SimpleMC.cpp

#include "SimpleMC.h"
#include "Random1.h"
#include <cmath>

// the basic math functions should be in 
// namespace std but arenft in VCPP6
#if !defined(_MSC_VER)
using namespace std; 
#endif

double SimpleMonteCarlo2(const PayOff& thePayOff, 
	double Expiry, 
	double Spot, 
	double Vol, 
	double r, 
	unsigned long NumberOfPaths)
{
	double variance = Vol*Vol*Expiry; 
	double rootVariance = sqrt(variance); 
	double itoCorrection = -0.5*variance;

	double movedSpot = Spot*exp(r*Expiry + itoCorrection); 
	double thisSpot; 
	double runningSum = 0;

	for (unsigned long i = 0; i < NumberOfPaths; i++) 
	{
		double thisGaussian = GetOneGaussianByBoxMuller();
		thisSpot = movedSpot*exp(rootVariance*thisGaussian); 
		double thisPayOff = thePayOff(thisSpot); 
		runningSum += thisPayOff; 
	} 
	double mean = runningSum / NumberOfPaths; 
	mean *= exp(-r*Expiry); 
	return mean;
}