mainvarianceswap.cpp

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#include "../PartA/BlackScholes/OptionStrategy.h"
#include "../PartK/VarianceSwap.h"

#include<iostream>
#include<valarray>
using namespace std;


bool mainvarianceswap(void) {

        //Create basket of options
        Real spot=100,strike1=90,strike2=110,vol1=0.2,vol2=0.22,vol3=0.21,mat=1.,rate=0.02;
        OptionStrategy* Strategy=new OptionStrategy();
        Strategy->addLongButterflySpread(spot,vol1,true,vol2,true,vol3,true,rate,strike1,strike2,mat,10);

        //Compute value of VIX index
        Real Kmin=200,Kmax=3500,step=10,Mat=1./12,SpotVix=1200,Fwd,ratevix=0.043,volvix=0.33;
        Real strike,result;
        Fwd=SpotVix*exp(ratevix/12);
        OptionStrategy* optionsVix=new OptionStrategy();
        unsigned int i=0;
        valarray<BlackScholes> bs;
        bs.resize(Natural((Kmax-Kmin)/step+1));
        while (Kmin+i*step<=Kmax) {
                strike=Kmin+i*step;
                if (strike<=Fwd)
                        bs[i]=BlackScholes(SpotVix,volvix,true,ratevix,strike,Mat,Put);
                else
                        bs[i]=BlackScholes(SpotVix,volvix,true,ratevix,strike,Mat,Call);
                optionsVix->addOneBlackScholesObject(&bs[i],1);
                i++;
        }
        VarianceSwap* vix=new VarianceSwap(optionsVix,Mat,Fwd);
        result=100*vix->getPrice();
        cout<<"The price of vix index is : "<<result<<" for a forward price of "<<Fwd<<" and vol of "<<volvix<<" and rate of "<<ratevix<<endl;

        //Create Variance Swap
        VarianceSwap myvarswap=VarianceSwap(Strategy,1.,100);
        Real price=myvarswap.getPrice();
        cout<<"The price of the variance swap is " << myvarswap.getPrice() <<endl;
        if (price>0.015 && price <0.02) return true;
        else return false;
}

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