Re: [Quantlib-dev] FW: SABR regression

[Ferdinando M. A. <na...@am...>]

wow, this was fast!
btw by "sabr test" I meant one test in the QuantlIb test suite

On Tue, Nov 18, 2014 at 9:47 PM, Peter Caspers <pca...@gm...>
wrote:

> Alright, I added a test case for the regression you found and one for the
> direct/inverse functions (a deterministic one, yes). I'll have a look at
> your data and see if we can extract more interesting test cases from that.
>
> And please send the new case when you are back.
>
> Peter
>
> On 18 November 2014 20:31, Ferdinando M. Ametrano <na...@am...>
> wrote:
>
>> Yes Peter, I can provide a caplet snapshot for a test.
>>
>> As for a direct/inverse test: yes please, but avoid random numbers as
>> that would make tests unpredictable.
>>
>> Please also note that one sabr test is currently failing: I don't know if
>> because of yesterday's patch or it has been failing for a while. thurdays,
>> back at my desk,  I can provide more details, but you might want to check
>> it up on your setup in the meantime
>> On Nov 18, 2014 9:33 AM, "Peter Caspers" <pca...@gm...> wrote:
>>
>>> yes, please send an example (otherwise I could already take the one from
>>> the excel you sent earlier ? or was that made up ?). In addtion I think I
>>> should add a technical test like
>>>
>>> for random input x
>>> - y = direct(x) generates admissable values
>>> - direct( inverse( y ) ) = y
>>>
>>> for sabr, noarbsabr, zabr and svi. What do you think ?
>>>
>>> Peter
>>>
>>>
>>> On 17 November 2014 20:07, Ferdinando M. Ametrano <na...@am...>
>>> wrote:
>>>
>>>> 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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>