quantlib-dev — Discussion of QuantLib development

[Quantlib-dev] GEV Distribution

[David B. <doc...@gm...>]

Hi Everyone-

  Has there been any discussion about using the GEV or Generalized Extreme
Value distribution pricing method as an alternative to BlackScholes etc.


DB

[Quantlib-dev] Heads up - Volatility model classes / Shanghai warrants

[Joseph W. <jo...@gn...>]

Just a heads up.  I'm currently working on some C++ classes that convert quote 
time series information into a volatility time series.  I'm started with a 
dead simple model that does a constant weighting of terms, but eventually, 
I'm hoping to put in a GARCH model.

In case anyone is interested, I'm finding some *really* interesting things 
about Shanghai warrants.  The really interesting thing is that the implied 
volatility for the put warrants are a linear function of the call warrants, 
but they implied volatilities are different from each other,  The thing that 
I need to do now is to compare the two with the volatility as calculated from 
the underlying, which requires some code to convert from quotes to 
volatilities.

Also, the prices of the warrants started off being insane, but are now not 
nearly as crazy now as they were Q3 last year.

Joseph Wang Ph.D.
China Derivatives Researcher
http://www.gnacademy.org/joe

[Quantlib-dev] Some suggestions

[Patrick C. <ch...@is...>]

Hi folks,

I just downloaded this package and built it. Nice job on this package.

I don't know if your folks have thought about using the CMake in this 
project or not.

http://www.cmake.org

CMake is a powerful cross-platform, open-source make system. It's using 
revise BSD style license, so there should be no conflict with the 
QuantLib's license.

Quote, "CMake is used to control the software compilation process using 
simple platform and compiler independent configuration files. CMake 
generates native makefiles and workspaces that can be used in the 
compiler environment of your choice."

Some benefit about using CMake in the project would be:
1. Simplify the build process
2. Supporting most platforms and compilers
3. Facilitating the automatic testing
4. Easy to mange and extend, you don't need to spend any time to support 
the new compilers(this will be taken care of by cmake)

As very first benefit, for instence, when we build this package using 
CMake, it will ask for the "boost" library, this will automatic link the 
given directory and lib to Make file or Project file. Saving user's 
energy to untangle the linking problem.

Right now CMake supports most OS, and Borland, NMake, Unix, Visual 
Studio 6, 7, .Net 2003, 2005 compilers.

I'd like to help on this project, first by adding the cmake support. It 
won't require any refactoring. Just add a simple "CMakeLists.txt" in 
each directory.

Some of my background:

Patrick Cheng
Software Engineer

Experience:
3 years experience with open source software development, (ITK, VTK, 
FLTK, CMake, CVS ...)
Current project: Image-guided Surgery Toolkit (IGSTK) C++ Object 
oriented open source project.

I am interested in the finance field and I am shooting for the CFA test 
this December. I'd love to get involved in this project.

I will look into the code a little bit more and see which part I am 
interested in.

Thank you for reading this long email,

Patrick

Re: [Quantlib-dev] Likelihood Ratio for MC

[Ferdinando A. <na...@am...>]

Hi Jason,

please go ahead and provide a patch, your contribution would be welcome.

btw are you sure you would own the copyright to your code? would you
be able to get a disclaimer from your employer allowing you to
contribute to QuantLib?

Yes, you got it, the domain in your email address struck me as much as
your likelihood proposal :-)

ciao -- Nando


On 3/27/06, Jas...@ri... <Jas...@ri...> w=
rote:
>
> Hi there, I'm looking to add an MC engine with Greeks using the Likelihoo=
d
> ratio, and from my explorations of the code so far, the best place to add
> the first variate, is to store it in the Path class (which is the biggest
> issue I want to get confirmation on) , so that it's easily accessible wit=
h
> custom MC engines and allows the ability to retrofit the Greeks enhanceme=
nt
> to existing MC engines.
> I'd add a simple MC pricer with the whole Greeks method implemented as an
> example for future implementations etc..
> Thoughts?
>
> Regards,
> Jason
>
>

[Quantlib-dev] Likelihood Ratio for MC

[<Jas...@ri...>]

Hi there, I'm looking to add an MC engine with Greeks using the Likelihood 
ratio, and from my explorations of the code so far, the best place to add 
the first variate, is to store it in the Path class (which is the biggest 
issue I want to get confirmation on) , so that it's easily accessible with 
custom MC engines and allows the ability to retrofit the Greeks 
enhancement to existing MC engines. 
I'd add a simple MC pricer with the whole Greeks method implemented as an 
example for future implementations etc..
Thoughts? 

