Re: [Quantlib-dev] FW: SABR regression

[Peter C. <pca...@gm...>]

Hi Ferdinando,

one problem is the transformation function direct(...) which is buggy for
alpha and nu. Can you try the attached version instead and see if it works
better ?

I'd like to have a closer look and try on more cases before I send a PR
though.

Thanks
Peter

On 17 November 2014 12:06, Ferdinando M. Ametrano <na...@am...>
wrote:

> Hi Peter
>
> SABR implementation on the current trunk has a regression compared with
> QuantLib 1.2.1
>
> While trying to calibrate problematic smiles as:
>
> strike1.00%1.13%1.25%1.38%1.50%vol123.20%20.25%31.21%39.02%50.45%vol2
> 16.67%20.20%27.85%32.79%37.27%
>
> 1.2.1 was able to offer these (non-optimal but decent) solutions:
>
> max errorrms errorend criteriaalphabetanurho1.79%0.94% StationaryPoint
> 0.58%25.00%346.03%34.19%0.65%0.43% StationaryPoint0.62%25.00%193.97%63.66%
>
>
> the current trunk instead fails for the second smile with error
> "qlSABRInterpolationAlpha - nu must be non negative: -124.897 not allowed".
>
> If one tries to just use the four leftmost volatilities to simplify the
> problem, both calibrations fail with the same error. This leads me to
> believe the problem is about the solver looking for a solution in the
> negative nu region. If this is the case it could be solved having a
> positive constraint for nu. Do you agree? Could you please look into it?
>
> Please find attached a spreadsheet reproducing the error. We might even
> want to add a non regression test to the test suite.
>
> thank you for your help
>
> regards
> F
>