Skip to content
New issue

Have a question about this project? Sign up for a free GitHub account to open an issue and contact its maintainers and the community.

Sign up for GitHub

By clicking “Sign up for GitHub”, you agree to our terms of service and privacy statement. We’ll occasionally send you account related emails.

Already on GitHub? Sign in to your account

Jump to bottom

Move credit spread and dividends to Binomial Convertible Engine #1220

Merged
merged 6 commits into from
Nov 9, 2021
Merged

Move credit spread and dividends to Binomial Convertible Engine #1220

Show file tree
Hide file tree
Changes from 5 commits
Commits
Show all changes
6 commits
Select commit Hold shift + click to select a range
f929a89
Move creditSpread and dividends into BinomalConvertibleEngine
w31ha0 Oct 30, 2021
582591d
Revert vcxproj file
w31ha0 Oct 30, 2021
193d2ff
Fix Build
w31ha0 Oct 30, 2021
e1aee00
Fix ordering
w31ha0 Oct 30, 2021
23f5928
Fix Build
w31ha0 Oct 30, 2021
7c3518a
Remove fields from engine arguments
w31ha0 Nov 2, 2021
File filter

Filter by extension

Filter by extension
Conversations
Failed to load comments.
Loading
Jump to
Jump to file
Failed to load files.
Loading
Diff view
Diff view
52 changes: 19 additions & 33 deletions Examples/ConvertibleBonds/ConvertibleBonds.cpp
View file
Open in desktop
Original file line number Diff line number Diff line change
Expand Up @@ -193,27 +193,25 @@ int main(int, char* []) {

ext::shared_ptr<PricingEngine> engine(
new BinomialConvertibleEngine<JarrowRudd>(stochasticProcess,
timeSteps));
timeSteps, creditSpread, dividends));

ConvertibleFixedCouponBond europeanBond(
exercise, conversionRatio, dividends, callability,
creditSpread, issueDate, settlementDays,
exercise, conversionRatio, callability,
issueDate, settlementDays,
coupons, bondDayCount, schedule, redemption);
europeanBond.setPricingEngine(engine);

ConvertibleFixedCouponBond americanBond(
amExercise, conversionRatio, dividends, callability,
creditSpread, issueDate, settlementDays,
amExercise, conversionRatio, callability,
issueDate, settlementDays,
coupons, bondDayCount, schedule, redemption);
americanBond.setPricingEngine(engine);

method = "Jarrow-Rudd";
europeanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<JarrowRudd>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<JarrowRudd>(stochasticProcess, timeSteps, creditSpread, dividends)));
americanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<JarrowRudd>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<JarrowRudd>(stochasticProcess, timeSteps, creditSpread, dividends)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
Expand All @@ -222,11 +220,9 @@ int main(int, char* []) {

method = "Cox-Ross-Rubinstein";
europeanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<CoxRossRubinstein>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<CoxRossRubinstein>(stochasticProcess, timeSteps, creditSpread, dividends)));
americanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<CoxRossRubinstein>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<CoxRossRubinstein>(stochasticProcess, timeSteps, creditSpread, dividends)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
Expand All @@ -236,12 +232,10 @@ int main(int, char* []) {
method = "Additive equiprobabilities";
europeanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<AdditiveEQPBinomialTree>(
stochasticProcess,
timeSteps)));
stochasticProcess, timeSteps, creditSpread, dividends)));
americanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<AdditiveEQPBinomialTree>(
stochasticProcess,
timeSteps)));
stochasticProcess, timeSteps, creditSpread, dividends)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
Expand All @@ -250,11 +244,9 @@ int main(int, char* []) {

method = "Trigeorgis";
europeanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Trigeorgis>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<Trigeorgis>(stochasticProcess, timeSteps, creditSpread, dividends)));
americanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Trigeorgis>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<Trigeorgis>(stochasticProcess, timeSteps, creditSpread, dividends)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
Expand All @@ -263,11 +255,9 @@ int main(int, char* []) {

method = "Tian";
europeanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Tian>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<Tian>(stochasticProcess, timeSteps, creditSpread, dividends)));
americanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Tian>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<Tian>(stochasticProcess, timeSteps, creditSpread, dividends)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
Expand All @@ -276,11 +266,9 @@ int main(int, char* []) {

method = "Leisen-Reimer";
europeanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<LeisenReimer>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<LeisenReimer>(stochasticProcess, timeSteps, creditSpread, dividends)));
americanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<LeisenReimer>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<LeisenReimer>(stochasticProcess, timeSteps, creditSpread, dividends)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
Expand All @@ -289,11 +277,9 @@ int main(int, char* []) {

method = "Joshi";
europeanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Joshi4>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<Joshi4>(stochasticProcess, timeSteps, creditSpread, dividends)));
americanBond.setPricingEngine(ext::shared_ptr<PricingEngine>(
new BinomialConvertibleEngine<Joshi4>(stochasticProcess,
timeSteps)));
new BinomialConvertibleEngine<Joshi4>(stochasticProcess, timeSteps, creditSpread, dividends)));
std::cout << std::setw(widths[0]) << std::left << method
<< std::fixed
<< std::setw(widths[1]) << std::left << europeanBond.NPV()
Expand Down
80 changes: 46 additions & 34 deletions ql/experimental/convertiblebonds/binomialconvertibleengine.hpp
View file
Open in desktop
Original file line number Diff line number Diff line change
Expand Up @@ -46,18 +46,28 @@ namespace QuantLib {
class BinomialConvertibleEngine : public ConvertibleBond::option::engine {
public:
BinomialConvertibleEngine(ext::shared_ptr<GeneralizedBlackScholesProcess> process,
Size timeSteps)
: process_(std::move(process)), timeSteps_(timeSteps) {
Size timeSteps,
const Handle<Quote>& creditSpread,
DividendSchedule dividends)
: process_(std::move(process)), timeSteps_(timeSteps),
dividends_(std::move(dividends)), creditSpread_(creditSpread)
{
QL_REQUIRE(timeSteps>0,
"timeSteps must be positive, " << timeSteps <<
" not allowed");

