mainbinomialtree.cpp

Go to the documentation of this file.

#include "..\PartA\BlackScholes\BlackScholes.h"
#include "../Interface/main.h"
#include "..\PartJ\binomialTree.h"
#include "..\common\utils.h"
using namespace std;

bool mainbinomialtree(void) {
        bool result = true;
        const valarray<Real> *stockValues;
        
        Real So = 50, K = 50, r = 0.05, sigma = .30, T = 1;
        Natural n = 10;
        binomialTree *bt = new binomialTree(So, r, sigma, T, n);
        binomialTree *bt2 = new binomialTree(So, r, sigma, T, n + 1);
        bt->runEngineCall(PayOff(K));
        bt2->runEngineCall(PayOff(K));

        cout << "bintree: " << bt << endl;
        
        stockValues = bt->getStockProcess(n);
        Real highest = So * exp(n * sigma * sqrt(T/n));
        Real lowest = So * exp(-1 * (Real)n * sigma * sqrt(T/n));
        if ((stockValues == NULL) || 
                !realsEqual((*stockValues)[0], lowest) || 
                !realsEqual((*stockValues)[n], highest)) {
                cout << "low value: " << (*stockValues)[0]
                        << " expecting: " << lowest
                        << " high value: " << (*stockValues)[n] 
                        << " expecting: " << highest << endl;
                result = false;
        }

        BlackScholes *BS = new BlackScholes(So, sigma, true, r, K, T, Call);

        LongNatural nPaths = 100000, nDates = 1;
        volsurface* myvol = new volsurface(sigma);
        yieldCurve* mycurve = new yieldCurve(r);
        Real mcPrice = mainmc(T, K, So, myvol, mycurve, nPaths, nDates, 1);

        cout << "binomial tree price: " << bt->getPrice() << endl;
        cout << "avg of " << n << " and " << (n + 1) << " tree prices: " <<
                (.5 * (bt->getPrice() + bt2->getPrice())) << endl;
        cout << "black-scholes price: " << BS->getPrice() << endl;
        cout << "monte carlo price: " << mcPrice << endl;

        delete BS;
        // delete myvol;
        // delete mycurve;
        delete bt;
        return result;
}

---