Pricing American Options using a bootstrapped yield curve

[kumar ganesh]

Hi all, 

I am currently working on a project , where we are trying to price American options  by passing in a "piecewise yield curve" object ( as opposed to generating a flat forward yield term structure using the risk free rate) . To this end, I am trying to modify the GeneralizedBlackScholesProcess class in qlo/processes.cpp so as to take in a PiecewiseYieldCurve object as a parameter. I believe , we dont need to modify any other class in order to achieve this objective. Please let me know if my understanding is correct . 

I have however run in to problems while trying to modify the code in processes.hpp . I am copy-pasting my modifications below 

processes.hpp 

namespace QuantLib {

    

class GeneralizedBlackScholesProcess;

    class BlackVolTermStructure;

    class DayCounter;

    class Date;

template <class Traits, class Interpolator,

              template <class> class Bootstrap = IterativeBootstrap>

class PiecewiseYieldCurve;

}

namespace QuantLibAddin {

   template <class Traits, class Interpolator,

              template <class> class Bootstrap = IterativeBootstrap>

class GeneralizedBlackScholesProcess2:public ObjectHandler::LibraryObject<QuantLib::GeneralizedBlackScholesProcess> {

      public:

        GeneralizedBlackScholesProcess2(

            const boost::shared_ptr<ObjectHandler::ValueObject>& properties,

            const boost::shared_ptr<QuantLib::BlackVolTermStructure>& blackVolTermStructureP,

            QuantLib::Real underlying,

            const QuantLib::DayCounter& dayCounter,

            const QuantLib::Date& settlementDate,

const boost::shared_ptr<QuantLib::PiecewiseYieldCurve<Traits,Interpolator,Bootstrap>>& piecewiseYieldCurveP,

QuantLib::Spread dividendYield,

            bool permanent);

    };

}

Processes.cpp 

template <class Traits, class Interpolator,

              template <class> class Bootstrap = IterativeBootstrap>

GeneralizedBlackScholesProcess2::GeneralizedBlackScholesProcess2(

const boost::shared_ptr<ObjectHandler::ValueObject> &properties,

const boost::shared_ptr<QuantLib::BlackVolTermStructure> &blackVolTermStructureP,

QuantLib::Real underlying, 

const QuantLib::DayCounter &dayCounter, 

const QuantLib::Date &settlementDate,

const boost::shared_ptr<QuantLib::PiecewiseYieldCurve<Traits,Interpolator,Bootstrap>>& piecewiseYieldCurveP, 

QuantLib::Spread dividendYield, 

bool permanent)

: ObjectHandler::LibraryObject<QuantLib::GeneralizedBlackScholesProcess>(properties, permanent) {

QuantLib::Handle<QuantLib::Quote> underlyingH(

            boost::shared_ptr<QuantLib::Quote>(

            new QuantLib::SimpleQuote(underlying)));

QuantLib::Handle<QuantLib::YieldTermStructure> yieldTermStructure(piecewiseYieldCurveP);

QuantLib::Handle<QuantLib::YieldTermStructure> flatDividendTS(

            boost::shared_ptr<QuantLib::YieldTermStructure>(

            new QuantLib::FlatForward(settlementDate, dividendYield, dayCounter)));

        QuantLib::Handle<QuantLib::BlackVolTermStructure>

            blackVolTermStructureH(blackVolTermStructureP);

        libraryObject_ = boost::shared_ptr<QuantLib::GeneralizedBlackScholesProcess> (

            new QuantLib::GeneralizedBlackScholesProcess(

                underlyingH,

                flatDividendTS,

                yieldTermStructure,

                blackVolTermStructureH));

}

However, when I compile I am getting the following error.

QuantLibAddin::GeneralizedBlackScholesProcess2' : use of class template requires template argument list

1>        .\qlo/processes.hpp(67) : see declaration of 'QuantLibAddin::GeneralizedBlackScholesProcess2'

1>.\qlo\processes.cpp(104) : error C2244: 'QuantLibAddin::GeneralizedBlackScholesProcess2<Traits,Interpolator,Bootstrap>::GeneralizedBlackScholesProcess2' : unable to match function definition to an existing declaration

1>        .\qlo/processes.hpp(69) : see declaration of 'QuantLibAddin::GeneralizedBlackScholesProcess2<Traits,Interpolator,Bootstrap>::GeneralizedBlackScholesProcess2'

1>        definition

1>        'QuantLibAddin::GeneralizedBlackScholesProcess2::GeneralizedBlackScholesProcess2(const boost::shared_ptr<T> &,const boost::shared_ptr<QuantLib::BlackVolTermStructure> &,QuantLib::Real,const QuantLib::DayCounter &,const QuantLib::Date &,const boost::shared_ptr<QuantLib::PiecewiseYieldCurve<Traits,Interpolator,Bootstrap>> &,QuantLib::Spread,bool)'

1>        with

1>        [

1>            T=ObjectHandler::ValueObject

1>        ]

1>        existing declarations

1>        'QuantLibAddin::GeneralizedBlackScholesProcess2<Traits,Interpolator,Bootstrap>::GeneralizedBlackScholesProcess2(const boost::shared_ptr<T> &,const boost::shared_ptr<QuantLib::BlackVolTermStructure> &,QuantLib::Real,const QuantLib::DayCounter &,const QuantLib::Date &,const boost::shared_ptr<QuantLib::PiecewiseYieldCurve<Traits,Interpolator,Bootstrap>> &,QuantLib::Spread,bool)'

1>        with

1>        [

1>            T=ObjectHandler::ValueObject

I have tried all possible options but to no avail . Could someone please point out where I am going wrong?? 

I really appreciate any help in this regard 

Thanks in Advance 

Kumaraganesh 

 
Thanks
Kumaraganesh Subramanian
MS in Financial Mathematics
Stanford University

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