-
Notifications
You must be signed in to change notification settings - Fork 16
/
Copy pathblog_american_and_european_option.py
179 lines (111 loc) · 4.73 KB
/
blog_american_and_european_option.py
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
'''
QuantLib with Python example
Copyright (C) 2014 John Orford
This program is free software: you can redistribute it and/or modify
it under the terms of the GNU Affero General Public License as
published by the Free Software Foundation, either version 3 of the
License, or (at your option) any later version.
This program is distributed in the hope that it will be useful,
but WITHOUT ANY WARRANTY; without even the implied warranty of
MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE. See the
GNU Affero General Public License for more details.
You should have received a copy of the GNU Affero General Public License
along with this program. If not, see <http://www.gnu.org/licenses/>.
'''
from QuantLib import *
def getProcess(valuation_date, interest_rate, dividend_rate, volatility_rate, underlying_price):
###################################################
##2)
#Date setup
###################################################
#Assumptions
calendar = UnitedStates()
day_counter = ActualActual()
Settings.instance().evaluation_date = valuation_date
###################################################
##3)
#Curve setup
###################################################
interest_curve = FlatForward(valuation_date, interest_rate, day_counter )
dividend_curve = FlatForward(valuation_date, dividend_rate, day_counter )
volatility_curve = BlackConstantVol(valuation_date, calendar, volatility_rate, day_counter )
#Collate market data together
u = QuoteHandle(underlying_price)
d = YieldTermStructureHandle(dividend_curve)
r = YieldTermStructureHandle(interest_curve)
v = BlackVolTermStructureHandle(volatility_curve)
return BlackScholesMertonProcess(u, d, r, v)
###################################################
##4)
#Option setup
###################################################
def getEuroOption(expiry_date, put_or_call, strike_price, process):
exercise = EuropeanExercise(expiry_date)
payoff = PlainVanillaPayoff(put_or_call, strike_price)
#Option Setup
option = VanillaOption(payoff, exercise)
engine = AnalyticEuropeanEngine(process)
option.setPricingEngine(engine)
return option
def getAmericanOption(valuation_date, expiry_date, put_or_call, strike_price, process):
exercise = AmericanExercise(valuation_date, expiry_date)
payoff = PlainVanillaPayoff(put_or_call, strike_price)
#Option Setup
option = VanillaOption(payoff, exercise)
time_steps = 100
grid_points = 100
#engine = BinomialVanillaEngine(process,'crr',time_steps)
engine = FDAmericanEngine(process,time_steps,grid_points)
option.setPricingEngine(engine)
return option
###################################################
##5)
##Collate results
###################################################
def getAmericanResults(option):
print "NPV: ", option.NPV()
print "Delta: ", option.delta()
print "Gamma: ", option.gamma()
#print "Theta: ", option.theta()
def getEuropeanResults(option):
print "NPV: ", option.NPV()
print "Delta: ", option.delta()
print "Gamma: ", option.gamma()
print "Vega: ", option.vega()
print "Theta: ", option.theta()
print "Rho: ", option.rho()
print "Dividend Rho: ", option.dividendRho()
print "Theta per Day: ", option.thetaPerDay()
print "Strike Sensitivity: ", option.strikeSensitivity()
###################################################
##1)
##Inputs
###################################################
#dates
valuation_date = Date(17,4,2014)
expiry_date = Date(15,1,2016)
#terms and conditions
strike_price = 35
put_or_call = Option.Call
#market data
interest_rate = 0.01
#see idivs.org for expected dividend yields
dividend_rate = 0
volatility_rate = 0.5
underlying_price = SimpleQuote(36.35)
market_value = 7.5
process = getProcess( valuation_date, interest_rate, dividend_rate, volatility_rate, underlying_price)
eOption = getEuroOption( expiry_date, put_or_call, strike_price, process)
implied_volatility_rate = eOption.impliedVolatility(market_value, process)
calibrated_process = getProcess( valuation_date, interest_rate, dividend_rate, implied_volatility_rate, underlying_price)
calibrated_eOption = getEuroOption( expiry_date, put_or_call, strike_price, calibrated_process)
aOption = getAmericanOption( valuation_date, expiry_date, put_or_call, strike_price, process)
implied_volatility_rate = aOption.impliedVolatility(market_value, process)
calibrated_process = getProcess( valuation_date, interest_rate, dividend_rate, implied_volatility_rate, underlying_price)
calibrated_aOption = getAmericanOption( valuation_date, expiry_date, put_or_call, strike_price, calibrated_process)
print ""
print "European Results"
getEuropeanResults(calibrated_eOption)
print ""
print "American Results"
getAmericanResults(calibrated_aOption)