Re: [Quantlib-dev] TreeLattice with different discounting and forwarding curves

[SK A <ska...@go...>]

Hi Luigi,

Thanks for your comments.

I didn't exactly understand one point. What do you mean by: "You'll have to
take care that the two lattices have
the same nodes, of course, so you'll have to use a model where they
don't depend on the underlying curve..."

By following your suggestion, we can not take into account the correlation
between two curves, right? This is exactly what I want to have. That's why I
constructed two trinomial trees and combined them as in G2++ tree
implementation. On this grid I want to have the freedom to forward and
discount with different curves. Does it make sense?

Regards,
Sarp Kaya

On Tue, Sep 13, 2011 at 4:24 PM, Luigi Ballabio <lui...@gm...>wrote:

> On Sun, 2011-08-21 at 21:17 +0200, SK A wrote:
> > I am planning to implement a lattice in QuantLib that can cope with
> > different discounting and forwarding curves. [...] I think that the
> > curicial point is to separate the rollback method on the payoffs (i.e.
> > DiscretizedSwap and DiscretizedSwaption objects)   and on the
> > DiscretizedBond object. In the first one  discounting will be done
> > with Eonia and in the second one with Euribor (in order to calculate
> > the Euribor forwards).
> >
> > My plan is to implement a new class in numericalmethod.hpp, called
> > TwoCurveTreeLattice that has two rollback and respectivley two
> > partialRollback methods, calling two different stepback methods with
> > corresponding discountings
>
> It could become a mess very quickly.  How about passing two lattices to
> the DiscretizedSwaption instead?  The swaption would roll itself and the
> DiscretizedSwap on the Eonia lattice, and the DiscretizedBond on the
> Euribor lattice.  You'll have to take care that the two lattices have
> the same nodes, of course, so you'll have to use a model where they
> don't depend on the underlying curve; but that's a problem you'd have
> with the two-curve lattice too.  This way, you wouldn't have to modify
> the Lattice class.
>
> Luigi
>
>
> --
>
> Quote me as saying I was misquoted.
> -- Groucho Marx
>
>
>