American forward option pricing

[Adrian O' Neill]

Hi,
I can see how to price a European option on a forward using the BlackModel
in QuantLib; I was wondering if it is possible to do the same for an
American option on a forward.  If anyone could point me at some relevant
classes that would be great.

Thanks,
Adrian

[Luigi Ballabio]

On 06/08/2006 10:58:07 PM, Adrian O' Neill wrote:
> I can see how to price a European option on a forward using the
> BlackModel in QuantLib; I was wondering if it is possible to do the  
> same for an American option on a forward.

Adrian,
        how did you do it for the European?

Later,
        Luigi


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Cogito ergo I'm right and you're wrong.
-- Blair Houghton

[Adrian O' Neill]

Simply by using BlackModel::formula(underlying, strike, volatility, dc)

I did work out how to do the American case though, that was to create the
dividend term structure equal to the yield for the underlying stochastic
process:

        Handle<YieldTermStructure> termStructure(termStructure_);
        Handle<YieldTermStructure> divStructure(termStructure_);

    boost::shared_ptr<BlackScholesProcess> stochasticProcess(new
        BlackScholesProcess(
            underlyingH,
                divStructure,
                termStructure,
            flatVolTS));

-----Original Message-----
From: Luigi Ballabio [mailto:[hidden email]]
Sent: 19 June 2006 11:28 AM
To: Adrian O' Neill
Cc: [hidden email]
Subject: Re: [Quantlib-users] American forward option pricing


On 06/08/2006 10:58:07 PM, Adrian O' Neill wrote:
> I can see how to price a European option on a forward using the
> BlackModel in QuantLib; I was wondering if it is possible to do the  
> same for an American option on a forward.

Adrian,
        how did you do it for the European?

Later,
        Luigi


----------------------------------------

Cogito ergo I'm right and you're wrong.
-- Blair Houghton

[Luigi Ballabio]

On 06/19/2006 08:40:54 PM, Adrian O' Neill wrote:

> I did work out how to do the American case though, that was to create
> the dividend term structure equal to the yield for the underlying
> stochastic process:
>
>     boost::shared_ptr<BlackScholesProcess> stochasticProcess(new
>         BlackScholesProcess(
>             underlyingH,
> divStructure,
> termStructure,
>             flatVolTS));

Yes, correct. In next version, you'll be able to write simply:

new BlackProcess(underlyingH,
  termStructure,
                  flatVolTS));

which will set the dividend structure accordingly.

Luigi


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The wisdom of the wise and the experience of the ages are perpetuated
by quotations.
-- Benjamin Disraeli