Code:
#include iostream
#include cstdio
#include cmath
using namespace std;
/*
* Node Declaration
*/
struct Node
{
double price, time, optionvalue;
};
/*
* Class Declaration
*/
class BinomialTree
{
private:
Node **tree;
int n;
double S, volatility, upfactor, tfin, tstep;
double getValue(int level, int node, double K, double R);
void initNode (int level, int node);
public:
BinomialTree(double S, double volatility, int n, double tstep);
double getValue(double K, double R);
void print();
};
/*
* Constructor
*/
BinomialTree::BinomialTree(double price , double vol, int _n, double _tstep)
{
n = _n;
S = price;
volatility = vol;
tstep = _tstep;
tfin = n * tstep;
upfactor = exp (volatility * sqrt (tstep));
tree = new Node * [n];
for (int i = 0; i < n; i++)
tree[i] = new Node [i+1] ;
tree[0][0].price = S;
tree[0][0].time = 0.0;
double currtime = 0.0;
for (int i = 1; i < n; i++)
{
Node * currnode = tree[i];
currtime += tstep;
for (int j = 0; j <= i; j++, currnode++)
{
if (!j)
{
currnode->price = tree[i-1][j].price / upfactor ;
currnode->time = currtime;
}
else
{
currnode->price = tree[i-1][j-1].price * upfactor ;
currnode->time = currtime;
}
}
}
}
/*
* Get Value Function
*/
double BinomialTree::getValue(int l, int node, double K, double df)
{
if (l == (n-1))
{
if (K < tree[l][node].price)
return tree[l][node].optionvalue = tree[l][node].price - K;
else
return tree[l][node].optionvalue = 0.0;
}
else
{
double g1 = getValue(l + 1, node + 1, K, df);
double g2 = getValue(l + 1, node, K, df);
return tree[l][node].optionvalue = 0.5 * df * (g1 + g2);
}
}
/*
* Get Value Function
*/
double BinomialTree::getValue(double K, double R)
{
double discountfactor = exp (-R * tstep);
return getValue(0, 0, K, discountfactor);
}
/*
* Display optimal values
*/
void BinomialTree::print()
{
for (int i = 0; i < n; i++)
{
for( int j = 0; j <= i; j++ )
{
cout<< "[" << tree[i][j].price << "," << tree[i][j].time << ",";
cout<< tree[i][j].optionvalue << "]\t";
}
cout <
}
}
/*
* Main Contains Menu
*/
int main()
{
double S, V, K, T, R, N;
cout<<"Enter Security Price: ";
cin>>S;
cout<<"Enter Volatility: ";
cin>>V;
cout<<"Enter Call Strike Price: ";
cin>>K;
cout<<"Enter Time To Expiry: ";
cin>>T;
cout<<"Enter Risk Free Rate: ";
cin>>R;
cout<<"Enter levels: ";
cin>>N;
BinomialTree bt(S, V, N, T / N);
double value = bt.getValue(K, R);
bt.print();
cout<< "OPTION VALUE = " << value <
return 0;
}
Output:
Enter Security Price: 10
Enter Volatility: 0.5
Enter Call Strike Price: 100
Enter Time To Expiry: 5
Enter Risk Free Rate: 0.6
Enter levels: 3
[10,0,0]
[5.24402,1.66667,0] [19.0693,1.66667,0]
[2.74997,3.33333,0] [10,3.33333,0] [36.364,3.33333,0]
OPTION VALUE = 0
------------------
(program exited with code: 0)
Press return to continue
More C++ Programs:
