I'm a math guy trying to self teach myself Python. Through some pointers here, I have this program working (without a class implementation) but being a math guy, my code is ugly. I'd like some help using classes to make it look cleaner.
But I think I'm confused on how to make one class flow into another. Or at the very least functions be put into other functions.
Anyway, I've read a lot of material and have this part working well:
#-----------------------------------------------
# Plain vanilla european option pricer
# by DudeWah
#-----------------------------------------------
#import libraries
import time as walltime
from random import gauss
from math import exp, sqrt
#-----------------------------------------------
#Class for all parameters
#-----------------------------------------------
class parameters():
"""parameters to be used for program"""
#--------------------------
def __init__(self):
"""initializa parameters"""
self.c_or_p = "call"
self.S = 857.29 #underlying asset price
self.v = 0.2076 #volatility
self.r = 0.0014 #rf treasury rate
self.T = 18/ 365.0 #days till maturity
self.K = 860.00 #strike rate
self.simulations = 10000000 #no. of simulations
#---------------------------
def print_parameters(self):
"""print parameters"""
print "---------------------------------------------"
print "---------------------------------------------"
print "Pricing a:", self.c_or_p.upper()
print "---------------------------------------------"
print "Parameters of Monte Carlo Vanilla Call Pricer"
print "Underlying Asset Price = ", self.S
print "Volatility = ", self.v
print "Risk-Free 10 Year Treasury Rate =", self.r
print "Days Until Expiration = ", self.T
print "Number of Simulations = ", self.simulations
print "---------------------------------------------"
print "---------------------------------------------"
This part is the issue. I have no idea what I'm doing lol. I can provide the algorithm if anyone cares.
#-----------------------------------------------
#Class for Monte Carlo
#-----------------------------------------------
class vanilla_option_mc():
def __init__(self):
self.payoffs = []
self.discount_factor = exp(-prm.r * prm.T)
def gen_asset_price(self):
#def gen_asset_price(S,v,r,T):
"""One of two main functions to be used. This will
generate the price of the security. This function
will be used repetitively inside the for loop
later on during the actual Monte Carlo simulation"""
self.asset_price = prm.S * exp((prm.r - 0.5 * prm.v**2) * prm.T
+ prm.v * sqrt(prm.T) * gauss(0,1.0))
return self.asset_price
def call_payoff(self):
"""use to price a call"""
self.cp = max(self.call_S - self.call_K, 0.0)
return self.cp
def put_payoff(self):
"""Use to price a put"""
self.pp = max(prm.K - prm.S, 0.0)
return self.pp
def calculate_payoff_vector(self):
"""main iterative loop to run the
Monte Carlo simulation. Returns a vector
of different potential payoffs"""
self.count = 0
for i in xrange(simulations):
self.S_T = gen_asset_price()
if self.c_or_p == "call":
self.payoffs.append(call_payoff(self.S_T,prm.K))
elif self.c_or_p == "put":
self.payoffs.append(put_payoff(self.S_T,prm.K))
self.count += 1
return self.payoffs
def compute_price(self):
"""Uses payoff vector and discount
factor to compute the price of the
option"""
self.V_i = [x*self.discount_factor for x in self.payoffs]
self.price = sum(self.V_i) / float(prm.simulations)
def print_price(self):
"""prints the option price to terminal"""
print str(prm.c_or_p.upper()),"Price: %.4f" % self.price
def calc_statistics():
"""uses payoffs and price to calc
variance, standard deviation, and
a 95% confidence interval for price"""
self.V_i_minus_price_squared = [(x - self.price)**2 for x in self.V_i]
self.variance = sum(self.V_i_minus_price_squared) /float(prm.simulations-1)
self.sd = sqrt(self.variance)
self.CI = [self.price - (1.96*sd/sqrt(float(prm.simulations))),
self.price + (1.96*sd/sqrt(float(prm.simulations)))]
def print_statistics():
print "Variance: %.4f" % self.variance
print "Standard Deviation: %.4f" % self.sd
print "95% Confidence Interval:", self.CI
prm = parameters()
prm.print_parameters()
I've hit the problem in the learning curve that I can make a lot of things work pretty well now. But as far as a little bit more in depth classes go, as well as readability and clean code, I am lacking.
I'd like to improve on these things.
Thanks in advance.
