Serving the Quantitative Finance Community

Search found 713 matches

by pcaspers
April 3rd, 2016, 9:00 am
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

<t>Yes, it's dependent on the drift, here are my results for the equity case (5 years, 52 steps / year, Variant B), r = 2%, S_0 = K = 1, BS-vol = 0.4Dividend = 0.06 Put = 0.371687 NewCall = 0.381258 NewCall - Put = 0.00957093Dividend = 0.05 Put = 0.357894 NewCall = 0.36837 NewCall - Put = 0.0104756D...
by pcaspers
April 2nd, 2016, 6:05 pm
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

That's for a bermudan new call generating a bermudan put with full two-phase regression as you mentioned.You did that for a bermudan call, but the generating put being european (with exercise at maturity ?). Is it obvious that the qualitative behavior is similar to a generated bermudan put?
by pcaspers
April 2nd, 2016, 6:03 pm
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

<t>ok, I fixed the code for the IR model first (because that's what I am actually interested in) and here I getput = 0.0124168new call = 0.0476237where before (with peeking into the future)new call = 0.086853so it got down, but not to the plain bermudan put. I will next adapt the equity code as well...
by pcaspers
April 2nd, 2016, 5:46 pm
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

yes exactly, currently I have a higher value, now the question is, does it go down to the put or some value in between ... :-)
by pcaspers
April 2nd, 2016, 5:15 pm
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

ok, Variant B or A does not really matter for the time being... You are right, my update scheme takes an illegal shortcut at the moment by directly using "newcall" instead of a regression value to take the exercise decision. Let me update this and see what happens ...
by pcaspers
April 2nd, 2016, 11:42 am
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

<t>QuoteOriginally posted by: Billy7Hi,Can I ask what method did you use to handle the early exercise?Are we really pricing the same thing (the way Alan described it), or maybe we are missing something?Yes, I also have the feeling that we are maybe talking about different things. Maybe I just sketch...
by pcaspers
April 1st, 2016, 5:30 pm
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

<t>Mmh, with your setup (5y maturity, S0=K=100, 5*52 steps, r=2%, q=6%) I get (using a Monte Carlo Simulation with 4096 calibration and 4096 pricing paths)American put = 37.2237American call generating a put = 53.5415While the usual put seems to be consistent with your pricing below, the new option ...
by pcaspers
April 1st, 2016, 3:23 pm
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

I still need some time to set up the equity case in order to be able to talk to you ... coming back soon ...
by pcaspers
March 31st, 2016, 3:45 pm
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

Mathematica is quick, but C++ is joy ... even if it takes a bit longer ...
by pcaspers
March 31st, 2016, 11:28 am
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

<t>QuoteOriginally posted by: PaulNumerically it will take twice as long as a simple Bermudan.PIt's even a bit simpler, you just roll back the "secondary" option and decide whether to exercise this one and - in a shadow lattice say - whether to exercise the "primary" option. The condition for the la...
by pcaspers
March 30th, 2016, 12:55 pm
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

<t>Not sure, doesn't seem to be the same at first sight (but I may be wrong). It's quite simple, you have an american (or bermudan) option and once you exercise you get another option (but of the opposite type, i.e. a put, if you started with a call and vice versa), which you then may or may not exe...
by pcaspers
March 28th, 2016, 3:14 pm
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

by pcaspers
March 28th, 2016, 3:13 pm
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

<r>QuoteOriginally posted by: AlanMy intuition on this problem is obviously from equities.If there is a precise translation of the term sheet and model into that language, that would be helpful to hear.I don't know much about equities, so it seems we can not talk to each other <E>:-)</E> ... I think...
by pcaspers
March 28th, 2016, 8:33 am
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

Thanks Alan. My setup seems to correspond to an equity-with-dividend-flows one, since the underlying has coupon payments. That probably changes things.
by pcaspers
March 27th, 2016, 6:23 pm
Forum: Technical Forum
Topic: Put-Call-Bermudan
Replies: 79
Views: 11136

Put-Call-Bermudan

<t>Oh, sorry. I realize now that put and call should be call (to be exercised first) and put (coming into existence by the call exercise) rather. Does that change your argument ?In any case the context is a two factor interest rate / credit spread model, and the call and put are credit linked payer ...