com.opengamma.analytics.financial.model.option.pricing.analytic.FixedStrikeLookbackOptionModel.java Source code

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Here is the source code for com.opengamma.analytics.financial.model.option.pricing.analytic.FixedStrikeLookbackOptionModel.java

Source

/**
 * Copyright (C) 2009 - present by OpenGamma Inc. and the OpenGamma group of companies
 *
 * Please see distribution for license.
 */
package com.opengamma.analytics.financial.model.option.pricing.analytic;

import org.apache.commons.lang.Validate;
import org.threeten.bp.ZonedDateTime;

import com.opengamma.analytics.financial.model.option.definition.FixedStrikeLookbackOptionDefinition;
import com.opengamma.analytics.financial.model.option.definition.StandardOptionWithSpotTimeSeriesDataBundle;
import com.opengamma.analytics.math.function.Function1D;
import com.opengamma.analytics.math.statistics.distribution.NormalDistribution;
import com.opengamma.analytics.math.statistics.distribution.ProbabilityDistribution;
import com.opengamma.timeseries.DoubleTimeSeries;

/**
 * 
 */
public class FixedStrikeLookbackOptionModel extends
        AnalyticOptionModel<FixedStrikeLookbackOptionDefinition, StandardOptionWithSpotTimeSeriesDataBundle> {
    private static final ProbabilityDistribution<Double> NORMAL = new NormalDistribution(0, 1);

    @Override
    public Function1D<StandardOptionWithSpotTimeSeriesDataBundle, Double> getPricingFunction(
            final FixedStrikeLookbackOptionDefinition definition) {
        Validate.notNull(definition, "definition");
        return new Function1D<StandardOptionWithSpotTimeSeriesDataBundle, Double>() {

            @SuppressWarnings("synthetic-access")
            @Override
            public Double evaluate(final StandardOptionWithSpotTimeSeriesDataBundle data) {
                Validate.notNull(data, "data");
                final DoubleTimeSeries<?> ts = data.getSpotTimeSeries();
                final double s = data.getSpot();
                final ZonedDateTime date = data.getDate();
                final double t = definition.getTimeToExpiry(date);
                final boolean isCall = definition.isCall();
                final double k = definition.getStrike();
                final double sCritical = isCall ? ts.maxValue() : ts.minValue();
                final double sigma = data.getVolatility(t, k);
                final double r = data.getInterestRate(t);
                final double b = data.getCostOfCarry();
                final double df1 = Math.exp(t * (b - r));
                final double df2 = Math.exp(-r * t);
                double x = k;
                if ((isCall && x <= sCritical) || (!isCall && x >= sCritical)) {
                    x = sCritical;
                }
                final int sign = isCall ? 1 : -1;
                final double d1 = getD1(s, x, t, sigma, b);
                final double d2 = getD2(d1, sigma, t);
                final double cdf1 = NORMAL.getCDF(sign * d1);
                return sign * (df2 * (x - k) + s * df1 * cdf1 - x * df2 * NORMAL.getCDF(sign * d2)
                        - s * df2 * sigma * sigma
                                * (Math.pow(s / x, -2 * b / sigma / sigma)
                                        * NORMAL.getCDF(sign * (d1 - 2 * b * Math.sqrt(t) / sigma))
                                        - Math.exp(b * t) * cdf1)
                                / 2 / b);
            }

        };
    }
}