Regards,
Jason 
 

[Quantlib-dev] python binding(and SWIG interface in general)

[gary n. <li...@ga...>]

Hi,

I tried to use the python binding instead of C++ but it seems that if I want
to do anything that is not in quantlib, I still need to program them in C++
then expose my implementation in SWIG, instead of implementing the logic in
python. Is this the intended usage of the binding ?

For example, the Hull White short rate model binding in python is exposed as
the top level short rate model class instead of the Hull White C++ class. As
a result, I cannot access those public members that is supposed to be in
Hull White like tree(), dynamics(), discount(), discountBond().

What I want to do is to implment some simple MBS using Monte Carlo and the
Hull White model, kind of following the path of the Discrete Hedging
example.

thanks for any pointer or help in advance.

regards,

gary

Re: [Quantlib-dev] FpML Extention

[eric e. <eri...@gm...>]

Hi Shilpi,

The subject of FpML-enabling QuantLib was discussed at length in the
mailing lists, a high-level design was sketched out:

http://sourceforge.net/mailarchive/forum.php?thread_id=3D6507779&forum_id=
=3D4300
http://sourceforge.net/mailarchive/forum.php?thread_id=3D6539684&forum_id=
=3D4300
http://sourceforge.net/mailarchive/forum.php?thread_id=3D6540997&forum_id=
=3D4300
http://sourceforge.net/mailarchive/forum.php?thread_id=3D6543552&forum_id=
=3D4300
http://sourceforge.net/mailarchive/forum.php?thread_id=3D6700844&forum_id=
=3D4300

The project is possibly too big for one person, in which case a
sensible approach might be to take on smaller tasks which could be
extended later as others participate.  My suggestion would be to
formalize the proposed design into a QuEP, followed by a functioning
prototype that could be extended.

Regards,
Eric

On 3/21/06, Shilpi M Agarwal <shi...@sa...> wrote:
>
>
> Hi
>
> I saw on the website http://quantlib.org/extensions.shtml
> that you are looking for people for FpML extention. not sure whom to
> contact.
>
> What is the work done in this field? I will be interested in knowing and
> joining if it suits.
>
> shilpi
>
>
>
>
>
>
>
>
> Shilpi M Agarwal
> Sapient | Technology
> m: +44 (0) 7775510347
> o:  +44 (0) 2079533555

[Quantlib-dev] FpML Extention

[Shilpi M A. <shi...@sa...>]

Hi
=20
I saw on the website http://quantlib.org/extensions.shtml that you are =
looking for people for FpML extention. not sure whom to contact.
=20
What is the work done in this field? I will be interested in knowing and =
joining if it suits.
=20
shilpi
=20
=20
Shilpi M Agarwal
Sapient | Technology
m: +44 (0) 7775510347
o:  +44 (0) 2079533555

Re: [Quantlib-dev] Final 0.3.12 tarballs

[eric e. <eri...@gm...>]

> I guess Eric will update ObjectHandler and QuantLibAddin shortly.)

Done.

Regards,
Eric

Re: [Quantlib-dev] Contribution request

[Ferdinando A. <na...@am...>]

Hi Bechir,

yes, forward stock and FRA would be a welcome addition. QuantLib needs
them and they (especially FRA) were the top item in my to-do list

