simulated_put_euro.cc

Financial Recipes

#include <cmath>  
#include <algorithm>     // define the max() function
using namespace std;
#include "normdist.h"   // definition of random number generator

double option_price_put_european_simulated(const double& S,
					   const double& X,
					   const double& r,
					   const double& sigma,
					   const double& time,
					   const int& no_sims) {
    double sigma_sqr = sigma * sigma;
    double R = (r - 0.5 * sigma_sqr)*time;
    double SD = sigma * sqrt(time);
    double sum_payoffs = 0.0;
    for (int n=1; n<=no_sims; n++) {
	double S_T = S * exp(R + SD * random_normal());
	sum_payoffs += max(0.0, X-S_T);
    };
    return exp(-r*time) * (sum_payoffs/double(no_sims));
};