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Mileage option

Posted by David Klein-5 on Jun 10, 2007; 11:32am
URL: http://quantlib.414.s1.nabble.com/Mileage-option-tp989.html

I am looking for a framework for running MC simulations in finance and
I am trying to see if Quantlib fits the bill. I have
download/installed/built Quantlib successfully, and am now trying to
figure out what modifications I need to do in order to run
simulations.

As an example task, I have selected to try to model a mileage option.
A mileage option is a European option with an expiry date ethe earlier
of matuirty and T, where T is the date at which the mileage runs out.
The mileage of an option is defined as sum_i=1^n ( (S_i-S_{i-1})/S_i
)^2 (basically the realized variance) and, for a given mileage M, the
option expires at the earlier of maturity and the first time T for
which the sum exceeds M.

At the time the option expires, the holder receives max(S-K,0), i.e. a
plain European payoff.

What derived classes would I need to define in order to model this?

I have read and understood (cursorily) the EquityOption.cpp example
code. Can someone show me how I would model a mileage option?

Thanks,

David

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