ciao -- Nando

On 3/17/06, bec...@ya... <bec...@ya...> wrote:
> Hi all,
>
> I'm Senior Software Designer with 8 years experience
> in development.
> I have a Baccaluareat Engineering in Telecommunication
> and a Master degree in
> Information Technology with software Engineering
> focus.
> I mainly work with C++ to develop rela time librairies
> for Voice Over IP.
> I have a strong numerical background and a very good
> experience using design patterns
> and UML.
>
> I have an introductory level of financial mathematics
> and derivative pricing.
> I want to contribute to this project.
>
> I suggest that I first implement the following
> To do task:
> "Forward (stock) and FRA (forward-rate agreement).
> ." in Financial Instruments.
>
>
>
> Bechir Trabelsi
> Software Designer
> M5T Centre d'Excellence en Telecom, Inc.
> 4283 Garlock Street
> Sherbrooke (Quebec).
> Canada J1L 2C8
> Email.: mailto:btr...@m5...
>
>
> __________________________________________________
> Do You Yahoo!?
> Tired of spam?  Yahoo! Mail has the best spam protection around
> http://mail.yahoo.com
>
>
> -------------------------------------------------------
> This SF.Net email is sponsored by xPML, a groundbreaking scripting langua=
ge
> that extends applications into web and mobile media. Attend the live webc=
ast
> and join the prime developer group breaking into this new coding territor=
y!
> http://sel.as-us.falkag.net/sel?cmd=3Dlnk&kid=3D110944&bid=3D241720&dat=
=3D121642
> _______________________________________________
> Quantlib-dev mailing list
> Qua...@li...
> https://lists.sourceforge.net/lists/listinfo/quantlib-dev
>

[Quantlib-dev] Final 0.3.12 tarballs

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

Hi all,
	final tarballs for the 0.3.12 release are available at =20
<http://quantlib.org/prerelease/> (I'm referring to the QuantLib and =20
QuantLib-SWIG ones; I guess Eric will update ObjectHandler and =20
QuantLibAddin shortly.)

Please give them a try: if no showstoppers are found, I'll release them =20
in a week or so.

Thanks,
	Luigi


----------------------------------------

A debugged program is one for which you have not yet found the
conditions that make it fail.
-- Jerry Ogdin

[Quantlib-dev] Re: add-in distribution

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

On 03/19/2006 02:27:24 PM, eric ehlers wrote:
> Already done!  The prerelease tarballs -
> http://quantlib.org/prerelease/oh-qla.html - include a binary release
> of QuantLibAddin, into which all of the prerequisites - QuantLib,
> ObjectHandler, log4cxx, and the MS runtime - are statically linked.

Great, thanks.

Luigi


----------------------------------------

The economy depends about as much on economists as the weather does on
weather forecasters.
-- Jean-Paul Kauffmann

[Quantlib-dev] Re: add-in distribution

[eric e. <eri...@gm...>]

Hi Luigi,

Already done!  The prerelease tarballs -
http://quantlib.org/prerelease/oh-qla.html - include a binary release
of QuantLibAddin, into which all of the prerequisites - QuantLib,
ObjectHandler, log4cxx, and the MS runtime - are statically linked.

The installation docs have been updated accordingly and I plan to
mention the change in the announcement email.

Regards,
Eric

On 3/19/06, Luigi Ballabio <lui...@gm...> wrote:
>
> Eric,
>         on the Wilmott forums I keep coming across Excel users that canno=
t
> wrap their head around compiling the add-in and prerequisites. Given
> that they're a different target than C++ developers, I would consider
> providing a compiled binary of the Excel add-in besides the sources. Of
> course all prerequisites should be statically linked in. Do you think
> it feasible?
>
> Thanks,
>         Luigi
>
>

[Quantlib-dev] add-in distribution

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

Eric,
	on the Wilmott forums I keep coming across Excel users that cannot 
wrap their head around compiling the add-in and prerequisites. Given 
that they're a different target than C++ developers, I would consider 
providing a compiled binary of the Excel add-in besides the sources. Of 
course all prerequisites should be statically linked in. Do you think 
it feasible?

Thanks,
	Luigi

[Quantlib-dev] Contribution request

[<bec...@ya...>]

Hi all,

I'm Senior Software Designer with 8 years experience
in development.
I have a Baccaluareat Engineering in Telecommunication
and a Master degree in 
Information Technology with software Engineering
focus.
I mainly work with C++ to develop rela time librairies
for Voice Over IP.
I have a strong numerical background and a very good
experience using design patterns 
and UML.

I have an introductory level of financial mathematics
and derivative pricing.
I want to contribute to this project.

I suggest that I first implement the following
To do task:
"Forward (stock) and FRA (forward-rate agreement).
." in Financial Instruments.



Bechir Trabelsi
Software Designer
M5T Centre d'Excellence en Telecom, Inc.
4283 Garlock Street
Sherbrooke (Quebec).
Canada J1L 2C8
Email.: mailto:btr...@m5...


