Re: [Quantlib-dev] Assistance with Implementing Partial-Time Put Barrier Option (Issue #1986)

[Luigi B. <lui...@gm...>]

Ciao Paolo,
    the cost of carry also needs to consider the dividend yield, in case
your test values include it as part of the inputs.  If you want to open a
pull request with what you have at the moment, I'd be glad to have a look.

Hope this helps,
    Luigi


On Mon, Jan 6, 2025 at 8:13 PM Paolo D'Elia <pao...@gm...> wrote:

> Dear QuantLib Developers,
>
> I hope this email finds you well. I’m currently working on implementing
> the feature request in issue #1986
> <https://github.com/lballabio/QuantLib/issues/1986>, which involves
> adding support for the calculation of partial-time put barrier options
> using the put-call symmetry approach as described on page 167 of Haug’s
> book (since there is no closed-form formula available). I’ve pushed my
> current work to the branch [partial-time-barrier-put-option]
> <https://github.com/paolodelia99/QuantLib/tree/partial-time-barrier-put-option>
> in my fork, and I would greatly appreciate your guidance on the following
> matters.
>
> So far, I’ve extended the AnalyticPartialTimeBarrierOptionEngine to
> support this feature. My implementation creates a synthetic call option and
> leverages the put-call symmetry to calculate the put price. While the code
> works in the context of the AnalyticPartialTimeBarrierOptionEngine, I
> wanted to verify its correctness by testing this same symmetry property on
> standard barrier options.
>
> Here is where I’m encountering an issue: for interest rate values
> different from 0, I observe a discrepancy in the put-call symmetry results.
> My suspicion is that I may not have properly accounted for the "cost of
> carry" term in the symmetry calculation. However, I’m struggling to fully
> understand this concept. I’ve read on page 8 of Haug’s book that, in the
> Black-Scholes model, the cost of carry is the same as the risk-free
> interest rate, but I can’t wrap my head around how it applies here or
> whether I’m omitting this variable in my implementation.
>
> Could this discrepancy be related to the cost-of-carry term, or am I
> misunderstanding something fundamental about the put-call symmetry for
> barrier options? If anyone has experience or insights into this area, I
> would be very grateful for your assistance and guidance.
>
> Thank you in advance for your time and help. Please let me know if further
> details or specific code snippets would be helpful.
>
> Best regards,
> Paolo D'Elia
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