net.finmath.montecarlo.assetderivativevaluation.products

Class DigitalOption

java.lang.Object

net.finmath.montecarlo.AbstractMonteCarloProduct

net.finmath.montecarlo.assetderivativevaluation.products.AbstractAssetMonteCarloProduct

net.finmath.montecarlo.assetderivativevaluation.products.DigitalOption

All Implemented Interfaces:

Product, AssetMonteCarloProduct, MonteCarloProduct

Direct Known Subclasses:

SingleAssetMonteCarloProductFactory.DigitalOptionMonteCarlo

public class DigitalOption
extends AbstractAssetMonteCarloProduct

Implements the valuation of a digital option on a single asset. Given a model for an asset S, the digital option with strike K, maturity T pays
V(T) = indicator(S(T) - K) in T.
That is 1 if S(T) > 0 otherwise 0. The getValue method of this class will return the random variable N(t) * V(T) / N(T), where N is the numeraire provided by the model. If N(t) is deterministic, calling getAverage on this random variable will result in the value. Otherwise a conditional expectation has to be applied.

Version:

1.3

Author:

Christian Fries

Constructor Summary

Constructors

Constructor and Description
DigitalOption(double maturity, double strike) Construct a product representing an digital option on an asset S (where S the asset with index 0 from the model - single asset case).
DigitalOption(double maturity, double strike, int underlyingIndex) Construct a product representing an digital option on an asset S (where S the asset with index 0 from the model - single asset case).
DigitalOption(String nameOfUnderlying, double maturity, double strike)

Method Summary

Modifier and Type	Method and Description
RandomVariable	getValue(double evaluationTime, AssetModelMonteCarloSimulationModel model) This method returns the value random variable of the product within the specified model, evaluated at a given evalutationTime.

Methods inherited from class net.finmath.montecarlo.assetderivativevaluation.products.AbstractAssetMonteCarloProduct

getValue

Methods inherited from class net.finmath.montecarlo.AbstractMonteCarloProduct

getCurrency, getValue, getValue, getValues, getValues, getValues, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, getValuesForModifiedData, toString

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, wait, wait, wait

Constructor Detail

DigitalOption

public DigitalOption(double maturity,
                     double strike,
                     int underlyingIndex)

Construct a product representing an digital option on an asset S (where S the asset with index 0 from the model - single asset case).

Parameters:

maturity - The maturity T in the option payoff indicator(S(T)-K)

strike - The strike K in the option payoff indicator(S(T)-K).

underlyingIndex - The index of the underlying to be fetched from the model.

DigitalOption

public DigitalOption(double maturity,
                     double strike)

Construct a product representing an digital option on an asset S (where S the asset with index 0 from the model - single asset case).

Parameters:

maturity - The maturity T in the option payoff indicator(S(T)-K)

strike - The strike K in the option payoff indicator(S(T)-K).

DigitalOption

public DigitalOption(String nameOfUnderlying,
                     double maturity,
                     double strike)

Method Detail

getValue

public RandomVariable getValue(double evaluationTime,
                               AssetModelMonteCarloSimulationModel model)
                        throws CalculationException

This method returns the value random variable of the product within the specified model, evaluated at a given evalutationTime. Note: For a lattice this is often the value conditional to evalutationTime, for a Monte-Carlo simulation this is the (sum of) value discounted to evaluation time. Cashflows prior evaluationTime are not considered.

Specified by:

getValue in interface AssetMonteCarloProduct

Specified by:

getValue in class AbstractAssetMonteCarloProduct

Parameters:

evaluationTime - The time on which this products value should be observed.

model - The model used to price the product.

Returns:

The random variable representing the value of the product discounted to evaluation time

Throws:

CalculationException - Thrown if the valuation fails, specific cause may be available via the cause() method.