__________________________________________________
Do You Yahoo!?
Tired of spam?  Yahoo! Mail has the best spam protection around 
http://mail.yahoo.com 

Re: [Quantlib-dev] Advice regarding contribution to project

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

On 2/25/06, Peter Gee <gee...@ya...> wrote:
> Having read through various pages on the
> QuantLib site, I would like to become a
> contributor.

Peter,
    apologies for the delay. It's been a busy period.


> It seems best to start with a small task;
> a provisional list is:
>
> 1) Add more bonds
>    (but which ones are required?)
>
> 2) Add tests for short-rate models
>    (do developers have specific tests in mind?)

As for the second question, I can't think of any specific tests,
except that we might try and reproduce some results in literature. You
might look for examples in the books on the subject and turn them into
tests.

As for the first, the obvious bonds are done. It would be nice to have
callable bonds, but I'm not sure that it would be a small task...


> In the future, I might well be interested
> in adding code for credit derivatives.

There might be other people working (or wanting to work) on that.
Maybe you could look in the mailing list archives and coordinate with
them?

Thanks,
    Luigi

Re: [Quantlib-dev] Re: N-dimensional interpolation template library

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

On 03/17/2006 11:04:10 AM, Toyin Akin wrote:
> I think this would be a great addition to quantlib.

Likewise. But it might be of interest to more people than just quants.
Did you consider submitting it to Boost?

Later,
	Luigi

----------------------------------------

Ogden's Law:
         The sooner you fall behind, the more time you have to catch up.

RE: [Quantlib-dev] Re: N-dimensional interpolation template library

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

Hi,

I think this would be a great addition to quantlib.

Any chance of sending me a copy of the library (source code) with some test 
code so that I can play with it a bit?

This should be great, for example, for the extrapolation of volatility data 
from a 2D grid (maturity/strike) or (maturity/underlying length).

Toy out.


>From: Rom...@ao...
>To: qua...@li...
>Subject: [Quantlib-dev] Re: N-dimensional interpolation template library
>Date: Thu, 16 Mar 2006 13:33:47 EST
>
>
>Hi everyone
>
>Since I  wrote an N-dimensional cubic spline class back in 2003,  I have
>developed a framework for N-dimensional algoriths that allows  
>incorporation of a
>widely divergent set of 1-dimensional algorithms.into it. For  example 
>within
>the library I have developed so far such entirely diffferent  algoriths as
>quintic_hermite interpolation and rational polinomial interpolation  can be
>chosen by the user to interpolate the same set of tabulated  data.  ...
>     Tthis programatic framework is implemented as a template  class
>instantiated using  1-dimensional algorithms along with number of  
>dimensions as its
>template parameters. The library features a  uniform user friendly 
>interface.
>Thus the user, instead of going through the  tedium of plugging the same 
>set of
>data into different algorithms for can choose  and run any algorithm
>implemented within the framework by choosing  between a  few typedefs. The 
>choice of
>an algorithb becomes a  matte of a few clics of the mouth.
>       Among the algorithsI have implemented  so far within this framework 
>are
>the following:
>multi-linear interpolation, natural cubic spline interpolation;  clamped
>cubic spline interpolation, monotonicity preserving clamped   cubic spline
>interpolation, polinomial interpolation, rational polinomial  
>interpolation,
>cubic-hermite  and quintic-hermite spline.
>    Also, since quintic-hermite spline implementation takes cubic  spline 
>as
>its template parameter that means that the user have a choice of 3  flavors 
>of
>quintic-hermite spline.
>      Besides , every algorithm that uses second  detivatives is 
>implemented
>in two ways: one that calculates second derivatives  globally when memory 
>is
>not an issue, and locally when memory is at  premium.
>     Though it may sound counterintuitive, this united  approach to
>implementation of different algorithms within united  framework, besides 
>being user
>friendly, also made each of the library's  implementations more efficient.
>    For example N-dimensional cubic spline as  implemented within this
>framework runs few times faster than the  one currewntly  implemented in 
>the Quantlib
>library, and on top  of that the library as a whole and this the library's
>cubic spline  implementation's in particular features vastly improved 
>memory
>management.
>     I hope this library can be incorporated  into the Quntlib.
>          Any feedback is  welcome..
>
>          Roman  Gitlin
>

