<t>Hello Everyone,Recently I have finalized an article on a local volatility model which allows for large time-steps simulation. The model is called the CLV model (Collocating Local Volatility) which is available at The CLV Framework- A Fresh Look at Efficient Pricing with Smile.I hope you find this...

<t>Hi everyone,thanks for the feedback.A few points from my side:- The essence of the method is to construct a polynomial g(X)=a0+a1*X+a2*X^2+... where X~N(0,1) and match its survival probabilities with the ones from another variable Y (Hagan's or any others).- The collocation method as presented in...

Hi,Just finished one article on getting arbitrage-free density implied from Hagan's formula. Maybe you will find it helpful too.An Arbitrage-Free Hagan Implied Density Via the Stochastic Collocation MethodAny commnets/remarks are highly appreciated.Cheers,L.

<t>Hi,taking r_0 for calculating implied volatilities may indeed give you very poor results, especially if r_0 significantly differes from the \theta (the term structure for the short-rate process).I think that the best way to get the implied volatilities when the rates are stochastic is by using Bl...

<t>Hi Alberto,I see in your code that when calculating the implied volatilities for the Heston and the Heston-Hull-White models you have used for both cases "r=0.05". Note that for the HHW model the interest rate is not constant- its stochastic so it may be inappropriate to plug in r=0.05 in the BS ...

for the second though, why dont you simply apply the same trick as for the following equality: ?

Try this one,http://papers.ssrn.com/sol3/papers.cfm? ... id=1295882

I got:payer, face value=10.1619563115018820.1286713970045160.09564302755727170.06393634955182860.03631998627747040.01643013522086670.005578385521478320.001359511854080290.0002310835398345242.69602264901348e-05ROCK and ROLL

<t>Hi one more time,I have found the bug, it was a small typo in the code,my output now is:1.2959648471360.4828166851460.1946411198010.0846938566800.0394032033450.0194137425690.0100461628680.0054231077190.0030369503210.0017562606920.0010448835810.0006375487660.0003979070010.0002534559410.00016445489...

Three options: 1. different model ex. CIR,2. penalty on negative paths, but then as you have said output is not good,3. take absolute value of the negative paths, then the problem is solved! ))bestL

<r>Yes, this is weird... MC is about between our implementations. Ironic, isn't it?I will look into implementation one more time (hate debugining).Yesterday I checked "fzero function" vs Newton-Raphson, and found that they throw out exactly the same output.I have seen that G2++ is already implemente...

There are two options... i have a bug... or you ;-)I will check my code as well, and come back soon...L

<r>Here is the data assuming P(t_0,T_i)=1, [1.87154245014561, 1.23267427122481, 0.826149229053335, 0.563621595788469, 0.391100061516812, 0.275705002719963 , 0.197202646077414, 0.142945451958571, 0.104891018457164, 0.0778367523268036, 0.0583610823274634, 0.0441783784300422, 0.0337393593092707, 0.0259...

<t>Hi,no problem, here it is (notation according to Brigo pp 158, second edition)Payment days: [10,11,12,13,14];omega=Payer=1.N=10;Maturity=5y;a=0.24,b=0.082;sigma=0.06;eta=0.1;rho=-0.82;Zero Coupon bond P(t_0,T=5)=0.8545;strikes: [0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1....

<t>Brigo&Mercurio p.167 in the second edition "...as it often heppens that the $\rho$ value is quite close to minus one, which implies that the G2++ model tends to degenerate into a one-factor (non-Markov) short rate process". The argument: caps prices do not depend on the correlation of forward...