doputmccondis.m

Matlab codes for financial models

% DOPutMCCondIS.m
function [Pdo,CI,NCrossed] = ...
   DOPutMCCondIS(S0,X,r,T,sigma,Sb,NSteps,NRepl,bp)
dt = T/NSteps;
nudt = (r-0.5*sigma^2)*dt;
b = bp*nudt;
sidt = sigma*sqrt(dt);
[Call,Put] = blsprice(S0,X,r,T,sigma);
% Generate asset paths and payoffs for the down and in option
NCrossed = 0;
Payoff = zeros(NRepl,1);
Times = zeros(NRepl,1);
StockVals = zeros(NRepl,1);
ISRatio = zeros(NRepl,1);
for i=1:NRepl
   % generate normals 
	vetZ = nudt - b + sidt*randn(1,NSteps);
	LogPath = cumsum([log(S0), vetZ]);
	Path = exp(LogPath);
   jcrossed = min(find( Path <= Sb ));
   if not(isempty(jcrossed))
      NCrossed = NCrossed + 1;
      TBreach = jcrossed - 1;
		Times(NCrossed) = TBreach * dt;
		StockVals(NCrossed) = Path(jcrossed);
      ISRatio(NCrossed) = exp( TBreach*b^2/2/sigma^2/dt +...
         b/sigma^2/dt*sum(vetZ(1:TBreach)) - ...
         TBreach*b/sigma^2*(r - sigma^2/2));
   end
end
if (NCrossed > 0)
   [Caux, Paux] = blsprice(StockVals(1:NCrossed),X,r,...
      T-Times(1:NCrossed),sigma);
   Payoff(1:NCrossed) = exp(-r*Times(1:NCrossed)) .* Paux ...
      .* ISRatio(1:NCrossed);
end
[Pdo, aux, CI] = normfit(Put - Payoff);