[Quantlib-dev] ImpliedVolatility bracketing error

[Ken A. <li...@an...>]

I'm trying to use the impliedVolatility method on a VanillaOption and  
I'm getting the following exception:

Underlying:66.900000
Strike 61.500000 Call  Price 7.750000 Expires:November 14th, 2006

java.lang.RuntimeException: root not bracketed: f[0.0001,4] ->  
[6.792459e-02,5.274040e+01]
	at org.quantlib.QuantLibJNI.VanillaOption_impliedVolatility__SWIG_4 
(Native Method)
	at org.quantlib.VanillaOption.impliedVolatility(VanillaOption.java:89)

The strange thing is, this one works fine:

Strike 62.000000 Call  Price 7.460000  Volatility 0.09146919793826723

So, with all other parameters the same (they're the 61.50 and 62.00  
calls on an oil future expiring on Nov 14), one calculates, the other  
one gets a bracketing error.  I'm using the default impliedVolatility  
method, so the input values are the defaults (.0001 and 4 with I  
believe up to 100 iterations).

Since the volatility is pretty low for the $62 Call, is it possible  
that it's just too far off?  Since the 61.50 Call costs $7.75 and the  
62 Call costs $ 7.46, I can't see how they could be too far off from  
each other.

Any thoughts are appreciated...  I'm running in Java through SWIG in  
case anyone is interested - and it's the latest stable release.

Ken

[Quantlib-dev] Correct classes for options on commodity futures?

[Ken A. <li...@an...>]

I need to generate greeks and implied volatilities for options on  
commodity futures.  Right now, I'm using BlackScholesProcess,  
AnalyticEuropeanEngine  and VanillaOption.  Is that correct?  I would  
like to use Black-76, but I'm not sure if I'm getting that this way  
or not...

Thanks,
Ken

[Quantlib-dev] Re: N-dimensional interpolation template library

[<Rom...@ao...>]

 
Hi everyone
 
Since I  wrote an N-dimensional cubic spline class back in 2003,  I have 
developed a framework for N-dimensional algoriths that allows  incorporation of a 
widely divergent set of 1-dimensional algorithms.into it. For  example within 
the library I have developed so far such entirely diffferent  algoriths as 
quintic_hermite interpolation and rational polinomial interpolation  can be 
chosen by the user to interpolate the same set of tabulated  data.  ...
    Tthis programatic framework is implemented as a template  class 
instantiated using  1-dimensional algorithms along with number of  dimensions as its  
template parameters. The library features a  uniform user friendly interface. 
Thus the user, instead of going through the  tedium of plugging the same set of 
data into different algorithms for can choose  and run any algorithm 
implemented within the framework by choosing  between a  few typedefs. The choice of 
an algorithb becomes a  matte of a few clics of the mouth.
      Among the algorithsI have implemented  so far within this framework are 
the following:
multi-linear interpolation, natural cubic spline interpolation;  clamped  
cubic spline interpolation, monotonicity preserving clamped   cubic spline 
interpolation, polinomial interpolation, rational polinomial  interpolation, 
cubic-hermite  and quintic-hermite spline.
   Also, since quintic-hermite spline implementation takes cubic  spline as 
its template parameter that means that the user have a choice of 3  flavors of 
quintic-hermite spline.
     Besides , every algorithm that uses second  detivatives is implemented 
in two ways: one that calculates second derivatives  globally when memory is 
not an issue, and locally when memory is at  premium.
    Though it may sound counterintuitive, this united  approach to 
implementation of different algorithms within united  framework, besides being user 
friendly, also made each of the library's  implementations more efficient.
   For example N-dimensional cubic spline as  implemented within this 
framework runs few times faster than the  one currewntly  implemented in the Quantlib 
library, and on top  of that the library as a whole and this the library's 
cubic spline  implementation's in particular features vastly improved memory 
management.
    I hope this library can be incorporated  into the Quntlib. 
         Any feedback is  welcome..
 
         Roman  Gitlin

RE: [Quantlib-dev] Re: [Quantlib-users] blackvariancecurve question - used by the LMM code...

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

Hi,

An update on this...

What you have is correct because you pass in the unadjusted EndDate to the 
Schedule class.
The convention is then used for the coupon periods.

Thus the capfloor test code is fine.

