mcbarrierengine.cpp

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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
 
/*
 Copyright (C) 2003 Neil Firth
 Copyright (C) 2003 Ferdinando Ametrano
 Copyright (C) 2003, 2004, 2005 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
 <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/pricingengines/barrier/mcbarrierengine.hpp>
#include <utility>
 
namespace QuantLib {
 
    BarrierPathPricer::BarrierPathPricer(Barrier::Type barrierType,
                                         Real barrier,
                                         Real rebate,
                                         Option::Type type,
                                         Real strike,
                                         std::vector<DiscountFactor> discounts,
                                         ext::shared_ptr<StochasticProcess1D> diffProcess,
                                         PseudoRandom::ursg_type sequenceGen)
    : barrierType_(barrierType), barrier_(barrier), rebate_(rebate),
      diffProcess_(std::move(diffProcess)), sequenceGen_(std::move(sequenceGen)),
      payoff_(type, strike), discounts_(std::move(discounts)) {
        QL_REQUIRE(strike>=0.0,
                   "strike less than zero not allowed");
        QL_REQUIRE(barrier>0.0,
                   "barrier less/equal zero not allowed");
    }
 
 
    Real BarrierPathPricer::operator()(const Path& path) const {
        static Size null = Null<Size>();
        Size n = path.length();
        QL_REQUIRE(n>1, "the path cannot be empty");
 
        bool isOptionActive = false;
        Size knockNode = null;
        Real asset_price = path.front();
        Real new_asset_price;
        Real x, y;
        Volatility vol;
        const TimeGrid& timeGrid = path.timeGrid();
        Time dt;
        std::vector<Real> u = sequenceGen_.nextSequence().value;
        Size i;
 
        switch (barrierType_) {
          case Barrier::DownIn:
            isOptionActive = false;
            for (i = 0; i < n-1; i++) {
                new_asset_price = path[i+1];
                // terminal or initial vol?
                vol = diffProcess_->diffusion(timeGrid[i],asset_price);
                dt = timeGrid.dt(i);
 
                x = std::log(new_asset_price / asset_price);
                y = 0.5*(x - std::sqrt (x*x - 2*vol*vol*dt*std::log(u[i])));
                y = asset_price * std::exp(y);
                if (y <= barrier_) {
                    isOptionActive = true;
                    if (knockNode == null)
                        knockNode = i+1;
                }
                asset_price = new_asset_price;
            }
            break;
          case Barrier::UpIn:
            isOptionActive = false;
            for (i = 0; i < n-1; i++) {
                new_asset_price = path[i+1];
                // terminal or initial vol?
                vol = diffProcess_->diffusion(timeGrid[i],asset_price);
                dt = timeGrid.dt(i);
 
                x = std::log(new_asset_price / asset_price);
                y = 0.5*(x + std::sqrt(x*x - 2*vol*vol*dt*std::log((1-u[i]))));
                y = asset_price * std::exp(y);
                if (y >= barrier_) {
                    isOptionActive = true;
                    if (knockNode == null)
                        knockNode = i+1;
                }
                asset_price = new_asset_price;
            }
            break;
          case Barrier::DownOut:
            isOptionActive = true;
            for (i = 0; i < n-1; i++) {
                new_asset_price = path[i+1];
                // terminal or initial vol?
                vol = diffProcess_->diffusion(timeGrid[i],asset_price);
                dt = timeGrid.dt(i);
 
                x = std::log(new_asset_price / asset_price);
                y = 0.5*(x - std::sqrt(x*x - 2*vol*vol*dt*std::log(u[i])));
                y = asset_price * std::exp(y);
                if (y <= barrier_) {
                    isOptionActive = false;
                    if (knockNode == null)
                        knockNode = i+1;
                }
                asset_price = new_asset_price;
            }
            break;
          case Barrier::UpOut:
            isOptionActive = true;
            for (i = 0; i < n-1; i++) {
                new_asset_price = path[i+1];
                // terminal or initial vol?
                vol = diffProcess_->diffusion(timeGrid[i],asset_price);
                dt = timeGrid.dt(i);
 
                x = std::log(new_asset_price / asset_price);
                y = 0.5*(x + std::sqrt(x*x - 2*vol*vol*dt*std::log((1-u[i]))));
                y = asset_price * std::exp(y);
                if (y >= barrier_) {
                    isOptionActive = false;
                    if (knockNode == null)
                        knockNode = i+1;
                }
                asset_price = new_asset_price;
            }
            break;
          default:
            QL_FAIL("unknown barrier type");
        }
 
        if (isOptionActive) {
            return payoff_(asset_price) * discounts_.back();
        } else {
            switch (barrierType_) {
              case Barrier::UpIn:
              case Barrier::DownIn:
                return rebate_*discounts_.back();
              case Barrier::UpOut:
              case Barrier::DownOut:
                return rebate_*discounts_[knockNode];
              default:
                QL_FAIL("unknown barrier type");
            }
        }
    }
 
 
    BiasedBarrierPathPricer::BiasedBarrierPathPricer(Barrier::Type barrierType,
                                                     Real barrier,
                                                     Real rebate,
                                                     Option::Type type,
                                                     Real strike,
                                                     std::vector<DiscountFactor> discounts)
    : barrierType_(barrierType), barrier_(barrier), rebate_(rebate), payoff_(type, strike),
      discounts_(std::move(discounts)) {
        QL_REQUIRE(strike>=0.0,
                   "strike less than zero not allowed");
        QL_REQUIRE(barrier>0.0,
                   "barrier less/equal zero not allowed");
    }
 
 
    Real BiasedBarrierPathPricer::operator()(const Path& path) const {
        static Size null = Null<Size>();
        Size n = path.length();
        QL_REQUIRE(n>1, "the path cannot be empty");
 
        bool isOptionActive = false;
        Size knockNode = null;
        Real asset_price = path.front();
        Size i;
 
        switch (barrierType_) {
          case Barrier::DownIn:
            isOptionActive = false;
            for (i = 1; i < n; i++) {
                asset_price = path[i];
                if (asset_price <= barrier_) {
                    isOptionActive = true;
                    if (knockNode == null)
                        knockNode = i;
                }
            }
            break;
          case Barrier::UpIn:
            isOptionActive = false;
            for (i = 1; i < n; i++) {
                asset_price = path[i];
                if (asset_price >= barrier_) {
                    isOptionActive = true;
                    if (knockNode == null)
                        knockNode = i;
                }
            }
            break;
          case Barrier::DownOut:
            isOptionActive = true;
            for (i = 1; i < n; i++) {
                asset_price = path[i];
                if (asset_price <= barrier_) {
                    isOptionActive = false;
                    if (knockNode == null)
                        knockNode = i;
                }
            }
            break;
          case Barrier::UpOut:
            isOptionActive = true;
            for (i = 1; i < n; i++) {
                asset_price = path[i];
                if (asset_price >= barrier_) {
                    isOptionActive = false;
                    if (knockNode == null)
                        knockNode = i;
                }
            }
            break;
          default:
            QL_FAIL("unknown barrier type");
        }
 
        if (isOptionActive) {
            return payoff_(asset_price) * discounts_.back();
        } else {
            switch (barrierType_) {
              case Barrier::UpIn:
              case Barrier::DownIn:
                return rebate_*discounts_.back();
              case Barrier::UpOut:
              case Barrier::DownOut:
                return rebate_*discounts_[knockNode];
              default:
                QL_FAIL("unknown barrier type");
            }
        }
    }
 
}