Posted by
Jack Jones-2 on
May 09, 2007; 9:44pm
URL: http://quantlib.414.s1.nabble.com/Black-Scholes-theoretical-value-tp823.html
I'd like to calculate the Black-Scholes theoretical value of an option.
I'm new to QuantLib and kind-of new to quantitative finance. I'm using
EquityOption.cpp as a base for my code.
Here is the relevant setup (questions at bottom):
//==========================
// Underlying price
shared_ptr<SimpleQuote>
underlyingPrice(new SimpleQuote(stockPrice));
// Dividend term structure
shared_ptr<YieldTermStructure>
dividendTS(new FlatForward(expiryDate,
dividend,
Actual360()));
// Interest rate term structure
shared_ptr<YieldTermStructure>
interestTS(new FlatForward(expiryDate,
interest,
Actual360()));
// Historical volatility term structure
shared_ptr<BlackVolTermStructure>
volatilityTS(new BlackConstantVol(expiryDate,
historicalVolitility,
Actual360()));
shared_ptr<StrikedTypePayoff>
payoff(new PlainVanillaPayoff(type, strikePrice));
shared_ptr<Exercise>
exercise(new AmericanExercise(Date::todaysDate(), expiryDate));
shared_ptr<QuantLib::GeneralizedBlackScholesProcess>
stochasticProcess(new
QuantLib::GeneralizedBlackScholesProcess(
Handle<Quote>(underlyingPrice),
Handle<YieldTermStructure>(dividendTS),
Handle<YieldTermStructure>(interestTS),
Handle<BlackVolTermStructure>(volatilityTS)));
shared_ptr<PricingEngine>
engine(new BinomialVanillaEngine<CoxRossRubinstein>(150));
VanillaOption option(stochasticProcess, payoff, exercise, engine);
//==========================
I have two questions:
1. what does the "price" argument to option.impliedVolatility()
represent?
2. now that I have this object infrastructure built up, what is the
actual method call to get the theoretical value of the option?
Thanks for your help!
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