quantlib-dev

[Quantlib-dev] Partial greeks calculation for MonteCarloed basket options

[<fho...@gm...>]

Hi there!
What is the most general way to calculate (partial) greeks for a MultiAssetOption or a BasketOption? Does anyone ever had the chance to implement something like this? E.g., in the case of delta at least I am not able move the spot of the underlying StochasticProcess within the option's class. Any hints are more than welcome.

Regards Frank
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Re: [Quantlib-dev] Partial greeks calculation for MonteCarloed basket options

[Simon I. <s.i...@gm...>]

Hi Frank,

Depends on the payoff. If you have to use Monte-Carlo, then the best way to
calculate Greeks is via pathwise or likelihood methods. There are plenty of
papers out there on this.

If the payoff is suitable, try using a single lognormal process and
moment-matching. This works extremely well for simple basket options.

Simon


On 11/27/07, "Frank H=F6vermann" <fho...@gm...> wrote:
>
> Hi there!
> What is the most general way to calculate (partial) greeks for a
> MultiAssetOption or a BasketOption? Does anyone ever had the chance to
> implement something like this? E.g., in the case of delta at least I am
> not able move the spot of the underlying StochasticProcess within the
> option's class. Any hints are more than welcome.
>
> Regards Frank
> --
> Der GMX SmartSurfer hilft bis zu 70% Ihrer Onlinekosten zu sparen!
> Ideal f=FCr Modem und ISDN: http://www.gmx.net/de/go/smartsurfer
>
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Re: [Quantlib-dev] Partial greeks calculation for MonteCarloed basket options

[<fho...@gm...>]

Hi Simon,
yes, I know there are many papers (e.g. one can find lots of references and a comprehensive treatment in Glasserman's book on MC methods). What I meant was how and where to implement such a thing within the QuantLib framework. Is there any canonical place within the QuantLib code to start from?

Rgds Frank

-------- Original-Nachricht --------
> Datum: Tue, 27 Nov 2007 13:40:33 +0000
> Von: "Simon Ibbotson" <s.i...@gm...>
> An: "Frank Hövermann" <fho...@gm...>
> CC: qua...@li...
> Betreff: Re: [Quantlib-dev] Partial greeks calculation for MonteCarloed basket options

> Hi Frank,
> 
> Depends on the payoff. If you have to use Monte-Carlo, then the best way
> to
> calculate Greeks is via pathwise or likelihood methods. There are plenty
> of
> papers out there on this.
> 
> If the payoff is suitable, try using a single lognormal process and
> moment-matching. This works extremely well for simple basket options.
> 
> Simon
> 
> 
> On 11/27/07, "Frank Hövermann" <fho...@gm...> wrote:
> >
> > Hi there!
> > What is the most general way to calculate (partial) greeks for a
> > MultiAssetOption or a BasketOption? Does anyone ever had the chance to
> > implement something like this? E.g., in the case of delta at least I am
> > not able move the spot of the underlying StochasticProcess within the
> > option's class. Any hints are more than welcome.
> >
> > Regards Frank
> > --
> > Der GMX SmartSurfer hilft bis zu 70% Ihrer Onlinekosten zu sparen!
> > Ideal für Modem und ISDN: http://www.gmx.net/de/go/smartsurfer
> >
> >
> -------------------------------------------------------------------------
> > This SF.net email is sponsored by: Microsoft
> > Defy all challenges. Microsoft(R) Visual Studio 2005.
> > http://clk.atdmt.com/MRT/go/vse0120000070mrt/direct/01/
> > _______________________________________________
> > QuantLib-dev mailing list
> > Qua...@li...
> > https://lists.sourceforge.net/lists/listinfo/quantlib-dev
> >

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Re: [Quantlib-dev] Partial greeks calculation for MonteCarloed basket options

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

On Tue, 2007-11-27 at 13:40 +0100, "Frank H=C3=B6vermann" wrote:
> Hi there!
> What is the most general way to calculate (partial) greeks for a
> MultiAssetOption or a BasketOption? Does anyone ever had the chance to
> implement something like this? E.g., in the case of delta at least I
> am not able move the spot of the underlying StochasticProcess within
> the option's class. Any hints are more than welcome.

You have to move the spot from outside the class. See for instance
EuropeanOption::testGreeks() in test-suite/europeanoption.cpp; you can
look at the part where the "expected" map is filled.

This said, as Simon mentioned, you'll have to be careful of numerical
artifacts in the results if you're using Monte Carlo.

Luigi


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