fdblackscholesvanillaengine.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, 2009 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/utilities/escroweddividendadjustment.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/fdminnervaluecalculator.hpp>
#include <ql/methods/finitedifferences/utilities/fdmescrowedloginnervaluecalculator.hpp>
#include <ql/methods/finitedifferences/utilities/fdmquantohelper.hpp>
#include <ql/pricingengines/vanilla/fdblackscholesvanillaengine.hpp>
#include <ql/processes/blackscholesprocess.hpp>
 
namespace QuantLib {
 
    FdBlackScholesVanillaEngine::FdBlackScholesVanillaEngine(
        ext::shared_ptr<GeneralizedBlackScholesProcess> process,
        Size tGrid,
        Size xGrid,
        Size dampingSteps,
        const FdmSchemeDesc& schemeDesc,
        bool localVol,
        Real illegalLocalVolOverwrite,
        CashDividendModel cashDividendModel)
    : process_(std::move(process)), tGrid_(tGrid), xGrid_(xGrid),
      dampingSteps_(dampingSteps), schemeDesc_(schemeDesc), localVol_(localVol),
      illegalLocalVolOverwrite_(illegalLocalVolOverwrite), cashDividendModel_(cashDividendModel) {
        registerWith(process_);
    }
 
    FdBlackScholesVanillaEngine::FdBlackScholesVanillaEngine(
        ext::shared_ptr<GeneralizedBlackScholesProcess> process,
        DividendSchedule dividends,
        Size tGrid,
        Size xGrid,
        Size dampingSteps,
        const FdmSchemeDesc& schemeDesc,
        bool localVol,
        Real illegalLocalVolOverwrite,
        CashDividendModel cashDividendModel)
    : process_(std::move(process)), dividends_(std::move(dividends)),
      tGrid_(tGrid), xGrid_(xGrid), dampingSteps_(dampingSteps), schemeDesc_(schemeDesc),
      localVol_(localVol), illegalLocalVolOverwrite_(illegalLocalVolOverwrite),
      cashDividendModel_(cashDividendModel) {
        registerWith(process_);
    }
 
    FdBlackScholesVanillaEngine::FdBlackScholesVanillaEngine(
        ext::shared_ptr<GeneralizedBlackScholesProcess> process,
        ext::shared_ptr<FdmQuantoHelper> quantoHelper,
        Size tGrid,
        Size xGrid,
        Size dampingSteps,
        const FdmSchemeDesc& schemeDesc,
        bool localVol,
        Real illegalLocalVolOverwrite,
        CashDividendModel cashDividendModel)
    : process_(std::move(process)),
      tGrid_(tGrid), xGrid_(xGrid), dampingSteps_(dampingSteps),
      schemeDesc_(schemeDesc), localVol_(localVol),
      illegalLocalVolOverwrite_(illegalLocalVolOverwrite), quantoHelper_(std::move(quantoHelper)),
      cashDividendModel_(cashDividendModel) {
        registerWith(process_);
        registerWith(quantoHelper_);
    }
 
    FdBlackScholesVanillaEngine::FdBlackScholesVanillaEngine(
        ext::shared_ptr<GeneralizedBlackScholesProcess> process,
        DividendSchedule dividends,
        ext::shared_ptr<FdmQuantoHelper> quantoHelper,
        Size tGrid,
        Size xGrid,
        Size dampingSteps,
        const FdmSchemeDesc& schemeDesc,
        bool localVol,
        Real illegalLocalVolOverwrite,
        CashDividendModel cashDividendModel)
    : process_(std::move(process)), dividends_(std::move(dividends)),
      tGrid_(tGrid), xGrid_(xGrid), dampingSteps_(dampingSteps),
      schemeDesc_(schemeDesc), localVol_(localVol),
      illegalLocalVolOverwrite_(illegalLocalVolOverwrite), quantoHelper_(std::move(quantoHelper)),
      cashDividendModel_(cashDividendModel) {
        registerWith(process_);
        registerWith(quantoHelper_);
    }
 
 
    void FdBlackScholesVanillaEngine::calculate() const {
 
        // 0. Cash dividend model
        const Date exerciseDate = arguments_.exercise->lastDate();
        const Time maturity = process_->time(exerciseDate);
        const Date settlementDate = process_->riskFreeRate()->referenceDate();
 
        Real spotAdjustment = 0.0;
        DividendSchedule dividendSchedule = DividendSchedule();
 
        ext::shared_ptr<EscrowedDividendAdjustment> escrowedDivAdj;
 
        switch (cashDividendModel_) {
          case Spot:
            dividendSchedule = dividends_;
            break;
          case Escrowed:
            if  (arguments_.exercise->type() != Exercise::European)
                // add dividend dates as stopping times
                for (const auto& cf: dividends_)
                    dividendSchedule.push_back(
                        ext::make_shared<FixedDividend>(0.0, cf->date()));
 
            QL_REQUIRE(quantoHelper_ == nullptr,
                "Escrowed dividend model is not supported for Quanto-Options");
 
            escrowedDivAdj = ext::make_shared<EscrowedDividendAdjustment>(
                dividends_,
                process_->riskFreeRate(),
                process_->dividendYield(),
                [&](Date d){ return process_->time(d); },
                maturity
            );
 
            spotAdjustment =
                escrowedDivAdj->dividendAdjustment(process_->time(settlementDate));
 
            QL_REQUIRE(process_->x0() + spotAdjustment > 0.0,
                    "spot minus dividends becomes negative");
 
            break;
          default:
              QL_FAIL("unknwon cash dividend model");
        }
 
