coxingersollrossprocess.cpp

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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
 
/*
 Copyright (C) 2020 Lew Wei Hao
 
 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/processes/coxingersollrossprocess.hpp>
 
namespace QuantLib {
 
    CoxIngersollRossProcess::CoxIngersollRossProcess(Real speed,
                                                       Volatility vol,
                                                       Real x0,
                                                       Real level)
    : x0_(x0), speed_(speed), level_(level), volatility_(vol) {
        QL_REQUIRE(volatility_ >= 0.0, "negative volatility given");
    }
 
    Real CoxIngersollRossProcess::variance(Time, Real, Time dt) const {
        Real exponent1 = std::exp(-speed_ * dt);
        Real exponent2 = std::exp(-2 * speed_ * dt);
        Real fraction = (volatility_ * volatility_) / speed_;
 
        return x0_ * fraction * (exponent1 - exponent2) + level_ * fraction * (1 - exponent1) * (1 - exponent1);
    }
 
}