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by berndL
March 13th, 2018, 1:45 pm
Forum: Technical Forum
Topic: Shifted log normal short rate model vs hull white short rate model
Replies: 31
Views: 6645

Re: Shifted log normal short rate model vs hull white short rate model

At my shop, we are running Hull White short rate model for mortgage risk management purpose.  So no LMM.   I ran some tests by switching to shifted lognormal short rate model.   The risk analytic results look pretty reasonable.  Just wondering why shifted log normal short rate model never gains ind...
by berndL
December 29th, 2017, 12:01 pm
Forum: General Forum
Topic: Which model for which fixed-income product?
Replies: 4
Views: 2387

Re: Which model for which fixed-income product?

Hi I am working in Fixed-income department and I would like to know how to choose the correct model (1, 2 or 3 factors) for the given products and the reason why we choose a model: - credit default swaps - inflation swaps - bond options (callable bond, puttable bond, convertible bond, extendible bo...
by berndL
December 24th, 2017, 5:29 pm
Forum: Technical Forum
Topic: If you are bored with Deep Networks
Replies: 574
Views: 135731

Re: If you are bored with Deep Networks

Someone wrote this reinforcement learning will not replace option pricing models. If you say Black-Scholes because you believe that is what traders and quants actually use, then you are an idiot and have not understood how option pricing works since... 1987. machine learning will have its uses but ...
by berndL
December 16th, 2017, 2:31 pm
Forum: Technical Forum
Topic: PDE/FDM for CVA: Benchmark Data needed
Replies: 4
Views: 3645

Re: PDE/FDM for CVA: Benchmark Data needed

Hi Bernd, Thanks. Two of my MSc students did some work on CVA using stochastic meshes and I wanted to compare against the Burgard-Kjaer PDE (as in Green XVA book). There was not enough to get them up to speed on PDE. The idea was to use Boost odeiint. I downloaded Quaternion. I am wondering how the...
by berndL
December 13th, 2017, 9:12 am
Forum: Technical Forum
Topic: PDE/FDM for CVA: Benchmark Data needed
Replies: 4
Views: 3645

Re: PDE/FDM for CVA: Benchmark Data needed

I am looking for data to test against using the Burgard-Kjaer nonlinear PDE model. Maybe MC as baseline case. Hi, for a start: Maybe just download the ore engine from quaternion. Its free and quantlib based. There are some examples in there. So this could be a benchmark. I havent done this yet but ...
by berndL
October 12th, 2017, 2:40 pm
Forum: General Forum
Topic: Monte-Carlo shouldn't be used for validation
Replies: 5
Views: 1797

Re: Monte-Carlo shouldn't be used for validation

Hi there, I'm not sure about what extra complications local vol may cause for Monte Carlo. Something to keep in mind though when talking barrier options and MC, is that continuous barriers cannot be priced accurately with (naive) Monte Carlo. Are you talking about continuously-monitored barrier opt...
by berndL
September 24th, 2017, 11:01 am
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 38719

Re: American options -- Reference prices

So seems like Bulirsch Stoer doesn't quite damp oscillations in this case? What was the spatial resolution you used? What happens if you increase it? By the way, I was looking at Meyer's paper on barrier options under stoch vol (http://people.math.gatech.edu/~meyer/PUBS/barrier-option.pdf) and the ...
by berndL
September 24th, 2017, 10:50 am
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 38719

Re: American options -- Reference prices

As for the gamma, a simple plot would tell if it's differentiation thing or a "real" oscillation. Or running it with higher resolution and see what happens. Yes. Knowing the root cause is first step. thanks. Yes i tried higher resolutions. And i did plot the numerical gamma. It showed som...
by berndL
September 24th, 2017, 10:35 am
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 38719

Re: American options -- Reference prices

Bulirsch Stoer gave nice results for me too. Only this gamma thing. How do you calculate gamma once you get (I presume) the array of option prices at t + T? Ah ok I see. This can give problems because numerical differentiation is an ill-posed problem, so it would not surprise me too much if gamma i...
by berndL
September 23rd, 2017, 10:31 am
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 38719

Re: American options -- Reference prices

 I only use cash karp (Ford Fiesta) and Bulirsch Stoer (Mercedes). The latter is very accurate but slow for linear BSPDE. I did manual loop unrolling and it gives _big_ performance gains. Boost matrices are a bottleneck I suspect. Here is C++ snippet to solve a _matrix_ ODE to compute exp(At) where...
by berndL
September 22nd, 2017, 11:00 am
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 38719

Re: American options -- Reference prices

Boost ODE also supports WhenEvents in the form of Observers and that's what I have done (Brennan-Schwarz) as well as penalties. I agree that this is a good place for this.   play around with odeint atm. Just a quick question at this point: Obersvers are not available in the implementation of the op...
by berndL
September 21st, 2017, 1:16 pm
Forum: Numerical Methods Forum
Topic: American options -- Reference prices
Replies: 265
Views: 38719

Re: American options -- Reference prices

Boost ODE also supports WhenEvents in the form of Observers and that's what I have done (Brennan-Schwarz) as well as penalties. I play around with odeint atm. Just a quick question at this point: Obersvers are not available in the implementation of the operator. This is where we calculate the deriv...
by berndL
July 6th, 2017, 2:45 pm
Forum: General Forum
Topic: Question on 'Cheapest-to-deliver' yield curve
Replies: 8
Views: 2029

Re: Question on 'Cheapest-to-deliver' yield curve

if you look at xccy basis swap spreads they give you an idea of the relative value of liquidity in differenct currencys. you are then generally advised to post the least valuable currency as CSA Cash Collateral if you are allowed to do so. Hi BerndL, thanks for the reply. Yes I understand what you ...
by berndL
July 6th, 2017, 2:35 pm
Forum: General Forum
Topic: Question on 'Cheapest-to-deliver' yield curve
Replies: 8
Views: 2029

Re: Question on 'Cheapest-to-deliver' yield curve

if you look at xccy basis swap spreads they give you an idea of the relative value of liquidity in differenct currencys. you are then generally advised to post the least valuable currency as CSA Cash Collateral if you are allowed to do so. Hi BerndL, thanks for the reply. Yes I understand what you ...
by berndL
July 6th, 2017, 8:17 am
Forum: General Forum
Topic: Question on 'Cheapest-to-deliver' yield curve
Replies: 8
Views: 2029

Re: Question on 'Cheapest-to-deliver' yield curve

if you look at xccy basis swap spreads they give you an idea of the relative value of liquidity in differenct currencys.

you are then generally advised to post the least valuable currency as CSA Cash Collateral if you are allowed to do so.
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