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RE: [Quantlib-dev] RE: R: [Quantlib-users] Credit default pricing / G2++ model
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From: Toyin A. <toy...@ho...> - 2005-10-07 16:22:36
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Hi Marco, Ignore my comments on bermudan swaptions on FLT/FLT swaps where both legs are of the same currency. This can be defined, as you said, within a new class inherited from the DiscretizedOption class if pricing via the Tree. However can the same be said with FLT/FLT swaps with different currencies on each leg (including exchange of notionals)? Best Regards, Toyin akin. >From: "Toyin Akin" <toy...@ho...> >To: qua...@li...,qua...@li... >Subject: [Quantlib-dev] RE: R: [Quantlib-users] Credit default pricing / >G2++ model >Date: Fri, 07 Oct 2005 08:54:53 +0100 > > >Hi Marco, > >I too deduced that the main implementation was on page 149, but the formula >for M(0,T) is on pg 144. Thus I was refering just to this piece of code. > >Thankyou for the explanation. I just wanted to know where the >simplification came from and now I know. > >As for the pricing of Bermudan swaptions on FLT/FLT swaps, surely some >modifications will need to be done within the G2++ class? > >In fact you would have 2 sets of logic, one for FLT/FLT (same currencies) >and one for FLT/FLT (different currencies). Or am I missing something...? > >A G2++ model is perfect for pricing bermudan options on swaps, where the >swaps have differing currency legs. > >Thankyou again, >Best Regards, >Toyin Akin. > >>From: "Tarenghi Marco" <mar...@ba...> >>To: "Toyin Akin" <toy...@ho...> >>Subject: R: [Quantlib-users] Credit default pricing / G2++ model >>Date: Fri, 7 Oct 2005 09:01:17 +0200 >> >> >>Hi Toyin, >>for what concerning the implementation of the G2++ model, I have tested >>the QuantLib functions and I think they work quite well. The formulas in >>G2::SwaptionPricingFunction class you are referring to are those on page >>149 of the Brigo-Mercurio book and not those on page 144. >>Anyway they use the formulas on page 144, since mux_ = -M(0,T): the fact >>is that the expression of mux_ is obtained using the formulas on page 144 >>but simply setting s=0 and t=T, so that the expression simplifies a lot. >> >>I hope I have been clear enough. >> >>Also, you are right: this class can price only vanilla options. >>Bermudan and/or amortizing swaptions can be priced using trees, and these >>are available in the G2 class: what you have to do is to implement a new >>Swaption class which has to derive from the DiscretizedOption class. >> >>Sorry for answering directly to you and not to the mailing list but I >>cannot do it with my office pc... >>I should do it from home >> >>Best regards, >>Marco >> >>-----Messaggio originale----- >>Da: qua...@li... >>[mailto:qua...@li...]Per conto di Toyin >>Akin >>Inviato: giovedì 6 ottobre 2005 17:26 >>A: lui...@gm...; qua...@li... >>Oggetto: [Quantlib-users] Credit default pricing / G2++ model >> >> >> >>Hi folks, >> >>Are there any plans to implement credit default swaps/options within >>QuantLib? >> >>I read somewhere, within one of the wilmott forums, that someone did >>actually have some working code. However I'm not too sure whether they are >>going to dedicate this code to the QuantLib project. >> >>I certainly would like to get a good handle on a C++ implementation of >>Credit derivatives as I'm pretty new to it, however I don't want to start >>a >>new credit project which could take months if someone else already has >>some >>working code. >> >>Also, I am stepping through the code of the G2++ model, comparing the math >>there to that of the Brigo-Mercurio book and all seems well apart from one >>expression that I can't get my head around. >> >>This concerns the code within the constructor of the >>G2::SwaptionPricingFunction class. >> >>There are expressions for mux_ and muy_ which I believe corresponds to the >>same expressions at the bottom of page 144. >> >>Taking just the mux_ expression, for example, I cannot match up the >>expressions within the book to that of the code. It's the 2nd and 3rd >>expressions of the formula (according to the book) that I am having some >>trouble matching up. >> >>Can someone confirm that the code here is correct and it's just a case of >>some smart mathematical manipulation (My brain has already died after >>validating all the other parts of the G2 model!!). >> >>Also from my analysis, it looks like we can only price options on vanilla >>swaptions under this G2++ implementation, no variation of notionals >>(amortisation), coupons, or margins (spreads). This should be possible but >>I >>believe that the limiting factor is because it is based on a SimpleSwap >>object which does not allow for such rich definitions of a swap. >> >>Also, does anyone know what code changes would be needed to implement a >>bermudan swaption on a FLT/FLT swap? I don't think that the >>SwaptionPricingFunction class is valid for this type of structure. >> >>Very good clean code by the way... >> >>Best Regards, >>Toyin Akin. >> >> >> >> >> >>DISCLAIMER: >>Privileged/Confidential Information may be contained in this message and >>in any of its attachments (the "message"). If you are not the addressee >>indicated in this message (or responsible for delivery of the message to >>such person), you may not copy or deliver this message to anyone. In such >>case, you should destroy this message and kindly notify the sender by >>reply e-mail. The contents of this message shall be understood as neither >>given nor endorsed by Banca Profilo S.p.A., nor Profilo Real Estate SGR >>S.p.A., nor Profilo Asset Management SGR S.p.A., nor Profilo Academy >>S.p.A.. 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