com.opengamma.analytics.financial.model.stochastic.BlackScholesGeometricBrownianMotionProcess.java Source code

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Here is the source code for com.opengamma.analytics.financial.model.stochastic.BlackScholesGeometricBrownianMotionProcess.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.stochastic;

import org.apache.commons.lang.Validate;

import com.opengamma.analytics.financial.model.option.definition.OptionDefinition;
import com.opengamma.analytics.financial.model.option.definition.StandardOptionDataBundle;
import com.opengamma.analytics.math.function.Function1D;
import com.opengamma.analytics.math.function.Function2D;

/**
 * 
 * @param <T>
 * @param <U>
 */
public class BlackScholesGeometricBrownianMotionProcess<T extends OptionDefinition, U extends StandardOptionDataBundle>
        extends StochasticProcess<T, U> {

    @Override
    public Function1D<Double, Double> getPathGeneratingFunction(final T t, final U u, final int steps) {
        Validate.notNull(t);
        Validate.notNull(u);
        if (steps < 1) {
            throw new IllegalArgumentException("Number of steps must be greater than zero");
        }
        final double k = t.getStrike();
        final double m = t.getTimeToExpiry(u.getDate());
        final double sigma = u.getVolatility(m, k);
        final double b = u.getCostOfCarry();
        final double dt = m / steps;
        final double sigmaSq = sigma * sigma;
        final double nu = dt * (b - 0.5 * sigmaSq);
        final double sigmaDt = sigma * Math.sqrt(dt);
        return new Function1D<Double, Double>() {

            @Override
            public Double evaluate(final Double e) {
                return nu + sigmaDt * e;
            }
        };
    }

    @Override
    public Double getInitialValue(final T t, final U u) {
        return Math.log(u.getSpot());
    }

    @Override
    public Double getFinalValue(final Double x) {
        return Math.exp(x);
    }

    @Override
    public Function2D<Double, Double> getPathAccumulationFunction() {
        return new Function2D<Double, Double>() {

            @Override
            public Double evaluate(final Double x1, final Double x2) {
                return x1 + x2;
            }

        };
    }
}