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Merged
jsidhu06 merged 10 commits into from
May 5, 2026
Merged

Feature/barriers #10

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46c5796
Amend discrete barrier default params in PDEParams.for_barriers cls m…
jsidhu06 May 3, 2026
57059cb
Add inception-triggered short-circuit barrier Greeks tests
jsidhu06 May 3, 2026
91e787b
Tighten _validate_bump: raise on bump+non-NUMERICAL even on auto-res…
jsidhu06 May 3, 2026
d2ab19e
Amend random_seed default in MonteCarloParams from None to 42
jsidhu06 May 4, 2026
920d7e1
Inception-triggered exemption from binomial barrier NUMERICAL block
jsidhu06 May 4, 2026
c7f48d4
Lift inception-triggered theta short-circuit to OV level
jsidhu06 May 4, 2026
6fd1e0a
Minor fix
jsidhu06 May 5, 2026
5d6f637
Add inception-triggered barrier short-circuits to vega and rho
jsidhu06 May 5, 2026
0d7ef48
(test_engine_caching) - Pass greek_calc_method=GreekCalculationMethod…
jsidhu06 May 5, 2026
72dbf2e
Minor update to 08_barriers notebook UOP example
jsidhu06 May 5, 2026
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84 changes: 48 additions & 36 deletions examples/08_barriers.ipynb
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Original file line number Diff line number Diff line change
Expand Up @@ -28,7 +28,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 1,
"id": "458cebb9",
"metadata": {},
"outputs": [],
Expand All @@ -41,7 +41,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 2,
"id": "62883135",
"metadata": {},
"outputs": [],
Expand Down Expand Up @@ -75,7 +75,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 3,
"id": "fb3abc32",
"metadata": {},
"outputs": [
Expand Down Expand Up @@ -118,7 +118,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 4,
"id": "82083afd",
"metadata": {},
"outputs": [
Expand Down Expand Up @@ -159,7 +159,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 5,
"id": "b9f9d3f0",
"metadata": {},
"outputs": [
Expand Down Expand Up @@ -204,7 +204,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 6,
"id": "969eccf5",
"metadata": {},
"outputs": [
Expand Down Expand Up @@ -257,7 +257,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 7,
"id": "924344e1",
"metadata": {},
"outputs": [
Expand All @@ -269,7 +269,7 @@
"------------------------------------------\n",
"bsm 11.0529 11.4489\n",
"binomial 11.0558 11.3924\n",
"pde_fd 11.0529 11.4491\n"
"pde_fd 11.0529 11.4502\n"
]
}
],
Expand Down Expand Up @@ -302,15 +302,15 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 8,
"id": "845efb07",
"metadata": {},
"outputs": [
{
"name": "stdout",
"output_type": "stream",
"text": [
"DOC with 5 custom monitoring dates: 11.8989\n"
"DOC with 5 custom monitoring dates: 11.8981\n"
]
}
],
Expand Down Expand Up @@ -345,7 +345,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 9,
"id": "e859736d",
"metadata": {},
"outputs": [
Expand Down Expand Up @@ -397,22 +397,22 @@
"name": "stdout",
"output_type": "stream",
"text": [
"UOP European (Binomial): 15.1171\n",
"UOP European (PDE_FD): 15.1147\n",
"UOP American (Binomial): 16.6296\n",
"UOP American (PDE_FD): 16.6280\n",
"Early-exercise premium (Binomial): +1.5125\n",
"Early-exercise premium (PDE_FD): +1.5133\n"
"UOP European (Binomial): 7.8446\n",
"UOP European (PDE_FD): 7.8432\n",
"UOP American (Binomial): 8.5558\n",
"UOP American (PDE_FD): 8.5541\n",
"Early-exercise premium (Binomial): +0.7112\n",
"Early-exercise premium (PDE_FD): +0.7109\n"
]
}
],
"source": [
"uop_spec = dp.BarrierSpec(\n",
" option_type=dp.OptionType.PUT,\n",
" exercise_type=dp.ExerciseType.EUROPEAN,\n",
" strike=115.0, # deep-ITM put (spot=100)\n",
" strike=105.0, # ITM put (spot=100)\n",
" maturity=maturity,\n",
" barrier=130.0, # up-barrier above spot\n",
" barrier=115.0, # up-barrier above spot (and strike)\n",
" direction=dp.BarrierDirection.UP,\n",
" action=dp.BarrierAction.OUT,\n",
" monitoring=dp.BarrierMonitoring.CONTINUOUS,\n",
Expand Down Expand Up @@ -450,7 +450,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 11,
"id": "1825e67a",
"metadata": {},
"outputs": [],
Expand All @@ -465,7 +465,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 12,
"id": "a0b8764f",
"metadata": {},
"outputs": [
Expand All @@ -475,11 +475,11 @@
"text": [
"Greek BSM Binomial PDE_FD\n",
"------------------------------------------\n",
"delta -0.6501 -0.6501 -0.6501\n",
"gamma 0.0119 0.0119 0.0119\n",
"vega 0.2715 nan 0.2715\n",
"theta 0.0008 0.0008 0.0008\n",
"rho -0.7372 -0.7373 -0.7372\n"
"delta -0.5886 -0.5886 -0.5886\n",
"gamma 0.0100 0.0100 0.0100\n",
"vega 0.1688 nan 0.1688\n",
"theta 0.0006 0.0006 0.0006\n",
"rho -0.4655 -0.4656 -0.4655\n"
]
}
],
Expand All @@ -503,7 +503,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 13,
"id": "8f00cba5",
"metadata": {},
"outputs": [
Expand All @@ -513,11 +513,11 @@
"text": [
"Greek Binomial PDE_FD\n",
"------------------------------------------\n",
"delta -0.7473 -0.7475\n",
"gamma 0.0175 0.0175\n",
"vega nan 0.2098\n",
"theta -0.0025 -0.0025\n",
"rho -0.3454 -0.3450\n"
"delta -0.6521 -0.6522\n",
"gamma 0.0133 0.0133\n",
"vega nan 0.1520\n",
"theta -0.0013 -0.0013\n",
"rho -0.2881 -0.2878\n"
]
}
],
Expand Down Expand Up @@ -559,7 +559,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 14,
"id": "14721416",
"metadata": {},
"outputs": [
Expand All @@ -568,7 +568,7 @@
"output_type": "stream",
"text": [
"DOC with discrete divs (PDE_FD): 9.5619\n",
"DOC without divs (PDE_FD): 15.1147\n"
"DOC without divs (PDE_FD): 7.8432\n"
]
}
],
Expand Down Expand Up @@ -606,7 +606,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 15,
"id": "e85a339a",
"metadata": {},
"outputs": [
Expand Down Expand Up @@ -658,7 +658,7 @@
},
{
"cell_type": "code",
"execution_count": null,
"execution_count": 16,
"id": "93bf3338",
"metadata": {},
"outputs": [
Expand Down Expand Up @@ -713,6 +713,18 @@
"display_name": "Python 3",
"language": "python",
"name": "python3"
},
"language_info": {
"codemirror_mode": {
"name": "ipython",
"version": 3
},
"file_extension": ".py",
"mimetype": "text/x-python",
"name": "python",
"nbconvert_exporter": "python",
"pygments_lexer": "ipython3",
"version": "3.12.3"
}
},
"nbformat": 4,
Expand Down
37 changes: 5 additions & 32 deletions src/derivatives_pricing/valuation/barrier_analytical.py
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Original file line number Diff line number Diff line change
Expand Up @@ -477,44 +477,17 @@ def theta(self) -> float:
central-difference bump-and-revalue around the same closed-form
evaluator (routed through :attr:`valuation_ctx` so repeated calls
hit the OV-level cache). The identity holds in the continuation
region; for inception-triggered KOs we short-circuit to a
closed-form θ because the contract is no longer PDE-governed
(it's just paid cash, or a deterministic discounted payment).
For inception-triggered KIs we delegate to the vanilla equivalent.
region only. Inception-triggered barriers are short-circuited
upstream in :meth:`OptionValuation.theta` (the PDE identity gives a
wrong answer for AT_HIT rebate KOs — paid cash doesn't accrue but
the identity returns ``r·R/365``), so this method may assume the
barrier is alive at pricing date.

