Java tutorial
/** * 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 com.opengamma.analytics.financial.model.option.definition.OptionDefinition; import com.opengamma.analytics.financial.model.option.definition.SkewKurtosisOptionDataBundle; 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 GramCharlierModel extends AnalyticOptionModel<OptionDefinition, SkewKurtosisOptionDataBundle> { private static final ProbabilityDistribution<Double> NORMAL = new NormalDistribution(0, 1); @Override public Function1D<SkewKurtosisOptionDataBundle, Double> getPricingFunction(final OptionDefinition definition) { Validate.notNull(definition); final Function1D<SkewKurtosisOptionDataBundle, Double> pricingFunction = new Function1D<SkewKurtosisOptionDataBundle, Double>() { @SuppressWarnings("synthetic-access") @Override public Double evaluate(final SkewKurtosisOptionDataBundle data) { Validate.notNull(data); final double s = data.getSpot(); final double k = definition.getStrike(); final double t = definition.getTimeToExpiry(data.getDate()); final double b = data.getCostOfCarry(); final double r = data.getInterestRate(t); final double sigma = data.getVolatility(t, k); final double sigmaT = sigma * Math.sqrt(t); final double d1 = getD1(s, k, t, sigma, b); final double d2 = getD2(d1, sigma, t); final double skew = data.getAnnualizedSkew(); final double kurtosis = data.getAnnualizedPearsonKurtosis(); final double correction = sigmaT * (skew * (2 * sigmaT - d1) / (6. * Math.sqrt(t)) - kurtosis * (1 - d1 * d1 + 3 * sigmaT * (d1 - sigmaT)) / (24 * t)); final double df1 = Math.exp(-r * t); final double df2 = getDF(r, b, t); final double callPrice = s * df2 * (NORMAL.getCDF(d1) + NORMAL.getPDF(d1) * correction) - k * df1 * NORMAL.getCDF(d2); if (!definition.isCall()) { return callPrice + k * df1 - s * df2; } return callPrice; } }; return pricingFunction; } }