Added test, improved

Author: jaehyukchoi

pyfeng/multiasset.py

@@ -288,7 +288,7 @@ def price(self, strike, spot, texp, cp=1):
 
 class BsmBasket1Bm(opt.OptABC):
     """
-    Basket/Spread option when all asset prices are driven by a single
+    Multiasset BSM model for pricing basket/Spread options when all asset prices are driven by a single Brownian motion (BM).
 
     """
 
@@ -351,12 +351,16 @@ def root(fac, std, strike):
         x[y_max <= 0] = np.inf
         ind = ~((y_min >= 0) | (y_max <= 0))
 
+        if np.all(~ind):
+            return x[0] if scalar_output else x
+
         for k in range(32):
             y_vec = fac * np.exp(std * x[ind, None])
             y = np.log(np.sum(y_vec, axis=-1)) - log_k[ind] if log else np.sum(y_vec, axis=-1) - strike[ind]
             dy = np.sum(std * y_vec, axis=-1) / np.sum(y_vec, axis=-1) if log else np.sum(std * y_vec, axis=-1)
             x[ind] -= y / dy
-
+            if len(y) == 0:
+                print(ind, y_vec, y)
             y_err_max = np.amax(np.abs(y))
             if y_err_max < BsmBasket1Bm.IMPVOL_TOL:
                 break

tests/test_multiasset.py

@@ -129,6 +129,30 @@ def test_BsmNormNdMc(self):
         p2 = np.array([39.42304794, 33.60383167, 28.32667559, 23.60383167, 19.42304794])
         np.testing.assert_almost_equal(p, p2)
 
+    def test_BsmBasket1Bm(self):
+        ### Check the BsmBasket1Bm price should be same as that of the Bsm price if sigma components are same.
+        for k in range(100):
+            n = np.random.randint(1, 8)
+            spot = np.random.uniform(80, 120, size=n)
+            strike = np.random.uniform(80, 120, size=10)
+            sigma = np.random.uniform(0.01, 1)*np.ones(n)
+            texp = np.random.uniform(0.1, 10)
+            intr = np.random.uniform(0, 0.1)
+            divr = np.random.uniform(0, 0.1)
+            weight = np.random.rand(n)
+            weight /= np.sum(weight)
+
+            cp = np.where(np.random.rand(10) > 0.5, 1, -1)
+            is_fwd = (np.random.rand() > 0.5)
+
+            m = pf.BsmBasket1Bm(sigma, weight=weight, intr=intr, divr=divr, is_fwd=is_fwd)
+            p = m.price(strike, spot, texp, cp)
+
+            m2 = pf.Bsm(sigma[0], intr=intr, divr=divr, is_fwd=is_fwd)
+            p2 = m2.price(strike, np.sum(spot*weight), texp, cp)
+            np.testing.assert_almost_equal(p, p2)
+
+
 
 if __name__ == '__main__':
     print(f'Pyfeng loaded from {pf.__path__}')