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mclongstaffschwartzpathengine.hpp

/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */

/*
 Copyright (C) 2009 Andrea Odetti

 This file is part of QuantLib, a free-software/open-source library
 for financial quantitative analysts and developers - http://quantlib.org/

 QuantLib is free software: you can redistribute it and/or modify it
 under the terms of the QuantLib license.  You should have received a
 copy of the license along with this program; if not, please email
 <quantlib-dev@lists.sf.net>. The license is also available online at
 <http://quantlib.org/license.shtml>.

 This program is distributed in the hope that it will be useful, but WITHOUT
 ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS
 FOR A PARTICULAR PURPOSE.  See the license for more details.
*/

#ifndef quantlib_mc_longstaff_schwartz_path_engine_hpp
#define quantlib_mc_longstaff_schwartz_path_engine_hpp

#include <ql/pricingengines/mcsimulation.hpp>
#include <ql/experimental/mcbasket/longstaffschwartzmultipathpricer.hpp>

namespace QuantLib {

    //! Longstaff-Schwarz Monte Carlo engine for early exercise options
    /*! References:

        Francis Longstaff, Eduardo Schwartz, 2001. Valuing American Options
        by Simulation: A Simple Least-Squares Approach, The Review of
        Financial Studies, Volume 14, No. 1, 113-147

        \test the correctness of the returned value is tested by
              reproducing results available in web/literature
    */
    template <class GenericEngine, template <class> class MC,
              class RNG, class S = Statistics>
00040     class MCLongstaffSchwartzPathEngine : public GenericEngine,
                                      public McSimulation<MC,RNG,S> {
      public:
        typedef typename MC<RNG>::path_type path_type;
        typedef typename McSimulation<MC,RNG,S>::stats_type
            stats_type;
        typedef typename McSimulation<MC,RNG,S>::path_pricer_type
            path_pricer_type;
        typedef typename McSimulation<MC,RNG,S>::path_generator_type
            path_generator_type;

        MCLongstaffSchwartzPathEngine(
            const boost::shared_ptr<StochasticProcess>& process,
            Size timeSteps,
            Size timeStepsPerYear,
            bool brownianBridge,
            bool antitheticVariate,
            bool controlVariate,
            Size requiredSamples,
            Real requiredTolerance,
            Size maxSamples,
            BigNatural seed,
            Size nCalibrationSamples = Null<Size>());

        void calculate() const;

      protected:
        virtual boost::shared_ptr<LongstaffSchwartzMultiPathPricer> 
                                                    lsmPathPricer() const = 0;

        TimeGrid timeGrid() const;
        boost::shared_ptr<path_pricer_type> pathPricer() const;
        boost::shared_ptr<path_generator_type> pathGenerator() const;

        boost::shared_ptr<StochasticProcess> process_;
        const Size timeSteps_;
        const Size timeStepsPerYear_;
        const bool brownianBridge_;
        const Size requiredSamples_;
        const Real requiredTolerance_;
        const Size maxSamples_;
        const Size seed_;
        const Size nCalibrationSamples_;

        mutable boost::shared_ptr<LongstaffSchwartzMultiPathPricer> pathPricer_;
    };

