Re: [Quantlib-dev] [Quantlib-users] Binomial Engines - Greeks

[Joe B. <jw...@ya...>]

Luigi,

Several of the greeks from a tree can be calculated from the current tree in memory.  The Delta and Gamma are calculated using numerical differencing of the next two time steps.  Theta requires the suggetion you provided below.  If you also calculated the delta and gamma off your time shifted tree, you are calculating the d theta-ddelta and d theta-dgamma or second order derivatives.  Vega and rho require also require a new tree calculation and a numerical differenceing using sigma+h or rate+h where h is a small increment but all other parameters are constant.

Good Luck
Joe


1. Re: Binomial Engines - Greeks (Luigi Ballabio)
   2. Re: Path dependent interest rate instruments? (Luigi Ballabio)
From: Luigi Ballabio <lui...@gm...>
CC: qua...@li..., qua...@li...
To: "Toyin Akin" <toy...@ho...>
Date: Sat, 15 Jul 2006 11:51:41 +0200
Subject: Re: [Quantlib-users] Binomial Engines - Greeks

 
On Jun 21, 2006, at 4:22 PM, Toyin Akin wrote:
> Normally pricing American options is done accurately via a tree and 
> it's hard to believe that Quantlib (well I think this is the case) 
> does not provide greeks for this common option type.
>
> Any ideas or suggestions on the best way of enabling the 
> BinomialEngine class to ouput the greek results?

Toyin,
 apologies for the delay.  Usually we tend not to provide numerical 
greeks, as the user can bump parameters himself---and moreover, he 
could bump them of the quantity he likes instead of the one we though 
sensible.

Instead, I think an often used trick for calculating Greeks on trees is 
to move the tree origin a bit back in time so that the tree has three 
nodes at today's date, the central one corresponding to the spot value. 
Delta and Gamma can then be calculated by a difference formula. This is 
an approach I'd like to have in the library if someone contributed it 
(hint, hint...)

Later,
 Luigi



From: Luigi Ballabio <lui...@gm...>
CC: qua...@li...
To: "Giorgio Pazmandi" <G.P...@th...>
Date: Sat, 15 Jul 2006 11:59:47 +0200
Subject: Re: [Quantlib-users] Path dependent interest rate instruments?

 
On Jul 12, 2006, at 10:47 AM, Giorgio Pazmandi wrote:
> I'm going to deal with IR Path Dependent instruments (like TARN, 
> Snowball
> ecc).
>
> Has anybody developed or tested some of this instruments?

Not the instruments themselves. However, an implementation of the Libor 
market model is available and another one is underway. You might try 
starting from this.

Later,
 Luigi




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