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by spursfan
May 1st, 2016, 3:05 pm
Forum: Book And Research Paper Forum
Topic: New 2nd Edition - The Complete Guide to Option Pricing Formulas + CD-ROM by Espen Gaarder Haug
Replies: 186
Views: 152330

New 2nd Edition - The Complete Guide to Option Pricing Formulas + CD-ROM by Espen Gaarder Haug

Cox & Rubinstein (1985, p178) give their own even better option pricing formula that needs just two applications of the binomial cumulative distribution function
by spursfan
March 22nd, 2016, 6:24 pm
Forum: Student Forum
Topic: Analytical solution for Heston Model
Replies: 2
Views: 1600

Analytical solution for Heston Model

Just because you're a beginner shouldn't exempt you from doing a quick Google searchYou should start by reading articles such as thishttp://arxiv.org/pdf/1502.02963.pdf
by spursfan
March 18th, 2016, 9:44 am
Forum: Student Forum
Topic: Is Song Ping Zhu's formula exact/closed form?
Replies: 19
Views: 38466

Is Song Ping Zhu's formula exact/closed form?

last I heard, it took hours and hours to calculate
by spursfan
February 28th, 2016, 8:15 pm
Forum: General Forum
Topic: Pronunciation of 'Black Scholes'
Replies: 39
Views: 3756

Pronunciation of 'Black Scholes'

This is a good place to start reading about LTCMhttp://merage.uci.edu/~jorion/papers%5Cltcm.pdf
by spursfan
February 14th, 2016, 12:08 pm
Forum: Numerical Methods Forum
Topic: Heston - Reference Prices
Replies: 37
Views: 22619

Heston - Reference Prices

The call prices look OK (the put ones just then follow by put-call parity)But even better if you now just adapt your Heston method to allow non-zero dividends and then see how many of the digits of the reference prices from Alan that you can match
by spursfan
January 27th, 2016, 1:03 pm
Forum: Programming and Software Forum
Topic: Office Web Apps - how fully featured is the Excel experience
Replies: 4
Views: 2853

Office Web Apps - how fully featured is the Excel experience

Or you could post on the exceldna forumhttps://groups.google.com/forum/#!forum/exceldna
by spursfan
January 26th, 2016, 7:20 am
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 18329

American options -- Reference prices

<t>We seem to have three cases nowS 100 S 100 S 100 K 100 K 100 K 100 r 0.20 r 0.10 r 0.02 q 0.01 q 0.01 q 0.01 Tyr 1.00 Tyr 1.00 Tyr 1 vol 0.01 vol 0.01 vol 0.01 nStep Tian Trunc Tian Extrap Tian Trunc Tian Extrap Tian Trunc Tian Extrap 512 0.00353560 0.01017334 0.01804628 0.02018684 0.16448443 0.1...
by spursfan
January 22nd, 2016, 9:14 am
Forum: Book And Research Paper Forum
Topic: Book on Stochastic Volatility Modeling by Lorenzo Bergomi
Replies: 5
Views: 4175

Book on Stochastic Volatility Modeling by Lorenzo Bergomi

Just ordered it - will we have to wait another ten years before your next post?
by spursfan
January 7th, 2016, 11:24 am
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 18329

American options -- Reference prices

Yep - you can also smooth the nodes at the penultimate stage by taking the BS value in order to improve the extrapolation but I don'tThe details are in the Joshi paper - I make the tolerance inversely related to the number of steps
by spursfan
January 7th, 2016, 7:50 am
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 18329

American options -- Reference prices

I think you're being too pessimistic - since nearly all the extreme nodes contribute almost nothing to the option value, intelligent truncation seems fine - with increases in computation time linear or log linear at worst
by spursfan
January 6th, 2016, 8:56 pm
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 18329

American options -- Reference prices

<t>For me, the most important feature of the truncated tree is the consistent halving of the differences in values as you continue doubling the number of steps - and I surmise that this pattern would be true of any untruncated trees (but forgive me for not volunteering to run the code up to 16m step...
by spursfan
January 6th, 2016, 8:20 pm
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 18329

American options -- Reference prices

<t>Here are my Tian valuesnStep Tian tree Tol (=0.25/nStep) Tian + extrapolation =2*T(2*nStep)-T(nStep) 64 6.29099554 0.00390625 6.30023828128 6.29561691 0.00195313 6.29922581256 6.29742136 0.00097656 6.29979572512 6.29860854 0.00048828 6.299674231024 6.29914139 0.00024414 6.299539262048 6.29934033 ...
by spursfan
January 6th, 2016, 7:59 pm
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 18329

American options -- Reference prices

I ran my code all the way up to 16,000,000 steps in less than 20 minutes using ExcelDna and VB.NET code - the truncation is brilliant and you can set the tolerance to minimise the truncation error
by spursfan
January 6th, 2016, 7:36 pm
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 18329

American options -- Reference prices

OutrunThe 2006 paper is not worth chasing - last time I heard the "quasi-closed form" took at least a day to runIf you want to read something, the Joshi paper on truncation and acceleration is much more valuableMike
by spursfan
January 4th, 2016, 2:21 pm
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 18329

American options -- Reference prices

Alan is correct, here's the referencehttp://fbe.unimelb.edu.au/__data/assets/pdf_file/0007/806362/212.pdf
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