quantark 0.1.0__py3-none-any.whl

quantark/asset/equity/engine/mc/digital_option_mc_engine.py

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+"""
+Monte Carlo pricing engine for cash-or-nothing digital options.
+"""
+
+import math
+from typing import Optional, Union, Tuple
+import numpy as np
+
+from quantark.asset.equity.engine.base_engine import BaseEngine
+from quantark.asset.equity.product.option.digital_option import CashOrNothingDigitalOption
+from quantark.asset.equity.product.base_equity_product import BaseEquityProduct
+from quantark.asset.equity.param import MCParams
+from quantark.priceenv import PricingEnvironment
+from quantark.util.enum.engine_enums import MonteCarloMethod, EngineType
+from quantark.util.exceptions import ValidationError, PricingError
+
+from quantark.asset.equity.process.bsm.qmc_path_generator import GBMPathGenerator
+from quantark.asset.equity.process.bsm.qmc_sobol import (
+    PseudoRandomNormalGenerator,
+    SobolNormalGenerator,
+)
+from quantark.asset.equity.process.bsm.qmc_rqmc_driver import run_rqmc
+from quantark.asset.equity.process.bsm.qmc_variance_reduction import VarianceReductionConfig
+
+
+class DigitalOptionMCEngine(BaseEngine):
+    """
+    Monte Carlo pricing engine for cash-or-nothing digital options.
+
+    Supports three Monte Carlo methods:
+    - PSEUDO: Standard Monte Carlo with pseudorandom numbers
+    - QUASI: Quasi-Monte Carlo with Sobol sequences
+    - RANDOMIZED_QUASI: Randomized QMC with adaptive batching
+
+    Digital options pay a fixed cash amount if the terminal spot is on the
+    paying side of the strike (S > K for calls, S < K for puts).
+
+    Usage:
+        # Preferred: Two-level enum pattern
+        engine = DigitalOptionMCEngine(
+            params=MCParams(num_paths=100000, time_steps=252),
+            method=EngineType.MONTE_CARLO(MonteCarloMethod.QUASI)
+        )
+
+        # Alternative: Direct method enum
+        engine = DigitalOptionMCEngine(
+            params=MCParams(num_paths=100000),
+            method=MonteCarloMethod.QUASI
+        )
+
+        # Backward compatibility: String
+        engine = DigitalOptionMCEngine(method="quasi")
+
+    The engine creates a GBMPathGenerator internally based on the pricing
+    environment and MCParams configuration.
+    """
+
+    engine_type = EngineType.MONTE_CARLO
+
+    DEFAULT_METHOD = MonteCarloMethod.PSEUDO
+
+    def __init__(
+        self,
+        params: Optional[MCParams] = None,
+        method: Union[str, MonteCarloMethod, tuple, None] = None,
+    ):
+        """
+        Initialize Monte Carlo engine for digital options.
+
+        Args:
+            params: Monte Carlo configuration parameters (MCParams)
+            method: Monte Carlo method selection, one of:
+                - EngineType.MONTE_CARLO(MonteCarloMethod.XXX) (preferred)
+                - MonteCarloMethod.XXX
+                - String: "pseudo", "quasi", "randomized_quasi"
+                - None: defaults to MonteCarloMethod.PSEUDO
+
+        Raises:
+            ValidationError: If method is invalid or params are invalid
+        """
+        if params is None:
+            params = MCParams()
+
+        if not isinstance(params, MCParams):
+            raise ValidationError(
+                f"params must be MCParams instance, got {type(params).__name__}"
+            )
+
+        super().__init__(params)
+
+        if method is None:
+            self.method = self.DEFAULT_METHOD
+        elif isinstance(method, tuple):
+            engine_type, mc_method = method
+            if engine_type != EngineType.MONTE_CARLO:
+                raise ValidationError(
+                    f"Expected EngineType.MONTE_CARLO, got {engine_type}"
+                )
+            if not isinstance(mc_method, MonteCarloMethod):
+                raise ValidationError(
+                    f"Expected MonteCarloMethod, got {type(mc_method).__name__}"
+                )
+            self.method = mc_method
+        elif isinstance(method, MonteCarloMethod):
+            self.method = method
+        elif isinstance(method, str):
+            try:
+                self.method = MonteCarloMethod[method.upper()]
+            except KeyError:
+                valid_methods = [m.name for m in MonteCarloMethod]
+                raise ValidationError(
+                    f"Invalid method string '{method}'. Valid methods: {valid_methods}"
+                )
+        else:
+            raise ValidationError(
+                f"Invalid method type {type(method).__name__}. "
+                "Expected MonteCarloMethod, tuple, str, or None"
+            )
+
+    def price(
+        self, product: BaseEquityProduct, pricing_env: PricingEnvironment
+    ) -> float:
+        """
+        Price a cash-or-nothing digital option using Monte Carlo simulation.
