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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 17:52:34
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Hi, Concerning the Bermudan FLT/FLT swap (or bermudan basis swaption) assuming one leg is based on a LIBOR curve and the other on a BASIS curve, how does one refer to each individual curve within a DiscretizedAsset class (assuming that one wants to model the code similar to that of the DiscretizedSwap class). Or is the infrastructure only suitable for only refering to a single curve. It looks like you need to model two G2++ objects and their joint dynamics. Probably the logic presented within the beginning of Chapter 11 of Brigo-Mercurio. Best Regards, Toyin Akin. >From: "Toyin Akin" <toy...@ho...> >To: qua...@li...,qua...@li... >Subject: RE: [Quantlib-dev] RE: R: [Quantlib-users] Credit default pricing >/ G2++ model >Date: Fri, 07 Oct 2005 17:21:56 +0100 > > >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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