TreeProduct Class Reference

Virtual base class for path-independent European and American options. More...

#include <treeproduct.h>

Inheritance diagram for TreeProduct:

List of all members.

Public Member Functions
virtual coefficient	current_price (const PiecewiseLinear &current, const Portfolio &holdings=Portfolio(0, 0)) const =0
coefficient	expiry () const
virtual PiecewiseLinear	final_hedge (const Spot &spot) const =0
virtual PiecewiseLinear	interim_hedge (const coefficient t, const Spot &spot, const PiecewiseLinear &future_hedge) const =0
Portfolio	next_portfolio (const coefficient t, const Spot &spot, const PiecewiseLinear &future_hedge, const Portfolio &current_portfolio) const
	TreeProduct (const coefficient expiry)

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Detailed Description

Virtual base class for path-independent European and American options.

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Constructor & Destructor Documentation

TreeProduct::TreeProduct

(

const coefficient

expiry

)

[inline]

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Member Function Documentation

virtual coefficient TreeProduct::current_price	(	const PiecewiseLinear &	current,
		const Portfolio &	holdings = Portfolio(0, 0)
	)		const [pure virtual]

Computes current price of option, given the holdings of the investor

Parameters:

current	Lower boundary of set of hedging portfolios
holdings	Current holdings of investor

Implemented in TreeProductAmericanBuyer, TreeProductAmericanSeller, TreeProductEuropeanBuyer, and TreeProductEuropeanSeller.

coefficient TreeProduct::expiry

(

)

const [inline]

Expiry time.

virtual PiecewiseLinear TreeProduct::final_hedge

(

const Spot &

spot

)

const [pure virtual]

Finds set of portfolios that hedges the option at its expiry time.

Parameters:

spot	Price of underlying asset

Returns:

Piecewise linear function that gives the lower boundary of set of hedging portfolios

Implemented in TreeProductAmericanBuyer, TreeProductAmericanBuyerOptional, TreeProductAmericanSeller, TreeProductAmericanSellerOptional, TreeProductEuropeanBuyerOptional, TreeProductEuropeanSeller, and TreeProductEuropeanSellerOptional.

virtual PiecewiseLinear TreeProduct::interim_hedge	(	const coefficient	t,
		const Spot &	spot,
		const PiecewiseLinear &	future_hedge
	)		const [pure virtual]

Finds set of portfolios that hedges the payoff of the option at time t and in the future

Parameters:

t	Time
spot	Price of underlying asset
future_hedge	Piecewise linear function whose epigraph consist of portfolios that hedge the option at all future time steps

Returns:

Piecewise linear function that gives the lower boundary of set of hedging portfolios

Implemented in TreeProductAmericanBuyer, TreeProductAmericanSeller, and TreeProductEuropean.

Portfolio TreeProduct::next_portfolio	(	const coefficient	t,
		const Spot &	spot,
		const PiecewiseLinear &	future_hedge,
		const Portfolio &	current_portfolio
	)		const [inline]

Given a portfolio that hedges at the current time, computes a portfolio into which the trader can enter that hedges at all future times

Parameters:

t	Time
spot	Price of underlying asset
future_hedge	Piecewise linear function whose epigraph consist of portfolios that hedge the option at all future time steps
current_portfolio	Current portfolio. Must correspond to a point in the epigraph of interim_hedge(t, spot, future_hedge) (this is not checked).

Returns:

Portfolio that will hedge the product over the next time step.

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The documentation for this class was generated from the following file:

• treeproduct/treeproduct.h