+
+        Args:
+            product: Cash-or-nothing digital option to price
+            pricing_env: Pricing environment with market data
+
+        Returns:
+            Option price
+
+        Raises:
+            PricingError: If product is not a cash-or-nothing digital option
+            ValidationError: If pricing parameters are invalid
+        """
+        if not isinstance(product, CashOrNothingDigitalOption):
+            raise PricingError(
+                f"DigitalOptionMCEngine only supports CashOrNothingDigitalOption, "
+                f"got {type(product).__name__}"
+            )
+
+        S = pricing_env.spot
+        K = product.strike
+        payout = product.payout
+        T = product.get_maturity(pricing_env)
+        r = pricing_env.get_rate(T)
+        q = pricing_env.get_div_yield(T)
+        sigma = pricing_env.get_vol(K, T)
+
+        self._validate_inputs(S, K, T, r, q, sigma, payout)
+
+        if T < 1e-10:
+            return product.get_payoff(S)
+
+        if self.method == MonteCarloMethod.RANDOMIZED_QUASI:
+            price, std_error = self._price_rqmc(
+                product, S, K, payout, T, r, q, sigma
+            )
+        else:
+            price, std_error = self._price_mc_or_qmc(
+                product, S, K, payout, T, r, q, sigma
+            )
+
+        self._last_std_error = std_error
+
+        if price < 0:
+            raise PricingError(f"Negative price computed: {price}")
+
+        # Digital options: price must be in [0, payout * exp(-r*T)]
+        # The upper bound is the discounted payout (certainty case)
+        max_price = payout * math.exp(-r * T)
+        if price > max_price + 1e-6:
+            raise PricingError(
+                f"Price ({price:.6f}) exceeds discounted payout ({max_price:.6f})"
+            )
+
+        return price
+
+    def _validate_inputs(
+        self, S: float, K: float, T: float, r: float, q: float,
+        sigma: float, payout: float
+    ) -> None:
+        """Validate pricing inputs."""
+        if S <= 0:
+            raise ValidationError(f"Spot price must be positive, got {S}")
+        if K <= 0:
+            raise ValidationError(f"Strike price must be positive, got {K}")
+        if T < 0:
+            raise ValidationError(f"Time to maturity must be non-negative, got {T}")
+        if sigma <= 0:
+            raise ValidationError(f"Volatility must be positive, got {sigma}")
+        if q < 0:
+            raise ValidationError(f"Dividend yield must be non-negative, got {q}")
+        if payout <= 0:
+            raise ValidationError(f"Payout must be positive, got {payout}")
+
+    def _create_path_generator(
+        self,
+        S: float,
+        r: float,
+        q: float,
+        sigma: float,
+        T: float,
+        num_paths: Optional[int] = None,
+    ) -> GBMPathGenerator:
+        """
+        Create a GBMPathGenerator configured for the current method.
+
+        Args:
+            S: Spot price
+            r: Risk-free rate
+            q: Dividend yield
+            sigma: Volatility
+            T: Time to maturity
+
+        Returns:
+            Configured GBMPathGenerator
+        """
+        params = self.params
+        effective_num_paths = params.num_paths if num_paths is None else int(num_paths)
+        if effective_num_paths <= 0:
+            raise ValidationError(
+                f"num_paths must be positive, got {effective_num_paths}"
+            )
+
+        if self.method == MonteCarloMethod.PSEUDO:
+            random_stream = PseudoRandomNormalGenerator(seed=params.seed)
+            is_qmc = False
+        elif self.method in (MonteCarloMethod.QUASI, MonteCarloMethod.RANDOMIZED_QUASI):
+            random_stream = SobolNormalGenerator(base_seed=params.seed)
+            is_qmc = True
+        else:
+            raise ValidationError(f"Unknown Monte Carlo method: {self.method}")
+
+        vr_config = None
+        if params.use_antithetic and not is_qmc:
+            vr_config = VarianceReductionConfig(antithetic=True)
+
+        generator = GBMPathGenerator(
+            initial_value=S,
+            vol=sigma,
+            rrf=r,
+            div=q,
+            maturity=T,
+            time_steps=params.time_steps,
+            num_paths=effective_num_paths,
+            model="bsm",
+            random_stream=random_stream,
+            use_brownian_bridge=False,
+            vr_config=vr_config,
+            is_qmc=is_qmc,
+        )
+
+        return generator
+
+    def _calculate_payoffs(
+        self, product: CashOrNothingDigitalOption, terminal_prices: np.ndarray
+    ) -> np.ndarray:
+        """
+        Calculate digital option payoffs from terminal prices.