Returned per **calendar day**
"""
ctx = self.valuation_ctx
underlying = self.underlying

# ── Inception-triggered short-circuit ─────────────────────────
# KO triggered: the contract has collapsed to a deterministic
# cashflow and is no longer PDE-governed. The identity then gives
# the wrong answer — e.g. r·V instead of 0 for an AT_HIT rebate
# — so we return the closed-form θ directly.
# KI triggered: the contract is the underlying vanilla, which DOES
# satisfy the BS PDE; the identity would still hold here (with the
# vanilla's δ and γ that OV's NUMERICAL short-circuit already
# provides). We delegate to ``vanilla.theta()`` anyway as a
# precision upgrade — it returns the analytical θ rather than the
# identity evaluated with bumped greeks.
if ctx._barrier_triggered_at_inception():
spec = self.spec
if spec.action is BarrierAction.IN:
return float(ctx._vanilla_equivalent_valuation().theta())
# KO triggered.
if spec.rebate <= 0.0 or spec.rebate_timing is RebateTiming.AT_HIT:
# No rebate or rebate paid immediately → pv has no time
# evolution → θ = 0.
return 0.0
# AT_EXPIRY rebate: pv = R · df_r(T), so dpv/dt = +r · pv;
# per-day θ = r · pv / 365.
T = ctx._maturity_year_fraction()
df_r = float(ctx.discount_curve.df(T))
pv = float(spec.rebate) * df_r
r = -np.log(df_r) / T
return float(r * pv / 365.0)

S = float(underlying.initial_value)
sigma = float(underlying.volatility)
sigma2 = sigma**2
Expand Down
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