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Question on registerWith for evaluationDates

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Tawanda Gwena

Question on registerWith for evaluationDates

Dear all,

I have the simple problem of trying to change the evaluation date for a basic option. For some reason I cannot seem to set the observer to work properly. I want to work out the price of an option on 15 May 2009 and 10 May 2010. The option expires on 17 May 2010.

If I set the evaluation date to after expiry I (rightly) get the value of the option to be 0.

Here is some code which I have. How can I fix/understand this?

#include <ql/quantlib.hpp>

#include <iostream>

using namespace QuantLib;

int main(int, char* [])

{

std::cout << std::endl;

// set up dates

Calendar calendar = TARGET();

Date todaysDate(15, May, 2009);

Settings::instance().evaluationDate() = todaysDate;

Date settlementDate(17, May, 2009);

Date maturity(17, May, 2010);

DayCounter dayCounter = Actual365Fixed();

// option parameters

Option::Type type(Option::Call);

Real underlying = 40;

Real strike = 40;

Spread dividendYield = 0.00;

Rate riskFreeRate = 0.06;

Volatility volatility = 0.1;

//basic option

boost::shared_ptr<StrikedTypePayoff> payoff(new PlainVanillaPayoff(type, strike));

boost::shared_ptr<Exercise> europeanExercise(new EuropeanExercise(maturity));

VanillaOption europeanOption(payoff, europeanExercise);

//Handle setups

Handle<Quote> underlyingH(boost::shared_ptr<Quote>(new SimpleQuote(underlying)));

Handle<YieldTermStructure> flatTermStructure(

boost::shared_ptr<YieldTermStructure>(

new FlatForward(settlementDate,

riskFreeRate,

dayCounter)));

Handle<YieldTermStructure> flatDividendTS(

boost::shared_ptr<YieldTermStructure>(

new FlatForward(settlementDate,

dividendYield,

dayCounter)));

Handle<BlackVolTermStructure> flatVolTS(

boost::shared_ptr<BlackVolTermStructure>(

new BlackConstantVol(settlementDate,

calendar,

volatility,

dayCounter)));

boost::shared_ptr<BlackScholesMertonProcess> bsmProcess(

new BlackScholesMertonProcess(underlyingH,

flatDividendTS,

flatTermStructure,

flatVolTS));

boost::shared_ptr<PricingEngine> analyticEngine(new AnalyticEuropeanEngine(bsmProcess));

europeanOption.setPricingEngine(analyticEngine);

europeanOption.registerWith(Settings::instance().evaluationDate());

std::cout<<"European Option value on 15, May 2009: " << europeanOption.NPV()<<std::endl;

Settings::instance().evaluationDate() = Date(10, May, 2010);

std::cout<<"European Option value on 10 May 2010: " << europeanOption.NPV()<<std::endl;

return 0;

}

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Luigi Ballabio

Re: Question on registerWith for evaluationDates

On Apr 9, 2010, at 9:55 PM, Tawanda Gwena wrote:

> I have the simple problem of trying to change the evaluation date
> for a basic option. For some reason I cannot seem to set the
> observer to work properly. I want to work out the price of an option
> on 15 May 2009 and 10 May 2010. The option expires on 17 May 2010.
>
> If I set the evaluation date to after expiry I (rightly) get the
> value of the option to be 0.
>
> Here is some code which I have. How can I fix/understand this?
>
> Handle<YieldTermStructure> flatTermStructure(
> boost::shared_ptr<YieldTermStructure>(
> new
> FlatForward(settlementDate,
>
> riskFreeRate,
>
> dayCounter)));

If you use the FlatForward constructor that takes a reference date,
the curve will keep calculating discounts from that date, no matter
where you move the evaluation date. Use the constructor taking a
number of settlement days instead, and the reference date will move
with the evaluation date.

Luigi

------------------------------------------------------------------------------
Download Intel® Parallel Studio Eval
Try the new software tools for yourself. Speed compiling, find bugs
proactively, and fine-tune applications for parallel performance.
See why Intel Parallel Studio got high marks during beta.
http://p.sf.net/sfu/intel-sw-dev
_______________________________________________
QuantLib-users mailing list
[hidden email]
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Tawanda Gwena

Re: Question on registerWith for evaluationDates

Thanks!

I can now have a good weekend.

On Apr 9, 2010, at 4:07 PM, Luigi Ballabio wrote:

>
> On Apr 9, 2010, at 9:55 PM, Tawanda Gwena wrote:
>
>> I have the simple problem of trying to change the evaluation date
>> for a basic option. For some reason I cannot seem to set the
>> observer to work properly. I want to work out the price of an
>> option on 15 May 2009 and 10 May 2010. The option expires on 17 May
>> 2010.
>>
>> If I set the evaluation date to after expiry I (rightly) get the
>> value of the option to be 0.
>>
>> Here is some code which I have. How can I fix/understand this?
>>
>> Handle<YieldTermStructure> flatTermStructure(
>> boost::shared_ptr<YieldTermStructure>(
>> new
>> FlatForward(settlementDate,
>>
>> riskFreeRate,
>>
>> dayCounter)));
>
> If you use the FlatForward constructor that takes a reference date,
> the curve will keep calculating discounts from that date, no matter
> where you move the evaluation date. Use the constructor taking a
> number of settlement days instead, and the reference date will move
> with the evaluation date.
>
> Luigi
>