implementation of a European option to be valued by a the finite difference method.
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*
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* WARNING!! This class is scheduled for deletion in a future release. Use EuropeanOption.
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*
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* @author Christian Fries
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* @author Ralph Rudd
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*/
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@Deprecated
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public class FDMEuropeanPutOption implements FiniteDifference1DProduct, FiniteDifference1DBoundary {
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private final double maturity;
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private final double strike;

‎src/main/java/net/finmath/fouriermethod/models/BatesModel.java‎

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return initialValue;
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}
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/**
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* @return the discountCurveForForwardRate
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*/
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@Override
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public DiscountCurve getDiscountCurveForForwardRate() {
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return discountCurveForForwardRate;
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}
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/**
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* @return the riskFreeRate
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*/
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@Override
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public double getRiskFreeRate() {
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return riskFreeRate;
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}
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/**
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* @return the discountCurveForDiscountRate
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*/
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@Override
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public DiscountCurve getDiscountCurveForDiscountRate() {
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return discountCurveForDiscountRate;
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}
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/**
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* @return the volatility
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*/

‎src/main/java/net/finmath/fouriermethod/models/BlackScholesModel.java‎

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/**
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* @return the referenceDate
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*/
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@Override
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public LocalDate getReferenceDate() {
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return referenceDate;
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}
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/**
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* @return the initialValue
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*/
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@Override
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public double getInitialValue() {
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return initialValue;
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}

‎src/main/java/net/finmath/fouriermethod/models/CharacteristicFunctionModel.java‎

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package net.finmath.fouriermethod.models;
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import java.time.LocalDate;
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import net.finmath.fouriermethod.CharacteristicFunction;
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import net.finmath.marketdata.model.curves.DiscountCurve;
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import net.finmath.modelling.Model;
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/**
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* @author Christian Fries
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* @version 1.0
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*/
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@FunctionalInterface
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public interface CharacteristicFunctionModel extends Model {
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/**
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* @return The characteristic function of X(t).
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*/
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CharacteristicFunction apply(double time);
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/**
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*
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* @return the reference date
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*/
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public LocalDate getReferenceDate();
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/**
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*
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* @return the initial value of the stock
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*/
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public double getInitialValue();
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/**
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* @return the discountCurveForForwardRate
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*/
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public DiscountCurve getDiscountCurveForForwardRate();
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/**
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* @return the riskFreeRate
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*/
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public double getRiskFreeRate();
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/**
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* @return the discountCurveForDiscountRate
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*/
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public DiscountCurve getDiscountCurveForDiscountRate();
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/**
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* @return the discountRate
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*/
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public double getDiscountRate();
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}

‎src/main/java/net/finmath/fouriermethod/models/HestonModel.java‎

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/**
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* @return the referenceDate
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*/
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@Override
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public LocalDate getReferenceDate() {
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return referenceDate;
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}
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/**
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* @return the initialValue
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*/
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@Override
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public double getInitialValue() {
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return initialValue;
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}
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/**
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* @return the discountCurveForForwardRate
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*/
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@Override
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public DiscountCurve getDiscountCurveForForwardRate() {
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return discountCurveForForwardRate;
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}
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/**
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* @return the riskFreeRate
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*/
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@Override
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public double getRiskFreeRate() {
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return riskFreeRate;
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}
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/**
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* @return the discountCurveForDiscountRate
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*/
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@Override
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public DiscountCurve getDiscountCurveForDiscountRate() {
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return discountCurveForDiscountRate;
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}
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/**
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* @return the discountRate
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*/
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@Override
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public double getDiscountRate() {
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return discountRate;
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}

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