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Update blackScholesModel.cpp
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@lyndskg
lyndskg committed Jul 21, 2023
1 parent 5ad3497 commit cb75c10
Showing 1 changed file with 46 additions and 40 deletions.
86 changes: 46 additions & 40 deletions src/blackScholesModel.cpp
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Original file line number Diff line number Diff line change
Expand Up @@ -8,6 +8,7 @@
#include <iostream> // For cerr functionality.
#include <string>
#include <numbers>
#include <cassert>

#include "blackScholesModel.h"

Expand All @@ -22,43 +23,45 @@ using namespace std;
/*------------------------------ CONSTRUCTORS ------------------------------*/
// Default constructor.
blackScholesModel::blackScholesModel() {
underlyingPrice = getUnderlyingPrice();
strikePrice = getStrikePrice();
riskFreeRate = getRFR();
timeToExpiration = getTTE();
volatility = getVolatility();
optionType = getOptionType();
// Initialize member variables directly.
underlyingPrice = 0.0;
strikePrice = 0.0;
riskFreeRate = 0.0;
timeToExpiration = 0.0;
volatility = 0.0;
optionType = OptionType::CALL; // Set a default value
}

// Custom constructor for optionGreeks derived class.
blackScholesModel::blackScholesModel(double underlyingPrice, double strikePrice,
double riskFreeRate, double timeToExpiration,
double volatility) :
underlyingPrice(underlyingPrice), strikePrice(strikePrice),
riskFreeRate(riskFreeRate), timeToExpiration(timeToExpiration),
volatility(volatility), optionType(OptionType::CALL) {

// Calculate and store intermediate variables.
d1_ = calculateD1(underlyingPrice, strikePrice, timeToExpiration, riskFreeRate, volatility);
d2_ = calculateD2(underlyingPrice, strikePrice, timeToExpiration, riskFreeRate, volatility);
K_ = calculateK(d1_);
}

//// Custom constructor for optionGreeks derived class.
//blackScholesModel::blackScholesModel(double underlyingPrice, double strikePrice, double timeToExpiration,
// double riskFreeRate, double volatility) {
// // Initialize intermediate variable "d".
// d_ = calculateD1(underlyingPrice, strikePrice, timeToExpiration, riskFreeRate, volatility);
//
// // Calculate and store intermediate variable "K".
// K_ = calculateK(d_);
//}

// Custom constructor for general usage.
//
// Initializes all member functions used in the pricing formula via getter methods.
// TODO: Finish
blackScholesModel::blackScholesModel(double underlyingPrice, double strikePrice, double riskFreeRate,
double timeToExpiration, double volatility) :
underlyingPrice(getUnderlyingPrice()), strikePrice(getStrikePrice()),
riskFreeRate(getRFR()), timeToExpiration(getTTE()),
volatility(getVolatility()) {
d1_ = getD1();
d2_ = getD2();

// Initialize intermediate variable "d".
d_ = calculateD1(underlyingPrice, strikePrice, timeToExpiration, riskFreeRate, volatility);

// Calculate and store intermediate variable "K".
K_ = calculateK(d_);
}

double timeToExpiration, double volatility, OptionType optionType) :
underlyingPrice(underlyingPrice), strikePrice(strikePrice),
riskFreeRate(riskFreeRate), timeToExpiration(timeToExpiration),
volatility(volatility), optionType(OptionType::CALL) {

// Calculate and store intermediate variables.
d1_ = calculateD1(underlyingPrice, strikePrice, timeToExpiration, riskFreeRate, volatility);
d2_ = calculateD2(underlyingPrice, strikePrice, timeToExpiration, riskFreeRate, volatility);
K_ = calculateK(d1_);
}

