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finmath lib is a Mathematical Finance Library in Java.
It provides algorithms and methodologies related to mathematical finance.
/*
* (c) Copyright Christian P. Fries, Germany. Contact: [email protected].
*
* Created on 23.03.2014
*/
package net.finmath.fouriermethod.products;
import org.apache.commons.math3.complex.Complex;
/**
* Implements valuation of a European option on a single asset.
*
* Given a model for an asset S, the European option with strike K, maturity T
* pays
*
* max(S(T) - K , 0) in T
*
*
* The class implements the characteristic function of the call option
* payoff, i.e., its Fourier transform.
*
* @author Christian Fries
* @author Alessandro Gnoatto
* @version 1.0
*/
public class EuropeanOption extends AbstractFourierTransformProduct {
private final String underlyingName;
private final double maturity;
private final double strike;
public EuropeanOption(final String underlyingName, final double maturity, final double strike) {
super();
this.underlyingName = underlyingName;
this.maturity = maturity;
this.strike = strike;
}
/**
* Construct a product representing an European option on an asset S (where S the asset with index 0 from the model - single asset case).
* @param maturity The maturity T in the option payoff max(S(T)-K,0)
* @param strike The strike K in the option payoff max(S(T)-K,0).
*/
public EuropeanOption(final double maturity, final double strike) {
this(null, maturity, strike);
}
@Override
public Complex apply(final Complex argument) {
final Complex iargument = argument.multiply(Complex.I);
final Complex exponent = (iargument).add(1);
final Complex numerator = (new Complex(strike)).pow(exponent);
final Complex denominator = (argument.multiply(argument)).subtract(iargument);
return numerator.divide(denominator).negate();
}
@Override
public double getMaturity() {
return maturity;
}
@Override
public double getIntegrationDomainImagLowerBound() {
return 0.5;
}
@Override
public double getIntegrationDomainImagUpperBound() {
return 2.5;
}
}