simplemc6.cpp

C++ design pattern in finance. Must know for QF engineers

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//                      SimpleMC6.cpp
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#include<SimpleMC6.h>

#include <Random1.h>

#include <cmath>

// the basic math functions should be in namespace std but aren't in VCPP6
#if !defined(_MSC_VER)
using namespace std;
#endif

double SimpleMonteCarlo4(const VanillaOption& TheOption, 
						 double Spot, 
						 const Parameters& Vol, 
						 const Parameters& r, 
						 unsigned long NumberOfPaths)
{

    double Expiry = TheOption.GetExpiry();

	double variance = Vol.IntegralSquare(0,Expiry);
	double rootVariance = sqrt(variance);
	double itoCorrection = -0.5*variance;

	double movedSpot = Spot*exp(r.Integral(0,Expiry) +itoCorrection);

	double thisSpot;

	double runningSum=0;


	for (unsigned long i=0; i < NumberOfPaths; i++)
	{
		double thisGaussian = GetOneGaussianByBoxMuller();

		thisSpot = movedSpot*exp( rootVariance*thisGaussian);

		double thisPayOff = TheOption.OptionPayOff(thisSpot);

		runningSum += thisPayOff;
	}




	double mean = runningSum / NumberOfPaths;


	mean *= exp(-r.Integral(0,Expiry));

	return mean;
}