/*------------------------------ KEY MEMBER FUNCTIONS ------------------------------*/
/*------------------------------ { math } ------------------------------*/
Expand All @@ -73,14 +76,16 @@ double blackScholesModel::calculateOptionPrice() {
// Calculate the option price based on the option type (i.e. 'Call' vs. 'Put').
switch (optionType) {
// If the option type is 'C' (call):
case 'C':
case OptionType::CALL:
// Calculate and return the call option price using the Black-Scholes formula.
return underlyingPrice * normalCDF(d1_) - strikePrice * exp(-riskFreeRate * timeToExpiration) * normalCDF(d2_);
return underlyingPrice * normalCDF(d1_) - strikePrice
* exp(-riskFreeRate * timeToExpiration) * normalCDF(d2_);

// If the option type is 'P' (put):
case 'P':
case OptionType::PUT:
// Calculate and return the put option price using the Black-Scholes formula.
return strikePrice * exp(-riskFreeRate * timeToExpiration) * normalCDF(-d2_) - underlyingPrice * normalCDF(-d1_);
return strikePrice * exp(-riskFreeRate * timeToExpiration)
* normalCDF(-d2_) - underlyingPrice * normalCDF(-d1_);

// If neither option type is specified:
default:
Expand All @@ -106,12 +111,14 @@ double blackScholesModel::normalCDF(double d) const {
double K = getK(); // Access the stored value of 'K' from the member variable 'K_'.

// Calculate the approximation of the CDF based on the coefficients and intermediate values.
double result = 1.0 - 1.0 / sqrt(2 * numbers::pi) * exp(-L * L / 2.0) * (a[0] * K + a[1] * K * K + a[2] * pow(K, 3.0) + a[3] * pow(K, 4.0) + a[4] + pow(K, 5.0));
double result = 1.0 - 1.0 / sqrt(2 * numbers::pi) * exp(-L * L / 2.0)
* (a[0] * K + a[1] * K * K + a[2] * pow(K, 3.0) + a[3] * pow(K, 4.0) + a[4] + pow(K, 5.0));

// Return the result based on the sign of 'd'.
return d < 0 ? 1.0 - result : result; // Should ternary operator be used here? Or if-else statement (below)?

// The ternary operator is used to return 1.0 minus the result if 'd' is negative, or the result itself if 'd' is non-negative.
// The ternary operator is used to return 1.0 minus the result if 'd' is negative, or the result
// itself if 'd' is non-negative.
// Alternatively, an if-else statement can be used to achieve the same result.

} // normalCDF()
Expand All @@ -121,8 +128,8 @@ double blackScholesModel::normalCDF(double d) const {
double blackScholesModel::calculateD1(double underlyingPrice, double strikePrice,
double timeToExpiration,double riskFreeRate,
double volatility) const {
double numerator = log(underlyingPrice / strikePrice) + (riskFreeRate +
0.5 * volatility * volatility) * timeToExpiration;
double numerator = log(underlyingPrice / strikePrice)
+ (riskFreeRate + 0.5 * volatility * volatility) * timeToExpiration;
double denominator = volatility * sqrt(timeToExpiration);

double d1 = numerator / denominator;
Expand All @@ -134,7 +141,6 @@ double blackScholesModel::calculateD1(double underlyingPrice, double strikePrice
} // calculateD1()



// Calculate the intermediate variable 'd2'.
double blackScholesModel::calculateD2(double underlyingPrice, double strikePrice,
double timeToExpiration, double riskFreeRate,
Expand Down Expand Up @@ -193,7 +199,7 @@ void blackScholesModel::setVolatility(const double& value) {


// Setter method for the option type of the Black-Scholes model.
void blackScholesModel::setOptionType(const char& value) {
void blackScholesModel::setOptionType(const OptionType& value) {
optionType = value;
} // setOptionType()

Expand Down Expand Up @@ -249,7 +255,7 @@ const double& blackScholesModel::getVolatility() const {


// Getter method for the option type of the Black-Scholes model.
const char& blackScholesModel::getOptionType() const {
blackScholesModel::OptionType blackScholesModel::getOptionType() const {
return optionType;
} // getOptionType()

Expand Down

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