fdblackscholesrebateengine.cpp

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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
 
/*
 Copyright (C) 2008 Andreas Gaida
 Copyright (C) 2008, 2009 Ralph Schreyer
 Copyright (C) 2008 Klaus Spanderen
 
 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
 <quantlib-dev@lists.sf.net>. 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.
*/
 
#include <ql/exercise.hpp>
#include <ql/methods/finitedifferences/meshers/fdmblackscholesmesher.hpp>
#include <ql/methods/finitedifferences/meshers/fdmmeshercomposite.hpp>
#include <ql/methods/finitedifferences/operators/fdmlinearoplayout.hpp>
#include <ql/methods/finitedifferences/solvers/fdmblackscholessolver.hpp>
#include <ql/methods/finitedifferences/stepconditions/fdmstepconditioncomposite.hpp>
#include <ql/methods/finitedifferences/utilities/fdmdirichletboundary.hpp>
#include <ql/methods/finitedifferences/utilities/fdminnervaluecalculator.hpp>
#include <ql/pricingengines/barrier/fdblackscholesrebateengine.hpp>
#include <utility>
 
namespace QuantLib {
 
    FdBlackScholesRebateEngine::FdBlackScholesRebateEngine(
        ext::shared_ptr<GeneralizedBlackScholesProcess> process,
        Size tGrid,
        Size xGrid,
        Size dampingSteps,
        const FdmSchemeDesc& schemeDesc,
        bool localVol,
        Real illegalLocalVolOverwrite)
    : process_(std::move(process)),
      tGrid_(tGrid), xGrid_(xGrid), dampingSteps_(dampingSteps),
      schemeDesc_(schemeDesc), localVol_(localVol),
      illegalLocalVolOverwrite_(illegalLocalVolOverwrite) {
 
        registerWith(process_);
    }
 
    FdBlackScholesRebateEngine::FdBlackScholesRebateEngine(
        ext::shared_ptr<GeneralizedBlackScholesProcess> process,
        DividendSchedule dividends,
        Size tGrid,
        Size xGrid,
        Size dampingSteps,
        const FdmSchemeDesc& schemeDesc,
        bool localVol,
        Real illegalLocalVolOverwrite)
    : process_(std::move(process)), dividends_(std::move(dividends)),
      tGrid_(tGrid), xGrid_(xGrid), dampingSteps_(dampingSteps),
      schemeDesc_(schemeDesc), localVol_(localVol),
      illegalLocalVolOverwrite_(illegalLocalVolOverwrite) {
 
        registerWith(process_);
    }
 
    void FdBlackScholesRebateEngine::calculate() const {
 
        // 1. Mesher
        const ext::shared_ptr<StrikedTypePayoff> payoff =
            ext::dynamic_pointer_cast<StrikedTypePayoff>(arguments_.payoff);
        const Time maturity = process_->time(arguments_.exercise->lastDate());
 
        Real xMin=Null<Real>();
        Real xMax=Null<Real>();
        if (   arguments_.barrierType == Barrier::DownIn
            || arguments_.barrierType == Barrier::DownOut) {
            xMin = std::log(arguments_.barrier);
        }
        if (   arguments_.barrierType == Barrier::UpIn
            || arguments_.barrierType == Barrier::UpOut) {
            xMax = std::log(arguments_.barrier);
        }
 
        const ext::shared_ptr<Fdm1dMesher> equityMesher(
            new FdmBlackScholesMesher(
                xGrid_, process_, maturity, payoff->strike(),
                xMin, xMax, 0.0001, 1.5,
                std::make_pair(Null<Real>(), Null<Real>()),
                dividends_));
        
        const ext::shared_ptr<FdmMesher> mesher (
            new FdmMesherComposite(equityMesher));
        
        // 2. Calculator
        const ext::shared_ptr<StrikedTypePayoff> rebatePayoff(
                new CashOrNothingPayoff(Option::Call, 0.0, arguments_.rebate));
        const ext::shared_ptr<FdmInnerValueCalculator> calculator(
                                new FdmLogInnerValue(rebatePayoff, mesher, 0));
 
        // 3. Step conditions
        QL_REQUIRE(arguments_.exercise->type() == Exercise::European,
                   "only european style option are supported");
        
        const ext::shared_ptr<FdmStepConditionComposite> conditions =
            FdmStepConditionComposite::vanillaComposite(
                                dividends_, arguments_.exercise, 
                                mesher, calculator, 
                                process_->riskFreeRate()->referenceDate(),
                                process_->riskFreeRate()->dayCounter());
 
        // 4. Boundary conditions
        FdmBoundaryConditionSet  boundaries;
        if (   arguments_.barrierType == Barrier::DownIn
            || arguments_.barrierType == Barrier::DownOut) {
            boundaries.push_back(FdmBoundaryConditionSet::value_type(
                new FdmDirichletBoundary(mesher, arguments_.rebate, 0,
                                         FdmDirichletBoundary::Lower)));
 
        }
        if (   arguments_.barrierType == Barrier::UpIn
            || arguments_.barrierType == Barrier::UpOut) {
            boundaries.push_back(FdmBoundaryConditionSet::value_type(
                new FdmDirichletBoundary(mesher, arguments_.rebate, 0,
                                         FdmDirichletBoundary::Upper)));
        }
 
        // 5. Solver
        FdmSolverDesc solverDesc = { mesher, boundaries, conditions, calculator,
                                     maturity, tGrid_, dampingSteps_ };
 
        const ext::shared_ptr<FdmBlackScholesSolver> solver(
                new FdmBlackScholesSolver(
                                Handle<GeneralizedBlackScholesProcess>(process_),
                                payoff->strike(), solverDesc, schemeDesc_,
                                localVol_, illegalLocalVolOverwrite_));
 
        const Real spot = process_->x0();
        results_.value = solver->valueAt(spot);
        results_.delta = solver->deltaAt(spot);
        results_.gamma = solver->gammaAt(spot);
        results_.theta = solver->thetaAt(spot);
    }
}