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Option does not decay in time

Posted by Dan Krop on Mar 23, 2011; 4:42am
URL: http://quantlib.414.s1.nabble.com/Option-does-not-decay-in-time-tp8219.html

Hello Quantlibbers,
   I am having a problem approximating theta because it seems the option I have has constant NPV over time for a given underlying price.  

Here is a test function,

Real approximateTheta(VanillaOption & option)
{
DayCounter dc = Actual365Fixed();

Date today = Settings::instance().evaluationDate();
Time dT = dc.yearFraction(today-5,today+5);

std::cout<<"today="<<today<<"  dT="<<dT<<std::endl;
Settings::instance().evaluationDate()=today-5;
Real value_m=option.NPV();
Settings::instance().evaluationDate()=today+5;
Real value_p=option.NPV();

Settings::instance().evaluationDate()=today;
std::cout<<"m="<<value_m<<" p="<<value_p<<std::endl;

Real theta=(value_p - value_m)/dT;
return theta;
}

When I run this, I get that value_p=value_m. The option uses the AnalyticEuropeanEngine. I thought that options registered with the evaluationDate, so simply moving the date should be enough to get them to decay. I must be doing something wrong. I can provide a more complete example if it will help.

Thanks in advance,
     Dan

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