webcab.lib.finance.options.exotic
Class BinaryPayoff

java.lang.Object
  |
  +--webcab.lib.finance.options.exotic.BinaryPayoff

All Implemented Interfaces:

PayoffFunction, Serializable

public class BinaryPayoff

extends Object

implements PayoffFunction

This class gives an implementation of PayoffFunction for a binary option. A binary call is a contract which pays the holder a specified price at expiry if the asset price is greater than the strike price. Similarly a binary put pays the holder a specified amount if the asset price at expiry is less than the strike price.

See Also:

Serialized Form

Constructor Summary

BinaryPayoff(int call_put, int long_short, double strike_price, double high_payoff)
Creates new BinaryPayoff

Method Summary

double

getValueAt(double t, double[] x, double[] path_dependent_values, int n) Computes the value of the payoff function.

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Constructor Detail

BinaryPayoff

public BinaryPayoff(int call_put,
                    int long_short,
                    double strike_price,
                    double high_payoff)
             throws Exception

Creates new BinaryPayoff

Parameters:

call_put - Set this parameter to ExoticOptionsConstants.CALL or ExoticOptionsConstants.PUT

long_short - Set this parameter to ExoticOptionsConstants.LONG or ExoticOptionsConstants.SHORT (LONG - means that you buy the option; SHORT means that you are the writer of the option).

strike_price - The strike (exercise) price of the option.

high_payoff - The amount of money the holder receives if the asset price is higher/lower than the strike price for CALL/PUT options respectively.

Method Detail

getValueAt

public double getValueAt(double t,
                         double[] x,
                         double[] path_dependent_values,
                         int n)

Description copied from interface: PayoffFunction

Computes the value of the payoff function. If you don't need one or more parameters which are supplied, you can simply ignore them.

Specified by:

getValueAt in interface PayoffFunction

Parameters:

t - The time, used only for Bermudan options.

x - A vector containing n asset prices.

path_dependent_values - a vector containing the path dependent values. associated with the asset prices. Used only for strongly path dependent options.

n - the total number of assets.

Returns:

The value of the payoff function.