options_library 1.0.0 → 1.0.2

data/Manifest

@@ -1,5 +1,6 @@
+Manifest
+README.md
 Rakefile
 lib/options_library.rb
 lib/options_library/option_calculator.rb
 options_library.gemspec
-Manifest

data/README.md

@@ -0,0 +1,57 @@
+Initial Author
+--------------
+Dan Tylenda-Emmons
+Twitter: @CoderTrader
+Email: jrubyist@gmail.com
+
+Options Library
+===============
+
+A pure Ruby implementation of the classic Black-Scholes option model for pricing Calls or Puts.
+ 
+Goals
+-------
+
+* Provide the Open Source Ruby, JRuby and StockTwits communities with a publicly available model for computing option prices.
+* Allow users of the library to compute price and greeks: delta, gamma, theta, vega and rho.
+* To aid others in the understanding of how price and sensitivities to other factors are computed on a theoretical basis.
+* To allo users of the library to extend or contribute back to the project so that it may be improved upon.
+
+
+Installation
+-----------
+
+    gem install options_library
+
+
+Usage
+-----
+
+    require 'rubygems'
+    require 'options_library'
+
+    # Option::Calculator.price_call( underlying, strike, time, interest, sigma, dividend )
+    call_price = Option::Calculator.price_call( 94.5, 90.5, 0.015, 0.01, 0.4875, 0.0 ) 
+
+Testing
+-------
+
+To run the tests:
+
+    $ rake
+
+To add tests see the `Commands` section earlier in this
+README.
+
+
+Contributing
+------------
+
+1. Fork it.
+2. Create a branch (`git checkout -b my_options_library`)
+3. Commit your changes (`git commit -am "Added Hull-White Model"`)
+4. Push to the branch (`git push origin my_options_library`)
+5. Create an [Issue][1] with a link to your branch
+6. Enjoy a fresh cup of coffee and wait
+
+[1]: http://github.com/github/markup/issues

data/Rakefile

@@ -2,7 +2,7 @@ require 'rubygems'
 require 'rake'
 require 'echoe'
 
-Echoe.new('options_library', '1.0.0') do |p|
+Echoe.new('options_library', '1.0.2') do |p|
   p.description = 'A gem used to calc the price of an option.'
   p.url = 'http://github.com/codertrader/options_library'
   p.author = 'Dan Tylenda-Emmons'

data/lib/options_library/option_calculator.rb

@@ -5,121 +5,126 @@
 module Option
   class Calculator
 	class << self
+      # used for finding implied vol based on a market (target) price
+      LOW_VOL, HIGH_VOL, VOL_TOLERANCE = 0.0, 5.0, 0.0001
+
+      # used for min/max normal distribution
+      MIN_Z_SCORE, MAX_Z_SCORE = -8.0, +8.0
 	
-	  include Math
+      include Math
 	
-	  # computes the call price sensitivity to a change in underlying price
-	  def delta_call( underlying, strike, time, interest, sigma, dividend )
-		norm_sdist( d_one( underlying, strike, time, interest, sigma, dividend ) )
-	  end
+      # computes the call price sensitivity to a change in underlying price
+      def delta_call( underlying, strike, time, interest, sigma, dividend )
+        norm_sdist( d_one( underlying, strike, time, interest, sigma, dividend ) )
+      end
 
-	  # computes the put price sensitivity to a change in underlying price	
-	  def delta_put( underlying, strike, time, interest, sigma, dividend )
-		call_delta( underlying, strike, time, interest, sigma, dividend ) - 1
-	  end
+      # computes the put price sensitivity to a change in underlying price	
+      def delta_put( underlying, strike, time, interest, sigma, dividend )
+        delta_call( underlying, strike, time, interest, sigma, dividend ) - 1
+      end
 
