trading_formulas 0.0.1

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data/.gitignore ADDED
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+ *.gem
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+ *.rbc
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+ .bundle
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+ .config
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+ .yardoc
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+ Gemfile.lock
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+ InstalledFiles
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+ _yardoc
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+ coverage
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+ doc/
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+ lib/bundler/man
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+ pkg
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+ rdoc
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+ spec/reports
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+ test/tmp
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+ test/version_tmp
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+ tmp
data/Gemfile ADDED
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+ source 'https://rubygems.org'
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+
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+ # Specify your gem's dependencies in trading_formulas.gemspec
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+ gemspec
data/LICENSE ADDED
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+ Copyright (c) 2013 Matt Osentoski
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+
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+ MIT License
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+
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+ Permission is hereby granted, free of charge, to any person obtaining
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+ a copy of this software and associated documentation files (the
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+ "Software"), to deal in the Software without restriction, including
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+ without limitation the rights to use, copy, modify, merge, publish,
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+ distribute, sublicense, and/or sell copies of the Software, and to
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+ permit persons to whom the Software is furnished to do so, subject to
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+ the following conditions:
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+
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+ The above copyright notice and this permission notice shall be
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+ included in all copies or substantial portions of the Software.
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+
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+ THE SOFTWARE IS PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND,
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+ EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF
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+ MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
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+ NONINFRINGEMENT. IN NO EVENT SHALL THE AUTHORS OR COPYRIGHT HOLDERS BE
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+ LIABLE FOR ANY CLAIM, DAMAGES OR OTHER LIABILITY, WHETHER IN AN ACTION
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+ OF CONTRACT, TORT OR OTHERWISE, ARISING FROM, OUT OF OR IN CONNECTION
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+ WITH THE SOFTWARE OR THE USE OR OTHER DEALINGS IN THE SOFTWARE.
data/README.md ADDED
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+ # TradingFormulas
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+
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+ This gem contains trading formulas for Technical Analysis and Derivatives
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+
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+ ## Installation
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+
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+ Add this line to your application's Gemfile:
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+
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+ gem 'trading_formulas'
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+
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+ And then execute:
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+
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+ $ bundle
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+
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+ Or install it yourself as:
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+
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+ $ gem install trading_formulas
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+
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+ ## Usage
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+
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+ s = 50
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+ k = 50
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+ r = 0.10
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+ sigma = 0.30
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+ time = 0.50
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+ option_price = TradingFormulas::BlackScholes.call(s, k, r, sigma, time)
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+
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+ ## Contributing
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+
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+ 1. Fork it
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+ 2. Create your feature branch (`git checkout -b my-new-feature`)
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+ 3. Commit your changes (`git commit -am 'Added some feature'`)
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+ 4. Push to the branch (`git push origin my-new-feature`)
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+ 5. Create new Pull Request
data/Rakefile ADDED
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+ #!/usr/bin/env rake
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+ require "bundler/gem_tasks"
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+
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+ # Lines required for testing
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+ require 'rake/testtask'
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+ Rake::TestTask.new do |t|
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+ t.libs << 'test'
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+ end
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+ desc "Run tests"
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+ task :default => :test
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+ module TradingFormulas
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+ ##
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+ # Author:: Matt.Osentoski (matt.osentoski@gmail.com)
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+ #
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+ # This module contains formulas based on bermudan equations
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+ # Converted to Python from "Financial Numerical Recipes in C" by:
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+ # Bernt Arne Odegaard
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+ # http://finance.bi.no/~bernt/gcc_prog/index.html
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+ #
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+ class BermudanOptions
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+
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+ ##
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+ # Bermudan Option (Call) using binomial approximations
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+ # +s+: spot (underlying) price
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+ # +k+: strike (exercise) price
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+ # +r+: interest rate
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+ # +q+: artificial "probability"
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+ # +sigma+: volatility
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+ # +time+: time to maturity
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+ # +potential_exercise_times+: Array of potential exercise times. (Ex: [0.25, 0.75] for 1/4 and 3/4 of a year)
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+ # +steps+: Number of steps in binomial tree
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+ # *Returns* Option price
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+ def self.call(s, k, r, q, sigma, time, potential_exercise_times, steps)
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+ delta_t = time/steps
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+ r_tmp = Math.exp(r*delta_t)
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+ r_inv = 1.0/r_tmp
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+ u = Math.exp(sigma*Math.sqrt(delta_t))
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+ uu = u*u
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+ d = 1.0/u
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+ p_up = (Math.exp((r-q)*(delta_t))-d)/(u-d)
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+ p_down = 1.0-p_up
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+ prices = Array.new(steps+1)
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+ call_values = Array.new(steps+1)
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+
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+ potential_exercise_steps = [] # create list of steps at which exercise may happen
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+ (0..(potential_exercise_times.count)).each do |i|
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+ t = potential_exercise_times[i].to_f
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+ if ( (t>0.0) && (t<time) )
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+ potential_exercise_steps << (t/delta_t).to_i
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+ end
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+ end
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+ prices[0] = s*(d**steps) # fill in the endnodes.
