Re: [Quantlib-dev] FW: SABR regression

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Thank you Peter for the timely fix.

One takeaway is to create a unit test to check for possible future
regressions.
Do you have a relevant dataset from some paper to suggest? If not, I could
provide a snapshot of current euro caplets.
On Nov 17, 2014 7:40 PM, "MAZZOCCHI PAOLO" <pao...@es...>
wrote:

>  Hi Peter,
>
> I tested your modifications and they work properly. The results are in
> line with the ones obtained using QL 1.2.
>
> Anyway, the details (forward and time to expiry) are written in the excel
> file attached in the previous email.
>
>
>
> time
>
> fwd
>
> 0.1342
>
> 1.1075%
>
> 0.3833
>
> 1.1025%
>
>
>
> Thank you very much for your help.
>
>
>
> Paolo
>
>
>
> *Paolo Mazzocchi*
>
> *Deloitte Consulting Srl*
>
> consulente di
>
> *FINANCIAL ENGINEERING - Banca IMI*
>
> Tel: 02-72615029  Int: 35029
>
> *pao...@es... <pao...@es...>*
>
>
>
> *From:* Peter Caspers [mailto:pca...@gm...]
> *Sent:* Monday, November 17, 2014 7:00 PM
> *To:* Ferdinando M. Ametrano
> *Cc:* maz...@li...; QuantLib Mailing Lists; maddalena zanzi
> *Subject:* Re: [Quantlib-dev] FW: SABR regression
>
>
>
> Hi Ferdinando,
>
> I pushed a fix here (effectively it should yield the same results as the
> file attached earlier)
>
> https://github.com/lballabio/quantlib/pull/170
>
> As far as I remember the reason for the change in the transformation
> function (for 1.3 or 1.4 ?) were nan / inf values occuring from time to
> time in the calibration. This is why I replaced the parabolas by truncated
> parabolas with linear wings (such that the result is C^1).
>
> If you feel that your test case is still working better in 1.2, could you
> please send some more details (forward, time to expiry), I'd be happy to
> discuss again then.
>
>
>
> Best regards
> Peter
>
>
>
> On 17 November 2014 13:25, Peter Caspers <pca...@gm...> wrote:
>
> 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:
>
>
>
> strike
>
> 1.00%
>
> 1.13%
>
> 1.25%
>
> 1.38%
>
> 1.50%
>
> vol1
>
> 23.20%
>
> 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 error
>
> rms error
>
> end criteria
>
> alpha
>
> beta
>
> nu
>
> rho
>
> 1.79%
>
> 0.94%
>
>  StationaryPoint
>
> 0.58%
>
> 25.00%
>
> 346.03%
>
> 34.19%
>
> 0.65%
>
> 0.43%
>
> StationaryPoint
>
> 0.62%
>
> 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
>
>
>
>
>
>
> Prima di stampare, pensa all'ambiente ** Think about the environment
> before printing
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