-	  # computes the option price sensitivity to a change in delta	
-	  def gamma( underlying, strike, time, interest, sigma, dividend )
-		phi( d_one( underlying, strike, time, interest, sigma, dividend ) ) / ( underlying * sigma * sqrt(time) )
-	  end
+      # computes the option price sensitivity to a change in delta	
+      def gamma( underlying, strike, time, interest, sigma, dividend )
+        phi( d_one( underlying, strike, time, interest, sigma, dividend ) ) / ( underlying * sigma * sqrt(time) )
+      end
 	
-	  # computes the option price sensitivity to a change in volatility
-	  def vega( underlying, strike, time, interest, sigma, dividend )
-		0.01 * underlying * sqrt(time) * phi(d_one(underlying, strike, time, interest, sigma, dividend))
-	  end
+      # computes the option price sensitivity to a change in volatility
+      def vega( underlying, strike, time, interest, sigma, dividend )
+        0.01 * underlying * sqrt(time) * phi(d_one(underlying, strike, time, interest, sigma, dividend))
+      end
 	
-	  # computes the fair value of the call based on the knowns and assumed volatility (sigma)
-	  def price_call( underlying, strike, time, interest, sigma, dividend )
-		d1 = d_one( underlying, strike, time, interest, sigma, dividend )
-		discounted_underlying = exp(-1.0 * dividend * time) * underlying
-		probability_weighted_value_of_being_exercised = discounted_underlying * norm_sdist( d1 )
+      # computes the fair value of the call based on the knowns and assumed volatility (sigma)
+      def price_call( underlying, strike, time, interest, sigma, dividend )
+        d1 = d_one( underlying, strike, time, interest, sigma, dividend )
+        discounted_underlying = exp(-1.0 * dividend * time) * underlying
+        probability_weighted_value_of_being_exercised = discounted_underlying * norm_sdist( d1 )
 						
-		d2 = d1 - ( sigma * sqrt(time) )
-		discounted_strike = exp(-1.0 * interest * time) * strike
-		probability_weighted_value_of_discounted_strike = discounted_strike * norm_sdist( d2 )
+        d2 = d1 - ( sigma * sqrt(time) )
+        discounted_strike = exp(-1.0 * interest * time) * strike
+        probability_weighted_value_of_discounted_strike = discounted_strike * norm_sdist( d2 )
 		
-		expected_value = probability_weighted_value_of_being_exercised - probability_weighted_value_of_discounted_strike
-	  end
+        expected_value = probability_weighted_value_of_being_exercised - probability_weighted_value_of_discounted_strike
+      end
 	
-	  # computes the fair value of the put based on the knowns and assumed volatility (sigma)
-	  def price_put( underlying, strike, time, interest, sigma, dividend )
-		d2 = d_two( underlying, strike, time, interest, sigma, dividend )
-		discounted_strike = strike * exp(-1.0 * interest * time)
-		probabiltity_weighted_value_of_discounted_strike = discounted_strike * norm_sdist( -1.0 * d2 )
+      # computes the fair value of the put based on the knowns and assumed volatility (sigma)
+      def price_put( underlying, strike, time, interest, sigma, dividend )
+        d2 = d_two( underlying, strike, time, interest, sigma, dividend )
+        discounted_strike = strike * exp(-1.0 * interest * time)
+        probabiltity_weighted_value_of_discounted_strike = discounted_strike * norm_sdist( -1.0 * d2 )
 		
-		d1 = d2 + ( sigma * sqrt(time) )
-		discounted_underlying = underlying * exp(-1.0 * dividend * time)
-		probability_weighted_value_of_being_exercised = discounted_underlying * norm_sdist( -1.0 * d1 )
+        d1 = d2 + ( sigma * sqrt(time) )
+        discounted_underlying = underlying * exp(-1.0 * dividend * time)
+        probability_weighted_value_of_being_exercised = discounted_underlying * norm_sdist( -1.0 * d1 )
 		
