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From: Dan V. <dan...@gm...> - 2022-12-29 00:02:02
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Thank you jack. What direction did you end up taking to price non vanilla products using QL ? On Mon, Dec 19, 2022 at 7:24 PM Jack G <jac...@gm...> wrote: > Hi Dan, > > Just for reference on the PTD Heston, adding a path generator for PTD > Heston was something I looked at during a side project a year or so ago - > there is some code in an abandoned pull request here but it's fairly > horrible: https://github.com/lballabio/QuantLib/pull/1185/files > > In the end I found exactly the problems you have mentioned for PTD Heston > - hard and slow to calibrate, and I wasn't getting much convergence from > the MC prices for anything beyond vanillas. A lot of this is because > several of the extremely useful optimizations for Heston path generation > stop working nicely in PTD Heston. > > Best luck with the project, > Jack > > On Tue, 20 Dec 2022, 01:24 Dan VolPM, <dan...@gm...> wrote: > >> Hello experts, >> >> Has anyone been able to price any product in monte carlo (generating path >> via the GaussianMultiPathGenerator) using either a local vol surface or a >> piecewise Heston ? >> I should mention we used python. >> >> *The problems with LocalVol is:* >> - Only the AndreasenHugeVolatility does not break when generating paths, >> however there is such a loss of information in the process of building it >> that the prices generated are extremely far from the calibrating vanillas >> - Whenever we use our (smoothed and cleaned) BlackVarianceSurface and >> generate paths with it, it is converted into a localvol surface under the >> cover which is perfect for path generation BUT it is virtually impossible >> to actually get paths that don't break on "arbitrages". I use the quote >> there for arbitrage because the test used is so granular that converting >> any kind of real life market surface will fail (I'm not talking here about >> the 4x4 matrices that we all use for examples but rather a huge SPX surface >> with tons of strikes and maturities). Even an SVI failed at that which is >> telling me either we do something very wrong or the falling var and fly >> testing is just too granular. >> >> => this leaves us stuck unable to price any non standard payoff in LV >> >> *The problem with PTD Heston is:* >> - It takes forever to calibrate and still has a pretty poor quality of fit >> - there is no way to build a PTDHeston process like there is for regular >> Heston. Consequently building paths is just impossible. >> >> Is there a different way to go about pricing non standard payoffs using >> one of these 2 methods ? >> Happy to hear from someone who can actually make it work. >> >> Any help would be greatly appreciated. >> Thank you >> >> _______________________________________________ >> QuantLib-users mailing list >> Qua...@li... >> https://lists.sourceforge.net/lists/listinfo/quantlib-users >> > |