CODEWITHSUNDEEP
pythonalgorithmnumpy
Rison
Rison

Reputation: 21

IndexError: index 666 is out of bounds for axis 1 with size 501

import math
import numpy as np

def ExplicitMethod(S0, K, r, q, T, Sigma, M, N, Option):

    M = int(M)
    N = int(N)
    dt = T / N
    K = float(K)
    Smax = 2 * K
    dS = Smax / N

    FGrid = np.zeros(shape=(N+1, M+1))

    if Option == 'Call':
        FGrid[-1, :] = np.maximum(np.arange(0, M+1) * dS - K, 0)  
    elif Option == 'Put':
        FGrid[-1, :] = np.maximum(K - np.arange(0, M+1) * dS, 0)

    A = np.zeros(shape=(M+1, M+1))
    A[0,0] = 1
    A[-1,-1] = 1
    for j in range(1, M-1):
        A[j, (j-1,j, j+1)] = \
        [0.5 * dt * (Sigma ** 2 * j ** 2 - (r - q) * j  ), \
         1 - dt * (Sigma ** 2 * j ** 2 + r), \
         0.5 * dt * (Sigma **2 * j ** 2 + (r - q) * j)]


    for i in range(N):
        Fhat = FGrid [i, ]
        FGrid[i, :] = np.dot(A , Fhat)
        Fhat[0] = 0
        Fhat[-1] = Smax - K * math.exp(-r * (N - i) * dt)

    k = math.floor(S0 / dS)

    V = FGrid[0, k] + (FGrid[0, k] - FGrid[0, k]) / dS * [(S0 - k * dS)]

    print (V)

ExplicitMethod (50, 30, 0.1, 0.05, 2, 0.3, 400, 800, Option = 'Call')

And I got this error:

IndexError Traceback (most recent call last) in () 37 print (V) 38 ---> 39 ExplicitMethod (50, 30, 0.1, 0.05, 2, 0.3, 400, 800, Option = 'Call')

in ExplicitMethod(S0, K, r, q, T, Sigma, M, N, Option) 33 k = math.floor(S0 / dS) 34 ---> 35 V = FGrid[0, k] + (FGrid[0, k] - FGrid[0, k]) / dS * [(S0 - k * dS)] 36 37 print (V)

IndexError: index 666 is out of bounds for axis 1 with size 401

And FYI I'm coding Option Pricing Explicit Method:

enter image description here

Please help, thank you!

Upvotes: 1

Views: 1746

Answers (1)

hpaulj
hpaulj

Reputation: 231335

You have initialized FGrid to be (801,401). The tells us that, for some reason, k=666

k = math.floor(S0 / dS)
V = FGrid[0, k] + (FGrid[0, k] - FGrid[0, k]) / dS * [(S0 - k * dS)]

You need to refine how k is set. Maybe the math is wrong. At the very least you need to ensure that it does not get above 400.

In [200]: S0=50; K=30; N=800
In [201]: dS = 2*K/N
In [202]: dS
Out[202]: 0.075
In [203]: S0/dS
Out[203]: 666.6666666666667

There's your 666.

Upvotes: 2

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