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by dS
September 6th, 2004, 10:04 am
Forum: Numerical Methods Forum
Topic: Help with Heston Monte Carlo Spreadsheet
Replies: 15
Views: 199374

Help with Heston Monte Carlo Spreadsheet

...that was a *long* time ago - from memory, it was probably so that the graphs matched up - i.e. created by trial and error in order to produce a reasonable looking report
by dS
March 31st, 2004, 5:35 am
Forum: Technical Forum
Topic: Density function of the Heston model
Replies: 13
Views: 191375

Density function of the Heston model

Alternatively, if you use Monte Carlo, you can generate a whole load of paths for the Heston model, and create a histogram of the returns to give you your pdf which you can then compare against the normal distributiondS
by dS
March 30th, 2004, 6:35 am
Forum: Student Forum
Topic: Integration in Heston
Replies: 10
Views: 190613

Integration in Heston

<r>If you can read C code, "Numerical Recipes in C" (<URL url="http://www.nr.com">www.nr.com</URL>) has integration routines in that you could translate into VBA. I think there may even be a "Numerical Recipes in Basic". Be warned that these routines can produce oscillations in the tails of the pdf....
by dS
March 5th, 2004, 8:33 am
Forum: General Forum
Topic: two-factor HW paper?
Replies: 4
Views: 190007

two-factor HW paper?

Don't know about the pdf, but if it's of any help, the book "Hull-White on Derivatives" contains 20 papers including this one, and can probably be picked up fairly cheaply 2nd hand.If you're in London, I got mine from the Financial Bookshop for £20dS
by dS
March 4th, 2004, 6:31 am
Forum: Technical Forum
Topic: Derman-Kani fudge factor
Replies: 0
Views: 189350

Derman-Kani fudge factor

<t>I've implemented the Derman-Kani tree with the Barle and Cakici modifications.I'm getting a problem when I increase the steps to move than about 50 for the data I've got.Basically around the 50th step, the edge nodes become so close together, they become equal. This then throws out the probabilit...
by dS
December 17th, 2003, 7:34 pm
Forum: Numerical Methods Forum
Topic: Help with Heston Monte Carlo Spreadsheet
Replies: 15
Views: 199374

Help with Heston Monte Carlo Spreadsheet

<r>This is the corrected spreadsheet showing results in line with Heston. Thanks for all of your help.BTW, if you want to understand more about the reflection/absorption issues with the Heston Monte Carlo, then Gatheral has some stuff about it, as does Uwe Wystup in his formula catalogue:<URL url="h...
by dS
December 17th, 2003, 6:38 am
Forum: Numerical Methods Forum
Topic: Help with Heston Monte Carlo Spreadsheet
Replies: 15
Views: 199374

Help with Heston Monte Carlo Spreadsheet

<t>Yes of course!As you both point out - I've been plotting the distribution of S(T)/S(0) - which will be lognormal. I should be plotting ln[S(T)/S(0)]I'm getting the right results now - Hooray!...a basic error, which I might have picked up if I had started by plotting the standard Black-Scholes as ...
by dS
December 16th, 2003, 9:14 pm
Forum: Numerical Methods Forum
Topic: Help with Heston Monte Carlo Spreadsheet
Replies: 15
Views: 199374

Help with Heston Monte Carlo Spreadsheet

<r>Increasing the steps doesn't seem to make a difference - I'm still getting more skew as I decrease sigma, which I don't understand.AVt, can you explain a bit more about the pdf - I don't entirely follow you. Surely for the pdf of the returns, all I need to do is:1. Generate lots of expiry stock p...
by dS
December 15th, 2003, 9:23 pm
Forum: Numerical Methods Forum
Topic: Help with Heston Monte Carlo Spreadsheet
Replies: 15
Views: 199374

Help with Heston Monte Carlo Spreadsheet

<t>Thanks for the feedback AVt. You're always helpful on this stuff.The spreadsheet is a conversion of some code I wrote in C++ ...I thought it would expecting a bit too much of people to trawl through my C++, and to then plot the results! ...So I don't *think* it is a problem with the random number...
by dS
December 14th, 2003, 7:49 pm
Forum: Numerical Methods Forum
Topic: Help with Heston Monte Carlo Spreadsheet
Replies: 15
Views: 199374

Help with Heston Monte Carlo Spreadsheet

<t>I'm having problems with the Heston Model:According to Heston's paper, the correlation, rho, should affect the skew of the PDF, and the vol of variance, sigma, should give fat tails.I'm just not getting that effect with sigma. Sigma is affecting the skew, and does not seem to be giving me fat tai...
by dS
November 27th, 2003, 8:44 am
Forum: Student Forum
Topic: Pricing cliquets with Heston
Replies: 11
Views: 191616

Pricing cliquets with Heston

Do you know if there are any other sources for pricing forward-start options using Heston, other than the Wilmott mag?
by dS
November 26th, 2003, 11:10 pm
Forum: Student Forum
Topic: Pricing cliquets with Heston
Replies: 11
Views: 191616

Pricing cliquets with Heston

I do have solutions to the Heston model - it's pricing cliquets with it that I'm not certain about.regards,dS
by dS
November 26th, 2003, 4:50 pm
Forum: Student Forum
Topic: Pricing cliquets with Heston
Replies: 11
Views: 191616

Pricing cliquets with Heston

<t>I don't think Espen Gaarder Haug's book has the Heston Stoch Vol model at all (at least it's not in the index)For creating the PDE, do you mean by starting with a hedged portfolio, then using Ito's formula, etc?If so, then would you still be creating a series of forward-start options, (no matter ...
by dS
November 26th, 2003, 1:57 pm
Forum: Student Forum
Topic: Pricing cliquets with Heston
Replies: 11
Views: 191616

Pricing cliquets with Heston

<t>For cliquet options, Black-Scholes provides a closed-form solution by summing up a series of (forward-start) options where:1. The strike is the spot2. Everything is discounted by the dividends, up to the starting time of each option3. Start-time and maturity of each option is taken from one reset...
by dS
November 21st, 2003, 2:51 pm
Forum: Book And Research Paper Forum
Topic: Quant Programming
Replies: 29
Views: 192695

Quant Programming

<t>C++ in the book, C#, VB.Net, Java, or whatever on the CD.The assumption being:C++ is the "main" quant programming language, the others on the CD keeps everyone happy.I think P-code would be off-putting.I've seen books that try to cover multiple languages, and you spend your time trying to work ou...
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