Re: European option validation

Posted by ray 176 on Jan 08, 2013; 8:12pm
URL: http://quantlib.414.s1.nabble.com/Re-European-option-validation-tp13880.html

I am new to Quantlib code base, but I have a basic question, 

I tried to calculate a basic European option using the below but having difficulty to validate the results against my spreadsheet

[Call] = blsprice(100, 97, 0.1, 0.25, 0.5) returns a Call  price of $12.61 via spreadsheet

but, via Quantlib I am getting value $10.77 

can you advice,

I hope you don't mind that I posted the code below, 

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

QuantLib::Real stock = 100;

QuantLib::Real strike = 97;

QuantLib::Real time = 0.25;

QuantLib::Spread dividendYield = 0.00;

QuantLib::Rate riskFreeRate = 0.1;

QuantLib::Volatility volatility = 0.5;

QuantLib::DayCounter dc = QuantLib::Actual360();

QuantLib::Date today = QuantLib::Date::todaysDate();

boost::shared_ptr<QuantLib::SimpleQuote> spot(new QuantLib::SimpleQuote(0.0));

boost::shared_ptr<QuantLib::SimpleQuote> qRate(new QuantLib::SimpleQuote(0.0));

boost::shared_ptr<QuantLib::YieldTermStructure> qTS = flatRate(today, qRate, dc);

boost::shared_ptr<QuantLib::SimpleQuote> rRate(new QuantLib::SimpleQuote(0.0));

boost::shared_ptr<QuantLib::YieldTermStructure> rTS = flatRate(today, rRate, dc);

boost::shared_ptr<QuantLib::SimpleQuote> vol(new QuantLib::SimpleQuote(0.0));

boost::shared_ptr<QuantLib::BlackVolTermStructure> volTS = flatVol(today, vol, dc);

boost::shared_ptr<QuantLib::StrikedTypePayoff> payoff1(new

           QuantLib::PlainVanillaPayoff(type, strike));

           QuantLib::Date exDate = today + timeToDays(time);

boost::shared_ptr<QuantLib::Exercise> exercise(new QuantLib::EuropeanExercise(exDate));

spot ->setValue(strike);

 qRate->setValue(dividendYield);

 rRate->setValue(riskFreeRate);

vol  ->setValue(volatility);

 boost::shared_ptr<QuantLib::BlackScholesMertonProcess> stochProcess(new

            QuantLib::BlackScholesMertonProcess(QuantLib::Handle<QuantLib::Quote>(spot),

                                      QuantLib::Handle<QuantLib::YieldTermStructure>(qTS),

                                      QuantLib::Handle<QuantLib::YieldTermStructure>(rTS),

                                      QuantLib::Handle<QuantLib::BlackVolTermStructure>(volTS)));

        boost::shared_ptr<QuantLib::PricingEngine> engine(

                                    new QuantLib::AnalyticEuropeanEngine(stochProcess));

 QuantLib::EuropeanOption option(payoff1, exercise);

 option.setPricingEngine(engine);

 QuantLib::Real calculated = option.NPV();

.............................

boost::shared_ptr<QuantLib::YieldTermStructure>

    flatRate(const QuantLib::Date& today,

             const boost::shared_ptr<QuantLib::Quote>& forward,

             const QuantLib::DayCounter& dc) {

        return boost::shared_ptr<QuantLib::YieldTermStructure>(

                          new QuantLib::FlatForward(today, QuantLib::Handle<QuantLib::Quote>(forward), dc));

    }

Regards

Ray

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