Class TrinomialTree


  • public class TrinomialTree
    extends Object
    Trinomial tree.

    Option pricing model based on trinomial tree. Trinomial lattice is defined by LatticeSpecification and the option to price is specified by OptionFunction.

    Option pricing with non-uniform tree is realised by specifying RecombiningTrinomialTreeData.

    • Constructor Detail

      • TrinomialTree

        public TrinomialTree()
    • Method Detail

      • optionPrice

        public double optionPrice​(OptionFunction function,
                                  LatticeSpecification lattice,
                                  double spot,
                                  double volatility,
                                  double interestRate,
                                  double dividendRate)
        Price an option under the specified trinomial lattice.

        It is assumed that the volatility, interest rate and continuous dividend rate are constant over the lifetime of the option.

        Parameters:
        function - the option
        lattice - the lattice specification
        spot - the spot
        volatility - the volatility
        interestRate - the interest rate
        dividendRate - the dividend rate
        Returns:
        the option price
      • optionPrice

        public double optionPrice​(OptionFunction function,
                                  RecombiningTrinomialTreeData data)
        Price an option under the specified trinomial tree gird.
        Parameters:
        function - the option
        data - the trinomial tree data
        Returns:
        the option price
      • optionPriceAdjoint

        public ValueDerivatives optionPriceAdjoint​(OptionFunction function,
                                                   RecombiningTrinomialTreeData data)
        Compute option price and delta under the specified trinomial tree gird.

        The delta is the first derivative of the price with respect to spot, and approximated by the data embedded in the trinomial tree.

        Parameters:
        function - the option
        data - the trinomial tree data
        Returns:
        the option price and spot delta