Class AnalyticTwoAssetCorrelationEngine

Namespace

NanoQL.PricingEngines

Assembly

NanoQL.dll

The analytic engine for a European two-asset correlation option: M. Zhang, "Exotic Options", World Scientific (1998); E. G. Haug, "The Complete Guide to Option Pricing Formulas", 2nd edition (2007).

public static class AnalyticTwoAssetCorrelationEngine

Inheritance

object

AnalyticTwoAssetCorrelationEngine

Inherited Members

object.GetType()

object.MemberwiseClone()

object.ToString()

object.Equals(object)

object.Equals(object, object)

object.ReferenceEquals(object, object)

object.GetHashCode()

Remarks

The value alone, as QuantLib's. The bivariate normal is QuantLib's default, BivariateCumulativeNormalDistributionWe04DP, where QuantLib's engine reads Drezner's 1978 algorithm, to six decimal places (Divergences/TwoAssetCorrelationBivariateTests.cs). The second asset's volatility is read at its own strike X₂, where QuantLib reads it at X₁ (Divergences/TwoAssetCorrelationSmileTests.cs). At X₂ < 0 the call is linear in the second asset where the first is in the money and the put worth nothing, where QuantLib takes the log of a negative ratio (Divergences/TwoAssetCorrelationNegativeStrikeTests.cs).

Each asset's carry reads its own process's curves and the payoff is discounted on the first process's risk-free curve, where QuantLib takes the rate from the first process alone (Divergences/TwoAssetTwoRiskFreeCurvesTests.cs). Every rate and volatility is read over the time to expiry on the clock across both processes (NanoQL.Methods.FdmBlackScholesOp.ClockAcross(System.Collections.Generic.IReadOnlyList{NanoQL.Processes.GeneralizedBlackScholesProcess})), each structure at the instants that time denotes, accruing nothing before its date, where QuantLib reads each volatility at its own process's time and everything else at the second process's; a structure sharing the clock's times is read as QuantLib reads it (Divergences/TwoAssetMismatchedTimesTests.cs).

Methods

Calculate(TwoAssetCorrelationOption, EvaluationContext, GeneralizedBlackScholesProcess, GeneralizedBlackScholesProcess, double)

Prices a European two-asset correlation option: QuantLib's calculate.

public static MultiAssetOptionResults Calculate(TwoAssetCorrelationOption option, EvaluationContext context, GeneralizedBlackScholesProcess p1, GeneralizedBlackScholesProcess p2, double correlation)

Parameters

option TwoAssetCorrelationOption

The option.

context EvaluationContext

The evaluation context.

p1 GeneralizedBlackScholesProcess

The first asset's process.

p2 GeneralizedBlackScholesProcess

The second asset's process.

correlation double

The correlation of the two assets, in [−1, 1].

Returns

MultiAssetOptionResults

The option's results: the value.

Exceptions

ArgumentNullException

An argument is null.

ArgumentException

The correlation is outside [−1, 1].

NanoQLException

The first strike or the first spot isn't positive.