Hi,

I'm looking into the quasi-Gaussian model with linear local volatility as explained by Andersen and Piterbarg (Interest Rate Modeling, Volume 2). I'm trying to calibrate this model and implement it. I wonder if any of you knows where I can get a C++ or Matlab code for such model.

Many thanks

<t>Hello,I'm currently straggling with Delta hedging under SABR model (or other stochastic volatility models). As far as I know there are numerous Delta hedging strategies theoretically and practically such as Hagan's delta proposed in his original paper, Bartlett's delta known as minimum variance d...

<t>Hello,I have a problem with vega hedging.Consider the management of an exotic derivative, such as Barrier option. Typically we do the following tasks:1. selecting a pricing model, say, a local volatility model such as CEV model.2. choosing a relevant European option implied volatility smile/skew ...

Thanks Alan! That really helps.

I was wondering why future volatility smile is important to path dependent option and American type option such as Bermudan swaption. It would be best if someone could provide a reference article as well.Thanks!

<t>QuoteOriginally posted by: OrbitWell similar to what you've said already is that getting the Black-Scholes skew right means you have a proper or more correct description of the transition density. In other words, the real reason to have a good model of the skew is that you may now have a skew dep...

<t>QuoteOriginally posted by: ThinkDifferentif the sole purpose was to fit the market (as seen today), then LV model does the perfect job. SV is needed to create more realistic vol dynamics...not so much the move in the right direction as in Hagan (...whose argument is somewhat flawed, by the way), ...

<t>QuoteOriginally posted by: ThinkDifferentif the sole purpose was to fit the market (as seen today), then LV model does the perfect job. SV is needed to create more realistic vol dynamics...not so much the move in the right direction as in Hagan (...whose argument is somewhat flawed, by the way), ...

<t>Hi Wilmott peopleMany stochastic volatility LIBOR market models have been proposed in the literature. But I didn't find reasons why we have to use it in the paper. I know one reason introducing stochastic vol is to capture the correct smile dynamics, i.e. the smile moves to the right direction as...

<t>I know in order to price Bermudan swaption, the joint distribution of co-terminal swap rates at their setting dates is important. We would want to capture the correct marginal distribution and terminal correlation of co-terminal swap rates. The marginal distribution is relatively easy to be recov...

Thanks. I think you are right.

<t>I know from Karatzas & Shreve (1991) that a Brownian Bridge B(t) from a to b on time interval [0,T] satisfies: B(t)=a(1-t/T) + b*t/T + [W(t) - W(T)*t/T], where W(t) is a standard one-dimensional Brownian motion.By the above equation we can get its distribution. My question is what's the distr...