+
+        For a call: payout if S > K else 0
+        For a put:  payout if S < K else 0
+
+        Args:
+            product: Cash-or-nothing digital option
+            terminal_prices: Array of terminal spot prices, shape (num_paths,)
+
+        Returns:
+            Array of payoffs, shape (num_paths,)
+        """
+        K = product.strike
+        payout = product.payout
+
+        if product.is_call():
+            # Call pays out if terminal price > strike
+            payoffs = np.where(terminal_prices > K, payout, 0.0)
+        else:
+            # Put pays out if terminal price < strike
+            payoffs = np.where(terminal_prices < K, payout, 0.0)
+
+        return payoffs
+
+    def _price_mc_or_qmc(
+        self,
+        product: CashOrNothingDigitalOption,
+        S: float,
+        K: float,
+        payout: float,
+        T: float,
+        r: float,
+        q: float,
+        sigma: float,
+    ) -> Tuple[float, float]:
+        """
+        Price using normal MC or QMC (non-randomized).
+
+        Args:
+            product: Cash-or-nothing digital option
+            S: Spot price
+            K: Strike price
+            payout: Fixed cash payout
+            T: Time to maturity
+            r: Risk-free rate
+            q: Dividend yield
+            sigma: Volatility
+
+        Returns:
+            Tuple of (price, standard_error)
+        """
+        generator = self._create_path_generator(S, r, q, sigma, T)
+
+        paths, aux = generator.generate_paths(return_aux=True)
+
+        terminal_prices = paths[:, -1]
+
+        payoffs = self._calculate_payoffs(product, terminal_prices)
+
+        discount_factor = math.exp(-r * T)
+        discounted_payoffs = discount_factor * payoffs
+
+        mean_payoff = float(discounted_payoffs.mean())
+        std_payoff = float(discounted_payoffs.std(ddof=1))
+
+        std_error = std_payoff / math.sqrt(len(payoffs))
+
+        return mean_payoff, std_error
+
+    def _price_rqmc(
+        self,
+        product: CashOrNothingDigitalOption,
+        S: float,
+        K: float,
+        payout: float,
+        T: float,
+        r: float,
+        q: float,
+        sigma: float,
+    ) -> Tuple[float, float]:
+        """
+        Price using Randomized QMC with adaptive batching.
+
+        Args:
+            product: Cash-or-nothing digital option
+            S: Spot price
+            K: Strike price
+            payout: Fixed cash payout
+            T: Time to maturity
+            r: Risk-free rate
+            q: Dividend yield
+            sigma: Volatility
+
+        Returns:
+            Tuple of (price, standard_error)
+        """
+        discount_factor = math.exp(-r * T)
+
+        def pricer_fn(paths, aux):
+            """Pricer function for RQMC driver."""
+            terminal_prices = paths[:, -1]
+            payoffs = self._calculate_payoffs(product, terminal_prices)
+            discounted_payoffs = discount_factor * payoffs
+            return discounted_payoffs
+
+        params = self.params
+        max_batches = getattr(
+            params, "rqmc_max_batches", getattr(params, "max_batches", 32)
+        )
+        min_batches = getattr(
+            params, "rqmc_min_batches", getattr(params, "min_batches", 4)
+        )
+        if hasattr(params, "resolve_rqmc_target_std"):
+            target_std = params.resolve_rqmc_target_std(product=product)
+        else:
+            target_std = getattr(params, "target_std", 1e-4)
+        if hasattr(params, "resolve_rqmc_paths_per_batch"):
+            per_batch_paths = params.resolve_rqmc_paths_per_batch(
+                max_batches=max_batches
+            )
+        else:
+            per_batch_paths = params.num_paths
+
+        generator = self._create_path_generator(
+            S, r, q, sigma, T, num_paths=per_batch_paths
+        )
+
+        result = run_rqmc(
+            pricer_fn=pricer_fn,
+            path_generator=generator,
+            max_batches=max_batches,
+            target_std=target_std,
+            min_batches=min_batches,
+        )
+
+        self._last_rqmc_result = result
+
+        return result.price, result.std_error
+
+    def get_last_std_error(self) -> Optional[float]:
+        """
+        Get the standard error from the last pricing run.
+
+        Returns:
+            Standard error, or None if no pricing has been performed yet
+        """
+        return getattr(self, '_last_std_error', None)
+
+    def get_last_rqmc_result(self):
+        """
+        Get the full RQMC result from the last RQMC pricing run.
+
+        Returns:
+            RQMCResult object, or None if last pricing was not RQMC
+        """
+        return getattr(self, '_last_rqmc_result', None)
+
+    def __repr__(self):
+        return f"DigitalOptionMCEngine(method={self.method.name})"