GridPricedInstrument-class

GridPricedInstrument

Our basic instrument defines a tenor/maturity, a method
to provide values in case of default, and a method
to correct instrument prices in light of exercise
decisions.

Algorithms to price American and European
equity options, convertible bonds and a
variety of other financial derivatives. It uses an
extension of the usual Black-Scholes model in which
jump to default may occur at a probability specified
by a power-law link between stock price and hazard
rate as found in the paper by Takahashi, Kobayashi,
and Nakagawa (2001) <doi:10.3905/jfi.2001.319302>. We
use ideas and techniques from Andersen and
Buffum (2002) <doi:10.2139/ssrn.355308> and
Linetsky (2006) <doi:10.1111/j.1467-9965.2006.00271.x>.

Brian Boonstra

ragtop

Pricing Equity Derivatives with Extensions of Black-Scholes

GridPricedInstrument-class function

<dl class="dl-horizontal">
<dt><code>maturity</code></dt><dd>The tenor, expiration date or terminal date by which the value of this security will be certain.</dd></dl><dt><code>last_computed_grid</code></dt><dd>The most recently computed set of values from a grid pricing scheme. Used internally for pricing chains of derivatives.</dd><dt><code>name</code></dt><dd>A mnemonic name for the instrument, not used by ragtop</dd>

Fields

<dl class="dl-horizontal">
<dt><code>optionality_fcn(v, ...)</code></dt><dd>Return a version of v at time t corrected for any optionality conditions.</dd></dl><dt><code>recovery_fcn(v, S, t, ...)</code></dt><dd>Return recovery value, given non-default values v at time t. Subclasses may be more elaborate, this method simply returns 0.0.</dd><dt><code>terminal_values(v, ...)</code></dt><dd>Return a terminal value. defaults to simply calling optionality_fcn.</dd>

GridPricedInstrument-class: Representation of financial instrument amenable to grid pricing schemes

Description

Arguments

Fields

Methods