    template <class GenericEngine, template <class> class MC,
              class RNG, class S>
    inline MCLongstaffSchwartzPathEngine<GenericEngine,MC,RNG,S>::
    MCLongstaffSchwartzPathEngine(
            const boost::shared_ptr<StochasticProcess>& process,
            Size timeSteps,
            Size timeStepsPerYear,
            bool brownianBridge,
            bool antitheticVariate,
            bool controlVariate,
            Size requiredSamples,
            Real requiredTolerance,
            Size maxSamples,
            BigNatural seed,
            Size nCalibrationSamples)
    : McSimulation<MC,RNG,S> (antitheticVariate, controlVariate),
      process_            (process),
      timeSteps_          (timeSteps),
      timeStepsPerYear_   (timeStepsPerYear),
      brownianBridge_     (brownianBridge),
      requiredSamples_    (requiredSamples),
      requiredTolerance_  (requiredTolerance),
      maxSamples_         (maxSamples),
      seed_               (seed),
      nCalibrationSamples_( (nCalibrationSamples == Null<Size>())
                            ? 2048 : nCalibrationSamples) {
        QL_REQUIRE(timeSteps != Null<Size>() ||
                   timeStepsPerYear != Null<Size>(),
                   "no time steps provided");
        QL_REQUIRE(timeSteps == Null<Size>() ||
                   timeStepsPerYear == Null<Size>(),
                   "both time steps and time steps per year were provided");
        QL_REQUIRE(timeSteps != 0,
                   "timeSteps must be positive, " << timeSteps <<
                   " not allowed");
        QL_REQUIRE(timeStepsPerYear != 0,
                   "timeStepsPerYear must be positive, " 
                    << timeStepsPerYear << " not allowed");
        this->registerWith(process_);
    }

    template <class GenericEngine, template <class> class MC,
              class RNG, class S>
    inline
    boost::shared_ptr<typename
        MCLongstaffSchwartzPathEngine<GenericEngine,MC,RNG,S>::path_pricer_type>
        MCLongstaffSchwartzPathEngine<GenericEngine,MC,RNG,S>::pathPricer() 
        const {

        QL_REQUIRE(pathPricer_, "path pricer unknown");
        return pathPricer_;
    }

    template <class GenericEngine, template <class> class MC,
              class RNG, class S>
    inline
    void MCLongstaffSchwartzPathEngine<GenericEngine,MC,RNG,S>::calculate() 
    const {
        pathPricer_ = this->lsmPathPricer();
        this->mcModel_ = boost::shared_ptr<MonteCarloModel<MC,RNG,S> >(
                          new MonteCarloModel<MC,RNG,S>
                              (pathGenerator(), pathPricer_,
                               stats_type(), this->antitheticVariate_));

        this->mcModel_->addSamples(nCalibrationSamples_);
        this->pathPricer_->calibrate();

        McSimulation<MC,RNG,S>::calculate(requiredTolerance_,
                                          requiredSamples_,
                                          maxSamples_);
        this->results_.value = this->mcModel_->sampleAccumulator().mean();
        if (RNG::allowsErrorEstimate) {
            this->results_.errorEstimate =
                this->mcModel_->sampleAccumulator().errorEstimate();
        }
    }

    template <class GenericEngine, template <class> class MC,
              class RNG, class S>
    inline
    TimeGrid MCLongstaffSchwartzPathEngine<GenericEngine,MC,RNG,S>::timeGrid()
        const {
        const std::vector<Date> & fixings = this->arguments_.fixingDates;
        const Size numberOfFixings = fixings.size();

        std::vector<Time> fixingTimes(numberOfFixings);
        for (Size i = 0; i < numberOfFixings; ++i) {
            fixingTimes[i] =
                this->process_->time(fixings[i]);
        }

        return TimeGrid(fixingTimes.begin(), fixingTimes.end(), timeSteps_);
     }

    template <class GenericEngine, template <class> class MC,
              class RNG, class S>
    inline
    boost::shared_ptr<typename
    MCLongstaffSchwartzPathEngine<GenericEngine,MC,RNG,S>::path_generator_type>
    MCLongstaffSchwartzPathEngine<GenericEngine,MC,RNG,S>::pathGenerator() 
    const {

        Size dimensions = process_->factors();
        TimeGrid grid = this->timeGrid();
        typename RNG::rsg_type generator =
            RNG::make_sequence_generator(dimensions*(grid.size()-1),seed_);
        return boost::shared_ptr<path_generator_type>(
                   new path_generator_type(process_,
                                           grid, generator, brownianBridge_));
    }
}


#endif

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