RE: [Quantlib-dev] QuantLib developement

[Toyin A. <toy...@ho...>]

Hi Theo,

I too have not worked out how one can use the interest rate short rate 
models within a MonteCarlo
setting.

I'm even looking for how one can use two correlated short rate models.

All,

For the LMM model, there are several nice examples within the test files.

One question regarding the LMM model under the Monte Carlo setting, if one 
wanted to price a quanto structure (where the fixings thus need a quanto 
adjustment), is it the case that we simply multiply the initial libor rates 
by the convexity adjustment ( exp(- FXVol*Vol*Correlation) ) and then 
simulate?

Or do we apply this adjustment on the simulated libor rates at the end of 
each simulation?

Or do we require another model entirely?

Toy out.

>From: TB...@ao...
>To: qua...@li...
>Subject: [Quantlib-dev] QuantLib developement
>Date: Tue, 4 Apr 2006 06:36:15 EDT
>
>
>Hi Luigi,
>
>I did not get your reply for some reason, so I have subscribed to  
>developers
>mailing list and
>I am resending my previous e-mail.
>
>I want to do some further Quantlib development on the following:
>
>1) extend the convertible bond engine to include discrete  dividends.   I
>have an idea which involves recursion but which is  okay if you have 
>program in a
>non OO approach, but in Quantlib where its  strongly OO it may be a bit
>tricky but essentially we would need to construct a  separate tree for each
>dividend date work out the call values and compare with  early exercise of 
>(adjusted
>spot by divided -strike) and eventually all these  vector of call values
>become the call values of the previous dividend date which  in a way will 
>join the
>separate trees.  For each of the separate trees you  may need to store or
>apply call or putable features, coupon payments
>
>2) extend the convertible bond engine to allow cater for partial recovery  
>of
>bond
>and stock price going to 0 or partial recovery of stock  if there is a
>default.
>
>3) price Mortgage Backed Security.  In the case of the MBS, I am  trying to
>work out
>how a hullwhite short rate model can be modelled using Monte Carlo in
>Quantlib.  Its not
>very clear how the dynamics of the short rate process can be passed to  
>Monte
>Carlo class.
>If it was a stock process then fine.
>
>
>Regards
>
>Theo
>