Options
Class PathIndptBasketOption

java.lang.Object
  extended byOptions.BasketOption
      extended byOptions.PathIndptBasketOption
Direct Known Subclasses:
OptionToExchangeAssets

public abstract class PathIndptBasketOption
extends BasketOption

Path independent European option on a basket of underlying assets. Overrides some methods in BasketOption with more efficient methods taking advantage of the fact that the asset price vector is needed only at expiration and hence large time steps can be taken.


Field Summary
 
Fields inherited from class Options.BasketOption
name
 
Constructor Summary
PathIndptBasketOption(Basket assets, java.lang.String name)
          Constructor, does not initialize the option price path.
 
Method Summary
 double discountedMonteCarloPrice(double precision, double confidence)
          Monte Carlo price at time t=0 with price paths of the underlying simulated until desired precision is reached with desired confidence.
 double discountedMonteCarloPrice(int nPath)
          Monte Carlo option price at time t=0.
 double discountedMonteCarloPrice(int t, double precision, double confidence)
          Monte Carlo price at time t computed as a conditional expectation conditioned on information available at time t with price paths of the underlying simulated until desired precision is reached with desired confidence.
 double discountedMonteCarloPrice(int t, int nPath)
          Monte Carlo price at time t computed as a conditional expectation conditioned on information available at time t and computed from a sample of nPath (branches of) the price path of the underlying.
 RandomVariable discountedPayoff()
          The discounted option payoff as a random variable based on the risk neutral probability.
 ColtVector monteCarloDeltas(int t, int nPath)
          The vector of Monte Carlo deltas of the underlying assets at time t computed in the risk neutral probability.
 void newDiscountedPricePath(int whichProbability, int nPath)
          Computes one path of the underlying S and a corresponding path C of the option (discounted prices).
 
Methods inherited from class Options.BasketOption
analyticDeltas, currentDiscountedPayoff, discountedAnalyticPrice, get_C, get_dim, get_dt, get_hasAnalyticPrice, get_T, get_underlying, getName, minimumVarianceDeltas
 
Methods inherited from class java.lang.Object
clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait
 

Constructor Detail

PathIndptBasketOption

public PathIndptBasketOption(Basket assets,
                             java.lang.String name)

Constructor, does not initialize the option price path. This is left to the concrete subclasses which can decide wether analytic price formulas are available or not.

Parameters:
assets - the underlying assets.
name - name of the option.
Method Detail

discountedPayoff

public RandomVariable discountedPayoff()
The discounted option payoff as a random variable based on the risk neutral probability. You must call underlying.stepToHorizonSimulationInit(prob,t) before you compute expectations of this.

Overrides:
discountedPayoff in class BasketOption

discountedMonteCarloPrice

public double discountedMonteCarloPrice(int t,
                                        int nPath)

Monte Carlo price at time t computed as a conditional expectation conditioned on information available at time t and computed from a sample of nPath (branches of) the price path of the underlying.

Overrides:
discountedMonteCarloPrice in class BasketOption
Parameters:
t - current time (determines information to condition on).
nPath - number of path branches used to compute the option price.

discountedMonteCarloPrice

public double discountedMonteCarloPrice(int nPath)

Monte Carlo option price at time t=0.

Overrides:
discountedMonteCarloPrice in class BasketOption
Parameters:
nPath - number of asset price paths used to compute the option price.

discountedMonteCarloPrice

public double discountedMonteCarloPrice(int t,
                                        double precision,
                                        double confidence)

Monte Carlo price at time t computed as a conditional expectation conditioned on information available at time t with price paths of the underlying simulated until desired precision is reached with desired confidence.

Overrides:
discountedMonteCarloPrice in class BasketOption
Parameters:
t - current time (determines information to condition on).
precision - absolute error bound.
confidence - probability with which the precision is reached.

discountedMonteCarloPrice

public double discountedMonteCarloPrice(double precision,
                                        double confidence)

Monte Carlo price at time t=0 with price paths of the underlying simulated until desired precision is reached with desired confidence.

See discountedMonteCarloPrice(int,double,double) .

Overrides:
discountedMonteCarloPrice in class BasketOption
Parameters:
precision - absolute error bound.
confidence - probability with which the precision is reached.

newDiscountedPricePath

public void newDiscountedPricePath(int whichProbability,
                                   int nPath)

Computes one path of the underlying S and a corresponding path C of the option (discounted prices).

Overrides:
newDiscountedPricePath in class BasketOption
Parameters:
whichProbability - probability for simulation (risk neutral/market).
nPath - number of asset price path branches used in the Monte Carlo computation of the option price at each time step.

monteCarloDeltas

public ColtVector monteCarloDeltas(int t,
                                   int nPath)

The vector of Monte Carlo deltas of the underlying assets at time t computed in the risk neutral probability. It is assumed that a price path of the underlying asset has been computed up to time t.

Overrides:
monteCarloDeltas in class BasketOption
Parameters:
t - current time (time of branching).
nPath - number of asset price path branches expended on each conditional expectation.