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

Introduction

Here is the source code for com.opengamma.analytics.financial.model.option.pricing.analytic.ForwardStartOptionModel.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.ForwardStartOptionDefinition;
import com.opengamma.analytics.financial.model.option.definition.StandardOptionDataBundle;
import com.opengamma.analytics.math.function.Function1D;
import com.opengamma.analytics.math.statistics.distribution.NormalDistribution;
import com.opengamma.analytics.math.statistics.distribution.ProbabilityDistribution;

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

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

            @SuppressWarnings("synthetic-access")
            @Override
            public Double evaluate(final StandardOptionDataBundle data) {
                Validate.notNull(data, "data");
                final ZonedDateTime date = data.getDate();
                final double s = data.getSpot();
                final double t = definition.getTimeToExpiry(date);
                final double start = definition.getTimeToStart(date);
                final double b = data.getCostOfCarry();
                final double r = data.getInterestRate(t); // does this need r at both times?
                final double alpha = definition.getAlpha();
                final double sigma = data.getVolatility(t, alpha * s);
                final double deltaT = t - start;
                final double df1 = Math.exp(start * (b - r));
                final double df2 = Math.exp(deltaT * (b - r));
                final double df3 = Math.exp(-r * deltaT);
                final double sigmaT = sigma * Math.sqrt(deltaT);
                final double d1 = (Math.log(1. / alpha) + deltaT * (b + 0.5 * sigma * sigma)) / sigmaT;
                final double d2 = d1 - sigmaT;
                final int sign = definition.isCall() ? 1 : -1;
                return s * df1 * (sign * (df2 * NORMAL.getCDF(sign * d1) - alpha * df3 * NORMAL.getCDF(sign * d2)));
            }

        };
    }

}