registerWith(process_);
registerWith(creditSpread);
}
void calculate() const override;
const Handle<Quote>& creditSpread() const { return creditSpread_; }
const DividendSchedule& dividends() const { return dividends_; }

private:
ext::shared_ptr<GeneralizedBlackScholesProcess> process_;
Size timeSteps_;
DividendSchedule dividends_;
Handle<Quote> creditSpread_;
};


Expand All @@ -72,58 +82,60 @@ namespace QuantLib {
Real s0 = process_->x0();
QL_REQUIRE(s0 > 0.0, "negative or null underlying");
Volatility v = process_->blackVolatility()->blackVol(
arguments_.exercise->lastDate(), s0);
arguments_.exercise->lastDate(), s0);
Date maturityDate = arguments_.exercise->lastDate();
Rate riskFreeRate = process_->riskFreeRate()->zeroRate(
maturityDate, rfdc, Continuous, NoFrequency);
maturityDate, rfdc, Continuous, NoFrequency);
Rate q = process_->dividendYield()->zeroRate(
maturityDate, divdc, Continuous, NoFrequency);
maturityDate, divdc, Continuous, NoFrequency);
Date referenceDate = process_->riskFreeRate()->referenceDate();

// subtract dividends
Size i;
for (i=0; i<arguments_.dividends.size(); i++) {
if (arguments_.dividends[i]->date() >= referenceDate)
s0 -= arguments_.dividends[i]->amount() *
process_->riskFreeRate()->discount(
arguments_.dividends[i]->date());
for (i=0; i<dividends_.size(); i++) {
if (dividends_[i]->date() >= referenceDate)
s0 -= dividends_[i]->amount() *
process_->riskFreeRate()->discount(dividends_[i]->date());
}
QL_REQUIRE(s0 > 0.0,
"negative value after subtracting dividends");
"negative value after subtracting dividends");

// binomial trees with constant coefficient
Handle<Quote> underlying(ext::shared_ptr<Quote>(new SimpleQuote(s0)));
Handle<YieldTermStructure> flatRiskFree(
ext::shared_ptr<YieldTermStructure>(
new FlatForward(referenceDate, riskFreeRate, rfdc)));
Handle<YieldTermStructure> flatRiskFree(ext::shared_ptr<YieldTermStructure>(
new FlatForward(referenceDate, riskFreeRate, rfdc)));
Handle<YieldTermStructure> flatDividends(
ext::shared_ptr<YieldTermStructure>(
new FlatForward(referenceDate, q, divdc)));
Handle<BlackVolTermStructure> flatVol(
ext::shared_ptr<BlackVolTermStructure>(
new BlackConstantVol(referenceDate, volcal, v, voldc)));
ext::shared_ptr<YieldTermStructure>(new FlatForward(referenceDate, q, divdc)));
Handle<BlackVolTermStructure> flatVol(ext::shared_ptr<BlackVolTermStructure>(
new BlackConstantVol(referenceDate, volcal, v, voldc)));

ext::shared_ptr<PlainVanillaPayoff> payoff =
ext::dynamic_pointer_cast<PlainVanillaPayoff>(arguments_.payoff);
QL_REQUIRE(payoff, "non-plain payoff given");

Time maturity = rfdc.yearFraction(arguments_.settlementDate,
maturityDate);
Time maturity = rfdc.yearFraction(arguments_.settlementDate, maturityDate);

ext::shared_ptr<GeneralizedBlackScholesProcess> bs(
new GeneralizedBlackScholesProcess(underlying, flatDividends,
flatRiskFree, flatVol));
ext::shared_ptr<T> tree(new T(bs, maturity, timeSteps_,
payoff->strike()));

Real creditSpread = arguments_.creditSpread->value();

ext::shared_ptr<Lattice> lattice(
new TsiveriotisFernandesLattice<T>(tree,riskFreeRate,maturity,
timeSteps_,creditSpread,v,q));
new GeneralizedBlackScholesProcess(underlying, flatDividends, flatRiskFree, flatVol));
ext::shared_ptr<T> tree(new T(bs, maturity, timeSteps_, payoff->strike()));

Real creditSpread = creditSpread_->value();

ext::shared_ptr<Lattice> lattice(new TsiveriotisFernandesLattice<T>(
tree, riskFreeRate, maturity, timeSteps_, creditSpread, v, q));

// Setup arguments for convertible
arguments_.dividends.clear();
arguments_.dividendDates.clear();
for (const auto& dividend : dividends_) {
if (!dividend->hasOccurred(arguments_.settlementDate, false)) {
arguments_.dividends.push_back(dividend);
arguments_.dividendDates.push_back(dividend->date());
}
}
arguments_.creditSpread = creditSpread_;

DiscretizedConvertible convertible(arguments_, bs,
TimeGrid(maturity, timeSteps_));
DiscretizedConvertible convertible(arguments_, bs, TimeGrid(maturity, timeSteps_));

convertible.initialize(lattice, maturity);
convertible.rollback(0.0);
Expand All @@ -135,4 +147,4 @@ namespace QuantLib {
}


#endif
#endif
Loading