/usr/include/ql/experimental/convertiblebonds/tflattice.hpp is in libquantlib0-dev 1.4-2.
This file is owned by root:root, with mode 0o644.
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/*
Copyright (C) 2005, 2006 Theo Boafo
Copyright (C) 2006 StatPro Italia srl
This file is part of QuantLib, a free-software/open-source library
for financial quantitative analysts and developers - http://quantlib.org/
QuantLib is free software: you can redistribute it and/or modify it
under the terms of the QuantLib license. You should have received a
copy of the license along with this program; if not, please email
<quantlib-dev@lists.sf.net>. The license is also available online at
<http://quantlib.org/license.shtml>.
This program is distributed in the hope that it will be useful, but WITHOUT
ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS
FOR A PARTICULAR PURPOSE. See the license for more details.
*/
/*! \file tflattice.hpp
\brief Binomial Tsiveriotis-Fernandes tree model
*/
#ifndef quantlib_lattices_tf_lattice_hpp
#define quantlib_lattices_tf_lattice_hpp
#include <ql/methods/lattices/bsmlattice.hpp>
#include <ql/experimental/convertiblebonds/discretizedconvertible.hpp>
namespace QuantLib {
//! Binomial lattice approximating the Tsiveriotis-Fernandes model
/*! \ingroup lattices */
template <class T>
class TsiveriotisFernandesLattice : public BlackScholesLattice<T> {
public:
TsiveriotisFernandesLattice(const boost::shared_ptr<T>& tree,
Rate riskFreeRate,
Time end,
Size steps,
Spread creditSpread,
Volatility volatility,
Spread divYield);
Spread creditSpread() const { return creditSpread_; };
protected:
void stepback(Size i,
const Array& values,
const Array& conversionProbability,
const Array& spreadAdjustedRate,
Array& newValues,
Array& newConversionProbability,
Array& newSpreadAdjustedRate) const;
void rollback(DiscretizedAsset&, Time to) const;
void partialRollback(DiscretizedAsset&, Time to) const;
private:
Spread creditSpread_;
};
// template definitions
template <class T>
TsiveriotisFernandesLattice<T>::TsiveriotisFernandesLattice(
const boost::shared_ptr<T>& tree,
Rate riskFreeRate,
Time end,
Size steps,
Spread creditSpread,
Volatility sigma,
Spread divYield)
: BlackScholesLattice<T>(tree, riskFreeRate, end, steps),
creditSpread_(creditSpread) {
QL_REQUIRE(this->pu_<=1.0,
"probability (" << this->pu_ << ") higher than one");
QL_REQUIRE(this->pu_>=0.0,
"negative (" << this->pu_ << ") probability");
}
template <class T>
void TsiveriotisFernandesLattice<T>::stepback(
Size i,
const Array& values,
const Array& conversionProbability,
const Array& spreadAdjustedRate,
Array& newValues,
Array& newConversionProbability,
Array& newSpreadAdjustedRate) const {
for (Size j=0; j<this->size(i); j++) {
// new conversion probability is calculated via backward
// induction using up and down probabilities on tree on
// previous conversion probabilities, ie weighted average
// of previous probabilities.
newConversionProbability[j] =
this->pd_*conversionProbability[j] +
this->pu_*conversionProbability[j+1];
// Use blended discounting rate
newSpreadAdjustedRate[j] =
newConversionProbability[j] * this->riskFreeRate_ +
(1-newConversionProbability[j])*(this->riskFreeRate_+creditSpread_);
newValues[j] =
(this->pd_*values[j]/(1+(spreadAdjustedRate[j]*this->dt_)))
+ (this->pu_*values[j+1]/(1+(spreadAdjustedRate[j+1]*this->dt_)));
}
}
template <class T>
void TsiveriotisFernandesLattice<T>::rollback(DiscretizedAsset& asset,
Time to) const {
partialRollback(asset,to);
asset.adjustValues();
}
template <class T>
void TsiveriotisFernandesLattice<T>::partialRollback(DiscretizedAsset& asset,
Time to) const {
Time from = asset.time();
if (close(from,to))
return;
QL_REQUIRE(from > to,
"cannot roll the asset back to" << to
<< " (it is already at t = " << from << ")");
DiscretizedConvertible& convertible =
dynamic_cast<DiscretizedConvertible&>(asset);
Integer iFrom = Integer(this->t_.index(from));
Integer iTo = Integer(this->t_.index(to));
for (Integer i=iFrom-1; i>=iTo; --i) {
Array newValues(this->size(i));
Array newSpreadAdjustedRate(this->size(i));
Array newConversionProbability(this->size(i));
stepback(i, convertible.values(),
convertible.conversionProbability(),
convertible.spreadAdjustedRate(), newValues,
newConversionProbability,newSpreadAdjustedRate);
convertible.time() = this->t_[i];
convertible.values() = newValues;
convertible.spreadAdjustedRate() = newSpreadAdjustedRate;
convertible.conversionProbability() = newConversionProbability;
// skip the very last adjustment
if (i != iTo)
convertible.adjustValues();
}
}
}
#endif
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