The problem arises if you pass in an adjusted end date to the schedule class 
then the problems that I described before appy.

Regards,

Toyin Akin.


>From: "Toyin Akin" <toy...@ho...>
>To: kla...@fr...
>CC: qua...@li...
>Subject: [Quantlib-dev] Re: [Quantlib-users] blackvariancecurve question - 
>used by the LMM code...
>Date: Fri, 10 Mar 2006 03:12:27 +0000
>
>
>Hi,
>
>Normally if a client wants to price a 6 year swap from spot, 6 years is 
>added onto the spot date (UnAdjusted) and this date is used as a reference 
>for computing the period dates.
>
>What is adjusted are the period coupon dates (look at the code within the 
>Schedule object).
>
>The point is, the period dates are computed as : 
>Adjust(UnAdjustedSwapEndDate - N*Period).
>
>For the final enddate of the final cashflow, this will be 
>Adjust(UnAdjustedSwapEndDate).
>For the start date of the final cashflow, this will be 
>Adjust(UnAdjustedSwapEndDate - 1*Period).
>etc...
>
>For example, if a client wants to price a 6 year swap from the 17/3/2006, 
>the unadjusted end date of the swap will be 17/3/2012 (a sunday). When the 
>cashflows are computed 17/3/2012 is used as a reference date and for 
>example the last coupon will have dates of (18/12/2011, 18/3/2012).
>
>If the AdjustedSwapEndDate is used in this formula, the dates generated are 
>completely different and a client will look at this schedule and think, 
>well my swap start on the 17/3/2006 and lasts for 6 years, but why is 
>almost all my coupon dates starting and ending on the 18th?
>
>It should be the other way around, almost all the dates should be the 17th, 
>but with some being the 18th (give or take a few days).
>
>That's why for swap / cap calculations, you specify an unadjusted endate 
>into the schedule class. But an adjustment is used within the coupon class 
>itself.
>
>If however you use explicit start and end swap dates and you know that the 
>enddate is a non-holiday, it doesn't matter what BusinessdayConvention you 
>use.)
>
>Maybe the code within the test-suite/capfloor.cpp should be changed...
>I believe that this is the normal case...
>
>Any thoughts anyone...?
>
>Toyin Akin.
>
>
>>From: Klaus Spanderen <kla...@fr...>
>>Reply-To: kla...@fr...
>>To: "Toyin Akin" <toy...@ho...>
>>CC: qua...@li...
>>Subject: Re: [Quantlib-users] blackvariancecurve question - used by the 
>>LMM code...
>>Date: Thu, 9 Mar 2006 05:39:44 +0100
>>
>>Hi Toyin,
>>
>>On Thursday 09 March 2006 10:29 am, you wrote:
>> > One final point, the Schedule object used within the cashflows() 
>>function
>> > of the LMMProcess class... I think that you probably need a
>> > businessdayconvention of UnAdjusted. Otherwise your first cashflow 
>>could be
>> > slightly too long. This is because if the end date falls on a weekend, 
>>it
>> > will be move onto the newt good business day and thus within the 
>>generation
>> > of the coupon dates, the dates will be attached to this modified date.
>>
>>The libor forward process inherits the cashflow schedule from the given 
>>index
>>to allow exact pricing of cap(lets) using the lfm process. (see test case
>>LiborMarketModelTest::testCapletPricing() ) and the cashflow schedule for 
>>a
>>normal cap/floor is generated in the same way (see 
>>test-suite/capfloor.cpp).
>>IMO the cash flow should be rolled over if the end date falls on a weekend
>>but may be I miss the point here.
>>
>>cheers
>>  Klaus
>>
>
>
>
>
>-------------------------------------------------------
>This SF.Net email is sponsored by xPML, a groundbreaking scripting language
>that extends applications into web and mobile media. Attend the live 
>webcast
>and join the prime developer group breaking into this new coding territory!
>http://sel.as-us.falkag.net/sel?cmd=lnk&kid=110944&bid=241720&dat=121642
>_______________________________________________
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>https://lists.sourceforge.net/lists/listinfo/quantlib-dev

[Quantlib-dev] Re: [Quantlib-users] blackvariancecurve question - used by the LMM code...

