Internal Design of HWA Engine¶

Implementation¶

Zero Coupon Bond Price¶

The zero coupon bond price for Hull White One Factor Model is calculated using the following:

\[P(t,T) = A(t,T) e ^ {-B(t,T) r(t)}\]

\[B(t,T) = 1 - \frac {e ^ {-(T-t)} } {a}\]

\[lnA(t,T) = ln \frac{P(0,T)}{P(0,t)} - B(t,T) -\frac{\delta ln P(0,t)}{\delta t} - \frac {\sigma ^ {2}}{4a^{2}} (e ^ {-aT} - e ^ {-at}) ^ {2} (e ^ {2at} - 1)\]

These input parameters are:

\(a\) - the mean reversion

\(\sigma\) - the volatility

\(t\) - the current time

\(T\)- the maturity

\(r(t)\) - the short rate at time t

Equity Option Pricing¶

The price at time t of a European Call option with strike X, maturity T on a discount bond maturing at time S is given by:

\[ZBC(t,T,S,X) = P(t,S)\theta(h) - XP(t,T)\theta(h-\sigma^{p})\]

The price at time t of a European Put option with strike X, maturity T on a discount bond maturing at time S is given by:

\[ZBP(t,T,S,X) = XP(t,T)\theta(-h+\sigma^{p}) - P(t,T)\theta(-h)\]

The terms are derived from:

\[{\sigma^{p}} = \sigma \sqrt{1 - \frac{e ^ {-2a(T-t)}}{2a}} B(T,S)\]

\[h = \frac{1}{\sigma^{p}} ln(\frac{P(t,S)}{P(t,T)X}) + \frac{\sigma ^ {p}}{2}\]

Cap/Floor¶

ZBC & ZBP can be used to price caps & floors since they can be viewed as portfolios of zero-bond options:

\[Cap(t,T,N,X) = N \sum_{i=1}^{n}[P(t,t_{i-1})\theta(-h_i + \sigma_p^i) - (1+X_{Ti})P(t,t_i)\theta(-h_i)]\]

\[Flr(t,T,N,X) = N \sum_{i=1}^{n}[(1+X_{Ti})P(t,t_i)\theta(h_i)-P(t,t_{i-1})\theta(h_i-\sigma_p^i)]\]

The terms are derived from:

\[{\sigma_p^i} = \sigma{\sqrt{\frac{1-e^{2a(t_{i-1}-t)}}{2a}}}B(t_{i-1},t)\]

\[{h_i} = {\frac{1}{\sigma_p^i}} ln (\frac{P(t,t_i)(1+X_{Ti})}{P(t,t_{i-1})}) + \frac{\sigma_p^i}{2}\]

Implemention¶

The framework is split into host and kernel code.

Kernel¶

The kernel directory contains the 3 kernels based on the above formula:

HWA_K0.cpp contains the bond pricing engine
HWA_k1.cpp contains the option pricing engine
HWA_k2.cpp contains the cap/floor engine

Host¶

The host code (main.cpp) contains the OpenCL calls to invoke each of the kernels and test for accuracy compared to the CPU model (cpu.cpp).