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Highlights from
Modern Pricing Method using Transforms

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Modern Pricing Method using Transforms

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25 Jul 2012 (Updated )

COS, CONV, Lewis Option Pricing Methods including Bermudan and American Options.

mvratio1(S0,Strike, prices, K, levymeasure,dt,i_ub)
% This is material illustrating the methods from the book
% Financial Modelling  - Theory, Implementation and Practice with Matlab
% source
% Wiley Finance Series
% ISBN 978-0-470-74489-5
%
% Date: 02.05.2012
%
% Authors:  Joerg Kienitz
%           Daniel Wetterau
%
% Please send comments, suggestions, bugs, code etc. to
% kienitzwetterau_FinModelling@gmx.de
%
% (C) Joerg Kienitz, Daniel Wetterau
% 
% Since this piece of code is distributed via the mathworks file-exchange
% it is covered by the BSD license 
%
% This code is being provided solely for information and general 
% illustrative purposes. The authors will not be responsible for the 
% consequences of reliance upon using the code or for numbers produced 
% from using the code. 



function y = mvratio1(S0,Strike, prices, K, levymeasure,dt,i_ub)

v = interp1(Strike,prices,K,'linear','extrap');     % option values at K

xval2 = dt:dt:i_ub;
xval1 = -xval2;

f2 = @(x) (exp(x) - 1) .* levymeasure(x);

f3 = @(x) (exp(x)-1).^2 .* levymeasure(x);

    s2 = v * dt*(sum(f2(xval1)) + sum(f2(xval2)));
    s3 = dt*(sum(f3(xval1)) + sum(f3(xval2)));
    
    s1 = zeros(length(K),1);
    
    Xval1 = (exp(xval1) - 1) .* exp(xval1) .*  levymeasure(xval1);
    Xval2 = (exp(xval2) - 1) .* exp(xval2) .*  levymeasure(xval2);
    
    for jj = 1:length(K)
        s1(jj) = (sum(Xval1 .* interp1(Strike,prices,K(jj)*exp(-xval1))) ...
            + sum(Xval2.*interp1(Strike,prices,K(jj)*exp(-xval2))))*dt;
    end
    
num = s1-s2;
denum = s3;

y = num/denum/S0;
end

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