bug report: negative price for an American put option using Bjerksund and Stensland approximation
Posted by jan.willem.bikker on Nov 09, 2005; 12:31am
URL: http://quantlib.414.s1.nabble.com/bug-report-negative-price-for-an-American-put-option-using-Bjerksund-and-Stensland-approximation-tp4195.html
Hello,
I have a bug report: I encountered a
negative price for an American put option using Bjerksund and Stensland
approximation.
I used the setting of the example from
QuantLib-0.3.8\Examples\AmericanOption\AmericanOption.cpp as a basis
for my program.
The settings are
SettlementDate=38353
ExerciseDate=42003 = SettlementDate
+10*365
strike=100
spot=125
vol=0.05
interest=0.1
dividend=0.05
option type = put
and
option.setPricingEngine(boost::shared_ptr<PricingEngine>(
new
BjerksundStenslandApproximationEngine));
aBjStprice
= option.NPV();
yields
aBjStprice
=-25
Furthermore, changing the spot to 100
yields a price of 0, which also seems incorrect.
I've checked in total 85 american options
in various scenarios, and these are the only two behaving strangely (the
rest is comparable to the binomial CCR method).
I hope somebody finds this message useful.
I couldn't find this bug on sourceforge.
Kind regards,
Jan Willem Bikker
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