Quick-Algorithm-Pricing-BarrierOptions

A C++ implementation of fast Monte Carlo pricing methods for down-and-out barrier options under the Merton Jump Diffusion model. This repository contains a modular pricing system, example executable, and a test suite used to validate the pricing algorithms.

Repository contents

• code/ — main C++ implementation, headers, source files, and build configuration
• code/src/main.cpp — example program that constructs a barrier option and computes prices
• code/tests/ — Catch2-based tests for pricing methods
• docs/ — dissertation document with mathematical derivation and research results

See docs/Efficient_Barrier_Pricing_Daneel_Patel_final.pdf for the full dissertation and theoretical background.

What this code does

The code implements pricing for barrier options using several numerical methods. It is designed for modularity and extensibility, separating:

• asset dynamics (Dynamics)
• underlying security (Stock)
• option payoffs and barriers (Option, Barrier)
• pricing algorithms (IPricing implementations)

Supported pricing engines include:

• StandardMonteCarlo
• UniformSample
• TaylorApproximation

Build and run

In the code/ directory:

cd code
mkdir -p build
cd build
cmake ..
cmake --build .

Then run the example:

./main

Run the test suite:

ctest --output-on-failure

Example usage

The example program demonstrates a workflow with:

1. MertonJumpDynamics(r, sigma, lambda, mu_jump, sigma_jump)
2. Stock(S0, dynamics)
3. DownAndOut(ExerciseType::European, OptionType::Call, strike, barrier, maturity)
4. a pricing engine such as UniformSample, TaylorApproximation, or StandardMonteCarlo
5. calling Price() or PriceWithVarianceReduction()

The main executable prints a price estimate and the standard error.

Tests and validation

The project includes integration tests that verify down-and-out call pricing for different methods. The tests use a reference price and validate the algorithms with Catch2.

Project structure

• code/include/ — header files for dynamics, options, stock, and pricing algorithms
• code/src/ — implementation of the library and the example program
• code/tests/ — test implementations and helper functions

Extending the project

To add new models or products:

• implement a new IDynamics model for a different stochastic process
• extend the Option hierarchy for new derivative payoffs
• reuse existing pricing engines or add a new IPricing implementation

Notes

• The project is built with C++23.
• The example program currently prices a down-and-out European call under a Merton jump diffusion model.
• The modular design allows easy swapping of models, products, and pricing engines.