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+ (1..(steps+1)).each do |i|
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+ prices[i] = uu*prices[i-1]
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+ end
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+ (0..(steps+1)).each do |i|
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+ call_values[i] = [0.0, (prices[i]-k)].max
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+ end
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+ (steps-1).downto(0) do |step|
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+ check_exercise_this_step = false
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+ (0..(potential_exercise_steps.count)).each do |j|
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+ if (step == potential_exercise_steps[j])
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+ check_exercise_this_step = true
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+ end
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+ end
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+ (0..(steps+1)).each do |i|
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+ call_values[i] = (p_up*call_values[i+1].to_f+p_down*call_values[i].to_f)*r_inv
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+ prices[i] = d*prices[i+1].to_f
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+ if (check_exercise_this_step)
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+ call_values[i] = [call_values[i].to_f,prices[i].to_f-k].max
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+ end
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+ end
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+ end
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+ return call_values[0]
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+ end
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+
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+
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+ ##
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+ # Bermudan Option (Put) using binomial approximations
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+ # +s+: spot (underlying) price
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+ # +k+: strike (exercise) price
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+ # +r+: interest rate
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+ # +q+: artificial "probability"
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+ # +sigma+: volatility
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+ # +time+: time to maturity
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+ # +potential_exercise_times+: Array of potential exercise times. (Ex: [0.25, 0.75] for 1/4 and 3/4 of a year)
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+ # +steps+: Number of steps in binomial tree
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+ # *Returns* Option price
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+ def self.put(s, k, r, q, sigma, time, potential_exercise_times, steps)
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+ delta_t=time/steps
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+ r_tmp = Math.exp(r*delta_t)
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+ r_inv = 1.0/r_tmp
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+ u = Math.exp(sigma*Math.sqrt(delta_t))
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+ uu = u*u
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+ d = 1.0/u
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+ p_up = (Math.exp((r-q)*delta_t)-d)/(u-d)
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+ p_down = 1.0-p_up
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+ prices = Array.new(steps+1)
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+ put_values = Array.new(steps+1)
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+
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+ potential_exercise_steps = [] # create list of steps at which exercise may happen
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+ (0..(potential_exercise_times.count)).each do |i|
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+ t = potential_exercise_times[i].to_f
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+ if ( (t>0.0) && (t<time) )
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+ potential_exercise_steps << (t/delta_t).to_i
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+ end
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+ end
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+ prices[0] = s*(d**steps) # fill in the endnodes.
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+ (1..(steps+1)).each do |i|
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+ prices[i] = uu*prices[i-1]
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+ end
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+ (0..(steps+1)).each do |i|
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+ put_values[i] = [0.0, (k-prices[i])].max # put payoffs at maturity
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+ end
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+ (steps-1).downto(0) do |step|
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+ check_exercise_this_step = false
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+ (0..(potential_exercise_steps.count)).each do |j|
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+ if (step == potential_exercise_steps[j])
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+ check_exercise_this_step = true
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+ end
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+ end
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+ (0..(steps+1)).each do |i|
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+ put_values[i] = (p_up*put_values[i+1].to_f+p_down*put_values[i].to_f)*r_inv
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+ prices[i] = d*prices[i+1].to_f
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+ if (check_exercise_this_step)
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+ put_values[i] = [put_values[i].to_f,k-prices[i].to_f].max
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+ end
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+ end
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+ end
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+ return put_values[0]
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+ end
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+
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+ end
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+ end