Posted by
David Palmer-2 on
Jul 26, 2005; 6:42am
URL: http://quantlib.414.s1.nabble.com/Question-about-Black-Formula-results-tp3942p3944.html
Discount factor seems high. If it is, then the drift of the asset price
due to an increased rate will imply a higher delta.
-----Original Message-----
From:
[hidden email]
[mailto:
[hidden email]] On Behalf Of
Benjamin Janson
Sent: Tuesday, July 26, 2005 2:21 AM
To:
[hidden email]
Subject: [Quantlib-users] Question about Black Formula results
Hi,
just to get a feel for the QuandLib I tried to implement a simple call
option with the Black formula. But the results won't make sense to me.
underlying = 42.5;
vola = 0.2390;
discount_factor = 0.99;
strike_price = 42.5;
settlementDate(8, December, 2005);
Results are:
Black Value: 8.12504
Black Delta: 0.590589
Black Gamma: 0.0184494
Black Vega: 10.1256
Black Rho: 6.55746
First, the option value seems to be too high. I excepted it to be
somewhere aroung 4.70 - 4.90. Second the delta should be pretty exactly
0.5?? Third isn't it necessary to pass the maturity as an argument to
calculate the black value??
I guess I am using it wrong or something. Any help is appreciated.
Thanks a lot in advance for your help.
Cheers,
Benjamin
------------------------
Here is the code I used:
#include <cstdlib>
#include <string>
#include <stdexcept>
#include <iostream>
#include <ql/quantlib.hpp>
using namespace QuantLib;
int main(int argc, char *argv[])
{
try
{
QL_IO_INIT
Real underlying = 42.5;
Real vola = 0.2390;
Real discount_factor = 0.99;
Real strike_price = 42.5;
Date todaysDate(20, July, 2005);
Settings::instance().evaluationDate() = todaysDate;
Date settlementDate(8, December, 2005);
DayCounter dayCounter = Actual365Fixed();
Time maturity = dayCounter.yearFraction(todaysDate,
settlementDate);
Option::Type option_type(Option::Call);
boost::shared_ptr<StrikedTypePayoff> payoff(
new
PlainVanillaPayoff(option_type,
strike_price));
BlackFormula Black(underlying, discount_factor, vola, payoff);
std::cout << "Black Value: " << Black.value() << std::endl;
std::cout << "Black Delta: " << Black.delta(underlying) <<
std::endl;
std::cout << "Black Gamma: " << Black.gamma(underlying) <<
std::endl;
std::cout << "Black Vega: " << Black.vega(maturity) <<
std::endl;
std::cout << "Black Rho: " << Black.rho(maturity) << std::endl;
std::cout << std::endl;
std::cout << std::endl;
return 0;
}
catch (std::exception& e) {
std::cout << e.what() << std::endl;
return 1;
}
catch (...) {
std::cout << "unknown error" << std::endl;
return 1;
}
}
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