function I do not really understand, could somebody give me a hint?

Hi,

I have received a function which consists of several furnctions, but I have some problems to see what is going on here. In input parameters are given in line two: x0 = [1.1768 0.082259 0.83746 -0.54589]; %parameters: psi m xi rho

That's clear so mean that I can change them in order to get the function running. But I am not sure what is happending with those parameters. In the last function, the following is happening

Answer 1

[Wayne King]

u is just the variable for integration, so I could define a function

function y = myfun(x)
  y = x.^2;
end

and then integrate that function like:

quadl(@(u) myfun(u),0,2)

That is just the integral of x^2 from 0 to 2. So in LaTex

\int_{0}^{2} x^2 dx or \int_{0}^{2} u^2 du or whatever you variable you like.

Thank you for accepting my answer if I have helped you.

[Locks]

you did, thanks

Answer 2

[Wayne King]

This input

 x0 = [1.1768 0.082259 0.83746 -0.54589];

is fed into CallPriceF() as the input argument, parameters.

Then, it is fed into the function, CallPriceIntegralF(), as the input argument, x.

So the code:

kappa = x(1); theta = x(2);
sigma = x(3); rho   = x(4);

inside of CallPriceIntegralF() is really

kappa = x0(1); theta = x0(2);
sigma = x0(3); rho   = x0(4);

[Locks]

thanks, do you know where the u in the last function comes from?

%Help vectors
o = sqrt(-1)*u; b = sigma*rho*o-kappa;
a = o.*(1-o); g = sqrt(b.^2+a*sigma^2); %gamma
B = - (a.*(1-exp(-g*T))) ./ (2*g - (g+b).*(1-exp(-g*T)));
A = -kappa*theta*( (g+b)/sigma^2 * T + 2/sigma^2 * log(1- (g+b)./(2*g).*(1-exp(-g*T))));
CHF = exp(A + B*V0 + o * log(F));