Re: [Quantlib-dev] Local Vol

[<Tb...@ao...>]

Whilst on the subject, in cases where you don't have a very smooth and well defined BS volatility surface, what do you do?

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On 16 Dec 2012, at 17:19, "Simon Ibbotson" <Sim...@fs...> wrote:

> I have an implementation on Andreason's method for generating no-arbitrage local vol surfaces. I will submit it into QuantLib after New Years...
> 
> From: Klaus Spanderen <kl...@sp...> 
> To: Luigi Ballabio <lui...@gm...>; Theo Boafo <tb...@ao...> 
> Cc: qua...@li... <qua...@li...> 
> Sent: Fri Dec 14 14:44:51 2012
> Subject: Re: [Quantlib-dev] Local Vol 
> 
> Hi
>  
> The implementation is based on the original Dupire formula and therefore works only if you have a very "smooth" and well-defined BS volatility surface.  The test case 
>  
> BarrierOptionTest :: testLocalVolAndHestonComparison ()
>  
> shows a usage of it.
>  
> This algorithm
>  
> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1694972
>  
> might be helpful to generate "smooth" volatility surfaces.
>  
> cheers
>  Klaus
>  
> But then is seems to work, 
> Luigi Ballabio <lui...@gm...> hat am 14. Dezember 2012 um 12:01 geschrieben: 
> > Hi, 
> > the LocalVolSurface is what we have. It's not overly tested, 
> > though, so it would be great if anyone tried it out and reported. 
> > 
> > Luigi 
> > 
> > 
> > On Wed, Dec 12, 2012 at 3:43 PM, Theo Boafo <tb...@ao...> wrote: 
> > > Hi All, 
> > > 
> > > Do we have an implementation of Local Vol in Quantlib? I see a LocalVol 
> > > surface but does not seem like its used. 
> > > 
> > > Regards 
> > > 
> > > Theo 
> > 
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