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

[Lawrence S. <law...@gm...>]

Thanks. I'll check if there is a work around.

The driver is speed. My metrics show this method is 500 times faster than
all binomial methods. For pricing 800k options with basic greeks and
shocks, the difference is minutes versus day.

On Thu, Jan 20, 2022, 5:05 AM YaoBin Kuo, <yp...@gm...> wrote:

>
> 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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>