-		expected_value = probabiltity_weighted_value_of_discounted_strike - probability_weighted_value_of_being_exercised
-	  end
+        expected_value = probabiltity_weighted_value_of_discounted_strike - probability_weighted_value_of_being_exercised
+      end
 	
-	  # finds the implied volatility based on the target_price passed in.
-	  def implied_vol_call( underlying, strike, time, interest, target_price, dividend )
-		low, high = 0, 5
+      # finds the implied volatility based on the target_price passed in.
+      def implied_vol_call( underlying, strike, time, interest, target_price, dividend )
+        low, high = LOW_VOL, HIGH_VOL
 		
-		while( high - low > 0.0001 )
-			if( call_option( underlying, strike, time, interest, (high+low)/2.0, dividend ) > target_price )
-				high = (high + low) / 2.0
-			else
-				low = (high + low) / 2.0
-			end
-		end
+        while( high - low > VOL_TOLERANCE )
+          if( price_call( underlying, strike, time, interest, (high+low)/2.0, dividend ) > target_price )
+            high = (high + low) / 2.0
+          else
+            low = (high + low) / 2.0
+          end
+        end
 		
-		(high + low) / 2.0
+        (high + low) / 2.0
       end
 
-	  # finds the implied volatility based on the target_price passed in.
-	  def implied_vol_put( underlying, strike, time, interest, target_price, dividend )
-		low, high = 0, 5
+      # finds the implied volatility based on the target_price passed in.
+      def implied_vol_put( underlying, strike, time, interest, target_price, dividend )
+        low, high = LOW_VOL, HIGH_VOL
 		
-		while( high - low > 0.0001 )
-			if( put_option( underlying, strike, time, interest, (high+low)/2.0, dividend ) > target_price )
-				high = (high + low) / 2.0
-			else
-				low = (high + low) / 2.0
-			end
-		end
+		while( high - low > VOL_TOLERANCE )
+          if( price_put( underlying, strike, time, interest, (high+low)/2.0, dividend ) > target_price )
+            high = (high + low) / 2.0
+          else
+            low = (high + low) / 2.0
+          end
+        end
 		
-		(high + low) / 2.0
-	  end
+        (high + low) / 2.0
+      end
 	
-	  # probability of being exercised at maturity (must be greater than d2 by (sigma*sqrt(time)) if exercised)
-	  def d_one( underlying, strike, time, interest, sigma, dividend )
-		numerator = ( log(underlying / strike) + (interest - dividend + 0.5 * sigma ** 2.0 ) * time)
-		denominator = ( sigma * sqrt(time) )
-		numerator / denominator
-	  end
+      # probability of being exercised at maturity (must be greater than d2 by (sigma*sqrt(time)) if exercised)
+      def d_one( underlying, strike, time, interest, sigma, dividend )
+        numerator = ( log(underlying / strike) + (interest - dividend + 0.5 * sigma ** 2.0 ) * time)
+        denominator = ( sigma * sqrt(time) )
+        numerator / denominator
+      end
 	
-	  # probability of underlying reaching the strike price (must be smaller than d1 by (sigma*sqrt(time)) if exercised.
-	  def d_two( underlying, strike, time, interest, sigma, dividend ) 
-		d_one( underlying, strike, time, interest, sigma, dividend ) - ( sigma * sqrt(time) )
-	  end
+      # probability of underlying reaching the strike price (must be smaller than d1 by (sigma*sqrt(time)) if exercised.
+      def d_two( underlying, strike, time, interest, sigma, dividend ) 
+        d_one( underlying, strike, time, interest, sigma, dividend ) - ( sigma * sqrt(time) )
+      end
 	
-	  # Normal Standard Distribution
-	  # using Taylor's approximation
-	  def norm_sdist( z )
-		return 0.0 if z < -8.0
-		return 1.0 if z > +8.0
+      # Normal Standard Distribution
+      # using Taylor's approximation
+      def norm_sdist( z )
+        return 0.0 if z < MIN_Z_SCORE
+        return 1.0 if z > MAX_Z_SCORE
 		
