| Category: Quantlib |
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 Bond Option Pricing in Vasicek Model |
| Submitter: vanna |
Date: 2007/12/11 |
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Description:
A simple example, demonstartes how to price bond option in Vasicek model. atm_option_price : At the money bond option price itm_option_price : In the money bond option price otm_option_price : Out of the money bond option price
Rate r0 = 0.05;
Real a = 0.1;
Real b = 0.05;
Real sigma = 0.01;
Real lambda = 0.0;
Vasicek object_vasicek(r0,a,b,sigma,lambda);
Option::Type oType=Option::Call;
Time maturity=1;
Time bondMaturity=2;
Time now=0;
Real bondPrice=object_vasicek.discountBond(maturity,bondMaturity,r0);
Real strike=bondPrice;
Real atm_option_price=object_vasicek.discountBondOption(oType, strike, maturity, bondMaturity);
strike=bondPrice*0.9;
Real itm_option_price=object_vasicek.discountBondOption(oType, strike, maturity, bondMaturity);
strike=bondPrice*1.1;
Real otm_option_price=object_vasicek.discountBondOption(oType, strike, maturity, bondMaturity);
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