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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