        // 1. Mesher
        const ext::shared_ptr<StrikedTypePayoff> payoff =
            ext::dynamic_pointer_cast<StrikedTypePayoff>(arguments_.payoff);
 
        const ext::shared_ptr<Fdm1dMesher> equityMesher =
            ext::make_shared<FdmBlackScholesMesher>(
                    xGrid_, process_, maturity, payoff->strike(), 
                    Null<Real>(), Null<Real>(), 0.0001, 1.5, 
                    std::pair<Real, Real>(payoff->strike(), 0.1),
                    dividendSchedule, quantoHelper_,
                    spotAdjustment);
        
        const ext::shared_ptr<FdmMesher> mesher =
            ext::make_shared<FdmMesherComposite>(equityMesher);
        
        // 2. Calculator
        ext::shared_ptr<FdmInnerValueCalculator> calculator;
        switch (cashDividendModel_) {
          case Spot:
              calculator = ext::make_shared<FdmLogInnerValue>(
                  payoff, mesher, 0);
            break;
          case Escrowed:
              calculator = ext::make_shared<FdmEscrowedLogInnerValueCalculator>(
                  escrowedDivAdj, payoff, mesher, 0);
            break;
          default:
              QL_FAIL("unknwon cash dividend model");
        }
 
        // 3. Step conditions
        const ext::shared_ptr<FdmStepConditionComposite> conditions = 
            FdmStepConditionComposite::vanillaComposite(
                dividendSchedule, arguments_.exercise, mesher, calculator,
                process_->riskFreeRate()->referenceDate(),
                process_->riskFreeRate()->dayCounter());
 
        // 4. Boundary conditions
        const FdmBoundaryConditionSet boundaries;
 
        // 5. Solver
        FdmSolverDesc solverDesc = { mesher, boundaries, conditions, calculator,
                                     maturity, tGrid_, dampingSteps_ };
 
        const ext::shared_ptr<FdmBlackScholesSolver> solver(
            ext::make_shared<FdmBlackScholesSolver>(
                Handle<GeneralizedBlackScholesProcess>(process_),
                payoff->strike(), solverDesc, schemeDesc_,
                localVol_, illegalLocalVolOverwrite_,
                Handle<FdmQuantoHelper>(quantoHelper_)));
 
        const Real spot = process_->x0() + spotAdjustment;
 
        results_.value = solver->valueAt(spot);
        results_.delta = solver->deltaAt(spot);
        results_.gamma = solver->gammaAt(spot);
        results_.theta = solver->thetaAt(spot);
    }
 
    MakeFdBlackScholesVanillaEngine::MakeFdBlackScholesVanillaEngine(
        ext::shared_ptr<GeneralizedBlackScholesProcess> process)
    : process_(std::move(process)),
      schemeDesc_(ext::make_shared<FdmSchemeDesc>(FdmSchemeDesc::Douglas())),
      illegalLocalVolOverwrite_(-Null<Real>()) {}
 
    MakeFdBlackScholesVanillaEngine&
    MakeFdBlackScholesVanillaEngine::withQuantoHelper(
        const ext::shared_ptr<FdmQuantoHelper>& quantoHelper) {
        quantoHelper_ = quantoHelper;
        return *this;
    }
 
    MakeFdBlackScholesVanillaEngine&
    MakeFdBlackScholesVanillaEngine::withTGrid(Size tGrid) {
        tGrid_ = tGrid;
        return *this;
    }
 
    MakeFdBlackScholesVanillaEngine&
    MakeFdBlackScholesVanillaEngine::withXGrid(Size xGrid) {
        xGrid_ = xGrid;
        return *this;
    }
 
    MakeFdBlackScholesVanillaEngine&
    MakeFdBlackScholesVanillaEngine::withDampingSteps(Size dampingSteps) {
        dampingSteps_ = dampingSteps;
        return *this;
    }
 
    MakeFdBlackScholesVanillaEngine&
    MakeFdBlackScholesVanillaEngine::withFdmSchemeDesc(
        const FdmSchemeDesc& schemeDesc) {
        schemeDesc_ = ext::make_shared<FdmSchemeDesc>(schemeDesc);
        return *this;
    }
 
    MakeFdBlackScholesVanillaEngine&
    MakeFdBlackScholesVanillaEngine::withLocalVol(bool localVol) {
        localVol_ = localVol;
        return *this;
    }
 
    MakeFdBlackScholesVanillaEngine&
    MakeFdBlackScholesVanillaEngine::withIllegalLocalVolOverwrite(
        Real illegalLocalVolOverwrite) {
        illegalLocalVolOverwrite_ = illegalLocalVolOverwrite;
        return *this;
    }
 
    MakeFdBlackScholesVanillaEngine&
    MakeFdBlackScholesVanillaEngine::withCashDividends(
            const std::vector<Date>& dividendDates,
            const std::vector<Real>& dividendAmounts) {
        dividends_ = DividendVector(dividendDates, dividendAmounts);
        return *this;
    }
 
    MakeFdBlackScholesVanillaEngine&
    MakeFdBlackScholesVanillaEngine::withCashDividendModel(
        FdBlackScholesVanillaEngine::CashDividendModel cashDividendModel) {
        cashDividendModel_ = cashDividendModel;
        return *this;
    }
 
    MakeFdBlackScholesVanillaEngine::operator
    ext::shared_ptr<PricingEngine>() const {
        return ext::make_shared<FdBlackScholesVanillaEngine>(
                process_,
                dividends_,
                quantoHelper_,
                tGrid_, xGrid_, dampingSteps_,
                *schemeDesc_,
                localVol_,
                illegalLocalVolOverwrite_,
                cashDividendModel_);
    }
 
}