Generic Simulation Class

Object-oriented modeling — as introduced in Chapter 13 — allows inheritance of

attributes and methods. This is what we want to make use of when building our simulation

classes: we start with a generic simulation class containing those attributes and methods

that all other simulation classes share.

To begin with, it is noteworthy that we instantiate an object of any simulation class by

“only” providing three attributes:

name

A string object as a name for the model simulation object

mar_env

An instance of the market_environment class

corr

A flag (bool) indicating whether the object is correlated or not

This again illustrates the role of a market environment: to provide in a single step all data

and objects required for simulation and valuation. The methods of the generic class are:

generate_time_grid

This method generates the time grid of relevant dates used for the simulation; this

task is the same for every simulation class.

get_instrument_values

Every simulation class has to return the ndarray object with the simulated instrument

values (e.g., simulated stock prices, commodities prices, volatilities).

Example 16-2 presents such a generic model simulation class. The methods make use of

other methods that the model-tailored classes will provide, like self.generate_paths. All

details in this regard will become clear when we have the full picture of a specialized,

nongeneric simulation class.

Example 16-2. Generic financial model simulation class

DX Library Simulation

simulation_class.py

import numpy as np
import pandas as pd

class simulation_class(object):
”’ Providing base methods for simulation classes.

            Attributes

            ==========

            name    :   string

                            name    of  the object

            mar_env :   instance    of  market_environment

                            market  environment data    for simulation

            corr    :   Boolean

                            True    if  correlated  with    other   model   object



            Methods

            =======