I am having trouble using QuantLib with Python to calculate American options with discrete dividends. I am using Anaconda, Spyder, Python 3.6, and the most recent version of QuantLib. I created functions in pricingfunctions.py, which streamline the building process for pricing options and the greeks based on the code on this webpage - http://www.bnikolic.co.uk/blog/ql-american-disc-dividend.html:

import QuantLib as ql
def create_american_process(valuation_date, rf_rate, spot, ivol):

#set calendar & day count
calendar = ql.UnitedStates()
day_counter = ql.ActualActual()

#set evaluation date
ql.Settings.instance().evaluation_date = valuation_date    

#set rate & vol curves
rate_ts = ql.FlatForward(valuation_date, ql.QuoteHandle(rf_rate), 

vol_ts = ql.BlackConstantVol(valuation_date, calendar, 
                         ql.QuoteHandle(ivol), day_counter)  
#create process
process = ql.BlackScholesProcess(ql.QuoteHandle(spot),
return process

def american_px_greeks(valuation_date, expiry, call_or_put, strike,   div_dates, 
                       div_values, time_steps, process):

#create instance as call or put
if call_or_put.lower() == 'call':
    option_type = ql.Option.Call 
elif call_or_put.lower() == 'put':
    option_type = ql.Option.Put 
    raise ValueError("The call_or_put value must be call or put.")        

#set exercise and payoff
exercise = ql.AmericanExercise(valuation_date, expiry)
payoff = ql.PlainVanillaPayoff(option_type, strike)

#create option instance
option = ql.DividendVanillaOption(payoff, exercise, div_dates, div_values)

#set mesh size for finite difference engine    
grid_points = time_steps - 1                                  

#create engine
engine = ql.FDDividendAmericanEngine(process, time_steps, grid_points)
return option

def print_option_results(option):    
    print("NPV: ", option.NPV())
    print("Delta: ", option.delta())
    print("Gamma: ", option.gamma())
    return None   

Then I run the below script, but the outputs for NPV, Delta and Gamma are all 0.0, which is wrong. The NPV should be in the 12 to 13 range, and the Delta close to 0.50, while Gamma is negligible. I am not sure what is wrong. Any insights are much appreciated. Thanks

import QuantLib as ql
from pricingfunctions import create_american_process
from pricingfunctions import american_px_greeks
from pricingfunctions import print_option_results

vol = 0.25
strike = 100
spot = ql.SimpleQuote(100)
rf_rate = ql.SimpleQuote(0.01)
ivol = ql.SimpleQuote(vol)
call_or_put = 'call'
div_dates = [ql.Date(14, 5, 2014), ql.Date(14, 8, 2014), ql.Date(14, 11, 2014)]
div_values = [1.0, 1.0, 1.0]
expiry = ql.Date(15, 1, 2016)
valuation_date = ql.Date(17, 4, 2014)
time_steps = 456 

process_test = create_american_process(valuation_date, rf_rate, spot, ivol)
option_test = american_px_greeks(valuation_date, expiry, call_or_put, strike, div_dates, div_values, time_steps, process_test)

You're not setting the global evaluation date. If you don't, you're in December 2017 and your option has expired a good while ago.


ql.Settings.instance().evaluationDate = valuation_date

before the calculations will give you the expected results.

  • $\begingroup$ thanks very much. i realized the error. instead of using evaluationDate, i used evaluation_date. subtle but bad mistake. appreciate the response Luigi. cheers $\endgroup$ – fmc100 Dec 6 '17 at 17:30

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