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

Hi,

Normally if a client wants to price a 6 year swap from spot, 6 years is 
added onto the spot date (UnAdjusted) and this date is used as a reference 
for computing the period dates.

What is adjusted are the period coupon dates (look at the code within the 
Schedule object).

The point is, the period dates are computed as : 
Adjust(UnAdjustedSwapEndDate - N*Period).

For the final enddate of the final cashflow, this will be 
Adjust(UnAdjustedSwapEndDate).
For the start date of the final cashflow, this will be 
Adjust(UnAdjustedSwapEndDate - 1*Period).
etc...

For example, if a client wants to price a 6 year swap from the 17/3/2006, 
the unadjusted end date of the swap will be 17/3/2012 (a sunday). When the 
cashflows are computed 17/3/2012 is used as a reference date and for example 
the last coupon will have dates of (18/12/2011, 18/3/2012).

If the AdjustedSwapEndDate is used in this formula, the dates generated are 
completely different and a client will look at this schedule and think, well 
my swap start on the 17/3/2006 and lasts for 6 years, but why is almost all 
my coupon dates starting and ending on the 18th?

It should be the other way around, almost all the dates should be the 17th, 
but with some being the 18th (give or take a few days).

That's why for swap / cap calculations, you specify an unadjusted endate 
into the schedule class. But an adjustment is used within the coupon class 
itself.

If however you use explicit start and end swap dates and you know that the 
enddate is a non-holiday, it doesn't matter what BusinessdayConvention you 
use.)

Maybe the code within the test-suite/capfloor.cpp should be changed...
I believe that this is the normal case...

Any thoughts anyone...?

Toyin Akin.


>From: Klaus Spanderen <kla...@fr...>
>Reply-To: kla...@fr...
>To: "Toyin Akin" <toy...@ho...>
>CC: qua...@li...
>Subject: Re: [Quantlib-users] blackvariancecurve question - used by the LMM 
>code...
>Date: Thu, 9 Mar 2006 05:39:44 +0100
>
>Hi Toyin,
>
>On Thursday 09 March 2006 10:29 am, you wrote:
> > One final point, the Schedule object used within the cashflows() 
>function
> > of the LMMProcess class... I think that you probably need a
> > businessdayconvention of UnAdjusted. Otherwise your first cashflow could 
>be
> > slightly too long. This is because if the end date falls on a weekend, 
>it
> > will be move onto the newt good business day and thus within the 
>generation
> > of the coupon dates, the dates will be attached to this modified date.
>
>The libor forward process inherits the cashflow schedule from the given 
>index
>to allow exact pricing of cap(lets) using the lfm process. (see test case
>LiborMarketModelTest::testCapletPricing() ) and the cashflow schedule for a
>normal cap/floor is generated in the same way (see 
>test-suite/capfloor.cpp).
>IMO the cash flow should be rolled over if the end date falls on a weekend
>but may be I miss the point here.
>
>cheers
>  Klaus
>

Re: [Quantlib-dev] changing stochastic process object

[Warren C. <war...@al...>]

Hi Luigi

I was looking into implementing greek method (via difference quotients) in MC simulation, e.g. computing vega by copying StochasticProcess objects and bumping member BlackVolTermStructure objects. 

I've since decided users are better positioned to compute greeks by differencing.

Regards,

Warren Chou
warrench <at> alum.mit.edu

[Quantlib-dev] Re: [Quantlib-users] blackvariancecurve question - used by the LMM code...

[Klaus S. <kla...@fr...>]

Hi Toyin,

On Thursday 09 March 2006 10:29 am, you wrote:
> One final point, the Schedule object used within the cashflows() function
> of the LMMProcess class... I think that you probably need a
> businessdayconvention of UnAdjusted. Otherwise your first cashflow could be
> slightly too long. This is because if the end date falls on a weekend, it
> will be move onto the newt good business day and thus within the generation
> of the coupon dates, the dates will be attached to this modified date.

The libor forward process inherits the cashflow schedule from the given index 
to allow exact pricing of cap(lets) using the lfm process. (see test case 
LiborMarketModelTest::testCapletPricing() ) and the cashflow schedule for a 
normal cap/floor is generated in the same way (see test-suite/capfloor.cpp). 
IMO the cash flow should be rolled over if the end date falls on a weekend 
but may be I miss the point here.

cheers 
 Klaus