take_implicit_timestep function

Backwardate grid values one timestep

Take one timestep of an implicit solver for a given instrument

take_implicit_timestep(
  t,
  S,
  full_discount_factor,
  local_discount_factor,
  discount_factor_fcn,
  prev_grid_values,
  survival_probabilities,
  tridiag_matrix_entries,
  instrument = NULL,
  dividends = NULL,
  instr_name = "this instrument"
)

Arguments

• t: Time after this timestep has been taken
• S: Underlying equity values for the grid
• full_discount_factor: A discount factor for the transform from grid values to actual derivative prices
• local_discount_factor: A discount factor to apply to recovery values
• discount_factor_fcn: A function for computing present values to time t of various cashflows occurring during this timestep, with arguments T, t
• prev_grid_values: A vector of space grid values from the previously calculated timestep
• survival_probabilities: Vector of probabilities of survival for each space grid node
• tridiag_matrix_entries: Diagonal, superdiagonal and subdiagonal of tridiagonal matrix from the numerical integrator
• instrument: If not NULL/NA, must have a recovery_fcn and an optionality_fcn though those properties are themselves allowed to be NA.
• dividends: A data.frame with columns time, fixed, and proportional. Dividend size at the given time is then expected to be equal to fixed + proportional * S / S0
• instr_name: Name of instrument to use in log messages

Returns

Grid values for the instrument after taking the implicit timestep

See Also

Other Implicit Grid Solver: construct_implicit_grid_structure(), find_present_value(), form_present_value_grid(), infer_conforming_time_grid(), integrate_pde(), iterate_grid_from_timestep(), timestep_instruments()