-		i, sum, term = 3.0, 0.0, z
+        i, sum, term = 3.0, 0.0, z
 		
-		while( sum + term != sum )
-			sum = sum + term
-			term = term * z * z / i
-			i += 2.0
-		end
+        while( sum + term != sum )
+          sum = sum + term
+          term = term * z * z / i
+		  i += 2.0
+        end
 		
-		0.5 + sum * phi(z)
-	  end
-	
-	  # Standard Gaussian pdf
-	  def phi(x)
-		numerator = exp(-1.0 * x*x / 2.0)
-		denominator = sqrt(2.0 * PI)
-		numerator / denominator
-	  end
+        0.5 + sum * phi(z)
+      end
 	
-	end
+      # Standard Gaussian pdf
+      def phi(x)
+        numerator = exp(-1.0 * x*x / 2.0)
+        denominator = sqrt(2.0 * PI)
+        numerator / denominator
+      end	  		  
+
+    end
   end
 end

data/options_library.gemspec

@@ -2,17 +2,17 @@
 
 Gem::Specification.new do |s|
   s.name = %q{options_library}
-  s.version = "1.0.0"
+  s.version = "1.0.2"
 
   s.required_rubygems_version = Gem::Requirement.new(">= 1.2") if s.respond_to? :required_rubygems_version=
   s.authors = ["Dan Tylenda-Emmons"]
-  s.date = %q{2011-02-13}
+  s.date = %q{2011-02-16}
   s.description = %q{A gem used to calc the price of an option.}
   s.email = %q{jrubyist@gmail.com}
-  s.extra_rdoc_files = ["lib/options_library.rb", "lib/options_library/option_calculator.rb"]
-  s.files = ["Rakefile", "lib/options_library.rb", "lib/options_library/option_calculator.rb", "options_library.gemspec", "Manifest"]
+  s.extra_rdoc_files = ["README.md", "lib/options_library.rb", "lib/options_library/option_calculator.rb"]
+  s.files = ["Manifest", "README.md", "Rakefile", "lib/options_library.rb", "lib/options_library/option_calculator.rb", "options_library.gemspec"]
   s.homepage = %q{http://github.com/codertrader/options_library}
-  s.rdoc_options = ["--line-numbers", "--inline-source", "--title", "Options_library"]
+  s.rdoc_options = ["--line-numbers", "--inline-source", "--title", "Options_library", "--main", "README.md"]
   s.require_paths = ["lib"]
   s.rubyforge_project = %q{options_library}
   s.rubygems_version = %q{1.5.2}

metadata

@@ -2,7 +2,7 @@
 name: options_library
 version: !ruby/object:Gem::Version 
   prerelease: 
-  version: 1.0.0
+  version: 1.0.2
 platform: ruby
 authors: 
   - Dan Tylenda-Emmons
@@ -10,7 +10,7 @@ autorequire:
 bindir: bin
 cert_chain: []
 
-date: 2011-02-13 00:00:00 -06:00
+date: 2011-02-16 00:00:00 -06:00
 default_executable: 
 dependencies: []
 
@@ -21,14 +21,16 @@ executables: []
 extensions: []
 
 extra_rdoc_files: 
+  - README.md
   - lib/options_library.rb
   - lib/options_library/option_calculator.rb
 files: 
+  - Manifest
+  - README.md
   - Rakefile
   - lib/options_library.rb
   - lib/options_library/option_calculator.rb
   - options_library.gemspec
-  - Manifest
 has_rdoc: true
 homepage: http://github.com/codertrader/options_library
 licenses: []
@@ -39,6 +41,8 @@ rdoc_options:
   - --inline-source
   - --title
   - Options_library
+  - --main
+  - README.md
 require_paths: 
   - lib
 required_ruby_version: !ruby/object:Gem::Requirement