Re: [Quantlib-dev] Option pricing BARONE-ADESI/WHALEY and negative discount rate

[YaoBin K. <yp...@gm...>]

As I rember, Barone-Adesi/Whaley Paper，there is a quadratic equation,
the  discriminant is (N-1)^2 + 4M/K
where N = 2b/sigma^2, M = 2r/sigma^2, K = 1 - e^(-rT)
so when (N-1)^2 + 4M/K < 0, the method fail
So use binomial tree method.


Lawrence Sum <law...@gm...> 於 2022年1月17日 週一 下午10:45寫道：

> Hi,
>
> I am still using QuantLib 1.22/Windows and testing negative discount rates
> for all option pricing methods. I noticed if the discount rate is negative
> (I used -1.2%) and Barone-Adesi/Whaley will crash (forward + displacement
> (-3.875e+14 + 0) must be positive). All other methods seemed to produce
> reasonable prices. If the rate is exactly zero there is no crash. Is this
> an issue to fix or this is expected?
>
> I cross-tested negative rate for  Barone-Adesi/Whaley using matlab/fin
> toolkit and it worked there.
>
> Thanks
> Lawrence Sum
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